20210129Kinney Direct.pdf

DAVID J. MEYER
VICE PRESIDENT AND CHIEF COUNSEL FOR
REGULATORY & GOVERNMENTAL AFFAIRS
AVISTA CORPORATION
P.O. BOX 3727
1411 EAST MISSION AVENUE
SPOKANE, WASHINGTON 99220-3727
TELEPHONE: [phone]
FACSIMILE: [phone]
[e-mail]

BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION

IN THE MATTER OF THE APPLICATION ) CASE NO. AVU-E-21-01
OF AVISTA CORPORATION FOR THE )
AUTHORITY TO INCREASE ITS RATES )
AND CHARGES FOR ELECTRIC AND ) DIRECT TESTIMONY
NATURAL GAS SERVICE TO ELECTRIC ) OF
AND NATURAL GAS CUSTOMERS IN THE ) SCOTT J. KINNEY
STATE OF IDAHO )
)

FOR AVISTA CORPORATION

(ELECTRIC ONLY)

Kinney, Di 1
Avista Corporation
I. INTRODUCTION 1
Q. Please state your name, employer and business address. 2
A. My name is Scott J. Kinney. I am employed as the Director of Power Supply at 3
Avista Corporation, located at 1411 East Mission Avenue, Spokane, Washington. 4
Q. Would you briefly describe your educational and professional background? 5
A. Yes. I graduated from Gonzaga University in 1991 with a Bachelor of Science in 6
Electrical Engineering and I am a licensed Professional Engineer in the State of Washington. I 7
joined the Company in 1999 after spending the first eight years of my career with the Bonneville 8
Power Administration. I have held several different positions at Avista beginning as a Senior 9
Transmission Planning Engineer. In 2002, I moved to the System Operations Department as a 10
Supervisor and Operations Support Engineer. In 2004, I was appointed as the Chief Engineer, 11
System Operations and as the Director of Transmission Operations in June 2008. I became the 12
Director of Power Supply in January 2013, where my primary responsibilities involve management 13
and oversight of short- and long-term resource planning, acquisition of power resources, and power 14
trading. 15
Q. What is the scope of your testimony in this proceeding? 16
A. My testimony provides an overview of Avista’s evaluation and decision to join the 17
Western Energy Imbalance Market (EIM) operated by the California Independent System Operator 18
(CAISO). I will provide an overview of the current cost estimates associated with joining the EIM, 19
including a brief description of operation and maintenance costs (O&M) and a detailed description 20
of capital costs. As approved in Case No. AVU-E-20-01, Order No. 34606, the Company is 21
currently deferring the incremental O&M expenses associated with joining the EIM. Through this 22
deferral, the Company will be able to more appropriately align both the benefits and expenses of 23
Kinney, Di 2
Avista Corporation
the EIM and minimize the potential impacts to rates when benefits can be realized. At the time of 1
go-live, anticipated to be March 2, 2022, the Company will no longer defer these expenses, and 2
will provide additional information to justify the expenditures. Company witness Ms. Andrews 3
incorporates the capital additions, associated with the Company’s EIM investment, included in the 4
Company’s request for rate relief over the Two-Year Rate Plan effective September 1, 2021 and 5
ending August 31, 2023. 6
A table of contents for my testimony is as follows: 7
Description Page 8
I. Introduction 1 9
II. EIM Background - Decision to Join 3 10
III. EIM Integration and On-Going Costs 6 11
IV. EIM Benefits 15 12
V. Cost Benefit Analysis 17 13
VI. Requested Capital Rate Recovery 18 14
15
Q. Are you sponsoring an exhibit in this proceeding? 16
A. Yes, I am sponsoring Exhibit No. 8, Schedules 1 - 12 as listed below: 17
• Schedule 1 includes Avista’s signed EIM Implementation Agreement with the 18
CAISO. 19
• Schedule 2 includes the CAISO FERC filing of Avista’s Implementation 20
Agreement. 21
• Schedule 3 includes the FERC acceptance of Avista’s Implementation Agreement. 22
• Schedule 4 includes Utilicast Technology Assessment. 23
• Schedule 5 includes Utilicast Metering and Controls Assessment. 24
• Schedule 6 includes Avista’s original EIM Project Charter. 25
• Schedule 7 includes the updated EIM Scope document. 26
Kinney, Di 3
Avista Corporation
• Confidential Schedule 8C includes the updated cost estimate associated with the 1
Human Resource Plan. 2
• Schedule 9 includes Avista’s EIM Human Resource Plan. 3
• Confidential Schedule 10C includes the original cost estimate associated with the 4
Human Resource Plan. 5
• Schedule 11 includes the Energy and Environmental Economics (E3) EIM benefit 6
analysis report. 7
• Schedule 12 includes the EIM capital business case. 8
9
II. EIM BACKGROUND – DECISION TO JOIN 10
Q. Please describe the circumstances which led to Avista’s decision to join the 11
EIM. 12
A. Avista has actively monitored the operation and expansion of the EIM since its 13
inception in the fall of 2014. The Company regularly participates in regional meetings and 14
dialogue associated with EIM operations and enhancements including the potential expansion of 15
the EIM to a day ahead market. Avista continuously evaluates the operational benefits associated 16
with EIM participation, and the associated risks of not participating in the market. One of the 17
largest operational benefits for current EIM participants is the ability to balance and regulate load 18
and renewable resources by leveraging available market resources, instead of relying only on 19
internal resources to provide regulation and flexible ramping. 20
Avista has also closely monitored the impacts to the bi-lateral trading market as more 21
entities join the EIM. The integration of northwest utilities such as Portland General Electric 22
(“PGE”), Puget Sound Energy (“PSE”), Idaho Power (“IPC”) and Seattle City Light into the EIM 23
has had an impact on short term hourly market liquidity. The commitment of NorthWestern 24
Energy and the Bonneville Power Administration (BPA) to join the market in the next few years, 25
Kinney, Di 4
Avista Corporation
will put even more stress on near-term hourly market liquidity. EIM participants are less likely to 1
conduct bi-lateral transactions close to the operating hour due to the need to pass EIM sufficiency 2
and flexible ramping tests and meet other market transaction deadlines that occur well before the 3
operating hour. This leads to significant risk and inefficiencies for non-market participants to 4
reliably and responsibly meet load service obligations and balance variable resources. 5
With over 80 percent of the load in the western interconnection committed to joining the 6
EIM by April 2022, non-participating utilities will face growing market liquidity risk. To mitigate 7
that risk, they will need to hold back more reserves to minimize exposure to in-hour fluctuations 8
or extended non-planned generation outages. Holding additional reserves will lead to higher 9
overall power supply costs, as excess available resources can’t be fully utilized, or additional 10
resources may need to be built or purchased. 11
Q. Are there other circumstances that led to the Company’s decision? 12
A. Yes. As Avista seeks to transition its resource portfolio to meet stated Company 13
clean energy goals, there are multiple factors that influence Avista’s renewable resource mix, 14
including the price of renewable resources, our customer’s increasing interest in purchasing 15
cleaner energy, and the implementation of new carbon emission policies in the West. Based on 16
competitive pricing and customer interest, Avista recently signed two Power Purchase Agreements 17
(PPA) for renewable resources – 20 MW of solar starting in December of 2018 (Adams-Neilson)1 18
and 145 MW of wind starting in December 2020 (Rattlesnake Flat). 19
Avista has seen an increased interest from developers looking to integrate qualifying 20
resources that meet the requirements under the Public Utility Regulatory Policies Act (PURPA), 21

1 As described by Company witness Mr. Kalich, all output of Adams-Neilson solar is assigned to our Solar Select
Program.
Kinney, Di 5
Avista Corporation
which may lead to additional PURPA renewable resources integrating into the Avista Balancing 1
Authority Area (BAA). The Company is also in the process of conducting a renewable request for 2
proposal for up to 300MW of clean non-emitting resources to further its transition to a cleaner 3
resource portfolio. As additional variable resources are integrated into the Avista BAA, it becomes 4
more efficient and cost-effective for Avista to rely on the EIM to help meet the in-hour variability 5
of these resources, instead of holding back reserves and dispatching Avista-owned resources to 6
meet flexible ramping requirements. 7
Based on the short-term market liquidity risks associated with being a non-EIM participant 8
and Avista’s changing resource portfolio, which includes additional variable resources, Avista 9
made the decision in the spring of 2019 to join the Western EIM to reduce risk and provide benefits 10
to its customers. 11
Q. What is the general timeline associated with joining CAISO? 12
A. The signed CAISO implementation plan, and the associated approval from FERC, 13
called for an April 1, 2022 implementation date. However, in order to align with the decisions 14
made by both the Bonneville Power Administration and Tacoma Power, and capture efficiency 15
and operational gains associated with multiple entities joining simultaneously, the implementation 16
date has been accelerated to March 2, 2022. The following list provides a general timeline 17
associated with Avista joining the EIM: 18
April 25, 2019 Avista signed EIM Implementation Agreement with CAISO
December 11, 2019 CAISO filed Implementation Plan with FERC
February 19, 2020 FERC accepted the CAISO/Avista Implementation Agreement
March 2, 2022 Accelerated Go-Live date
19
Kinney, Di 6
Avista Corporation
A copy of the CAISO EIM Implementation Agreement, the CAISO FERC filing letter, 1
and the FERC acceptance letter are included in Exhibit No. 8, Schedules 1-3, respectively. 2
3
III. EIM INTEGRATION AND ON-GOING COSTS 4
Q. Please provide an overview of the initial cost estimates associated with joining 5
the EIM. 6
A. The original total cost estimates (system) associated with joining the EIM, as 7
compiled in the EIM Program Charter, are summarized in Table No. 1 below: 8
Table No. 1 – EIM Program Charter Estimates 9
10
11
12
13
The Company originally estimated spending approximately $22.7 million in capital costs, 14
$3.0 million in O&M expense, and $1.0 million in pre-paid application expense for a total 15
implementation expenditure of $26.7 million. The total expenditure included 25% contingency 16
funds for unknown costs and is consistent with the Company’s engineering estimating 17
methodology. These estimates were primarily based on information obtained from both internal 18
subject matter experts as well as input from our third-party consultant Utilicast2. Utilicast assisted 19
in the development of a technology assessment, as well as a metering and controls assessment 20

2 Utilicast is a provider of consulting services to the energy and utilities industry, providing expertise and experience
in the areas of regional electricity market solutions, power systems operations, project implementation, analytics,
energy services, customer care and related IT infrastructure.

EIM Program Charter Estimates
(as of 05/2019)Implementation Contingency Totals Annual O&M
Expenses
Capital $ 18,129,000 $ 4,532,250 $ 22,661,250 $ -
Expense $ 2,380,000 $ 595,000 $ 2,975,000 $ 3,534,000
Pre-Paid Expense $ 840,000 $ 210,000 $ 1,050,000 $ -
Total Costs $ 21,349,000 $ 5,337,250 $ 26,686,250 $ 3,534,000
Kinney, Di 7
Avista Corporation
associated with EIM participation requirements. Utilicast also updated the market costs 1
assessment that it had previously conducted for the Company in 2015. These costs were primarily 2
related to metering upgrades, generation control modifications, communication/network 3
infrastructure additions and improvements, the purchase and integration of multiple market-based 4
software applications, the hiring of a System Integrator consultant, CAISO implementation fees 5
and Avista labor, including both existing Avista labor, as well as estimated new employees. The 6
technology assessment and metering and control assessments conducted by Utilicast as well as the 7
EIM Program Charter, are provided in Exhibit No. 8, Schedules 4-6 respectively. 8
The anticipated on-going costs of $3.5 million included maintenance costs for software 9
licenses and communication networks, the addition of 11-13 new employees to facilitate market 10
operations and settlements (including a new five-person 24x7 hour EIM operating desk) and 11
CAISO grid management charges. 12
Q. Has the Company made updates to the estimates provided in the EIM 13
Program Charter? 14
A. Yes. The current estimate of total expected costs is summarized in Table No. 2 15
below and explained in the EIM Program Scope document3. 16
Table No. 2 – EIM Program Scope Estimates* 17
18
19
20
*Pre-paid expense estimates were reclassed to capital. 21

3 The cost estimates included in Table No. 2 represent the total costs of the EIM implementation and are not meant to
represent incremental. In this context, incremental represents only those costs which are new (not currently in ongoing
operation costs) and are required in ordered to join the EIM.
Kinney, Di 8
Avista Corporation
After completing more than a year of EIM integration work, and continued conversations 1
with Utilicast and other current EIM-entities, Avista obtained a better understanding of the total 2
market integration and operational support needs for both labor and non-labor. Based on this new 3
information and experience the Company updated estimates for overall EIM implementation and 4
on-going market operations. These new estimates are explained in the EIM Program Scope 5
document, provided in Exhibit No. 8, Schedules 7 and 8C, which incorporates updated metering 6
and network project designs and schedules; updated labor estimates as determined in the EIM 7
Human Resource Plan, provided in Exhibit No. 8, Schedule 9 and 10C; and overall project cost 8
estimates based on actual project spend through August of 2020 and remaining integration work. 9
The EIM Human Resource Plan provides the details related to labor requirements, including 10
number of full-time equivalents (FTE), hire dates, and salary estimates to support both integration 11
work and on-going market operations. Contingency funds were also included to address costs 12
unknown, but at a much lower rate than assumed in the EIM Project Charter. 13
Q. Please describe the revised costs in the preferred Human Resource Plan and 14
Scope document specific to labor costs. 15
A. The Human Resource Plan includes updates for how many new employees would 16
be needed for operational support after joining the market and the preferred hire date for all new 17
resources. As Avista continued to evaluate resource needs, the Company sought input from other 18
EIM participating utilities including what roles and responsibilities were needed to successfully 19
operate in the market post go-live. Avista met with these utilities, including Portland General 20
Electric, Idaho Power Company, Arizona Public Service and PacifiCorp, to discuss the roles and 21
responsibilities required to successfully operate in the market post go-live. These utilities indicated 22
a separate EIM operating desk was required to interact with the CAISO and ensure reliable market 23
Kinney, Di 9
Avista Corporation
operations. They also shared that they hired new employees to support settlement activities, data 1
collection and review, network model maintenance, system operations support, resource bidding 2
strategies, and new application technology support. Further, these EIM participating utilities 3
indicated that too lean of a workforce at the time of entry had contributed to operational 4
inefficiencies and recommended some additional personnel. After collecting this information, 5
Avista consulted with Utilicast regarding the new job responsibilities and functions, and gathered 6
input based on their knowledge with CAISO EIM requirements and experience integrating other 7
EIM participating utilities. 8
As a result of the information gathered through the review process, Avista determined that 9
an additional 17 full time employees (five more than the 12 originally estimated in the EIM 10
Program Charter) would be necessary to ensure successful implementation and on-going 11
operational support. In addition to revisions made based on external feedback, the Company also 12
performed several internal reviews to finalize labor cost estimates based on anticipated hire dates. 13
Additional changes were made in August 2020 to the original Human Resource Plan cost forecast 14
to reflect 2020 hiring delays and the postponement of two positions – the EIM BA Relief Operator 15
and one of the Settlement Analysts. Both roles were delayed a year from their original proposed 16
hire date. Table No. 3 provides a comparison of the original new employee estimate and hire dates 17
as provide in the EIM Charter, the Human Resource Plan and the revised estimate included in the 18
EIM Scope document. 19
Kinney, Di 10
Avista Corporation
Table No. 3 – EIM New Employee Plan Comparison 1
2
3
4
5
6
7
8
9
10
11
12
13
14
The Human Resources Plan includes a thorough description and justification for each new 15
position. Avista believes the 17 employees represents a mature workforce needed to fully support 16
implementation and on-going EIM operations. Once Avista has experience operating in the EIM 17
market, additional EIM labor and roles requirements will be reassessed at that time. 18
Table No. 4 provides a labor cost comparison associated with adding the five additional 19
employees from the original EIM Program Charter estimate. 20
Table No. 4 – Labor Cost Comparison 21
22
23
Quantity Hire Date Quantity Org. Hire Date
(as of 06/2020)
Rev. Hire Date
(as of 08/2020)
Implementation Resources
EIM Program Manager 1 Jan-19 1 Jan-19
Org. Change Management Specialist 1 1 Sep-20
Substation Engineer 1 Jan-20
Total 2 3
Incremental EIM FTEs
Power Supply Analyst 1 Oct-20 1 Jul-21 Sep-21
Network Model Tech 1 Oct-20 1 Jun-20
SCADA Tech 1 Oct-20 0
EIM BA Desk 1 Jul-21 1 Feb-20
EIM BA Desk 1 Jul-21 1 Sep-20 Oct-20
EIM BA Desk 1 Jul-21 1 Sep-20 Oct-20
EIM BA Desk 1 Jul-21 1 Jan-21
EIM BA Desk 1 Jul-21 1 Jan-21
EIM BA Desk 0 1 Mar-21 Mar-22
Training Admin 0 1 Mar-22
EIM BA Analyst 0 1 Jul-21 Sep-21
Settlements Manager 0 1 Sep-20 Oct-20
Data Management Operator 1 Oct-20 1 Apr-21
Settlement Analyst 1 Apr-21 1 Apr-21
Settlement Analyst 0 1 Jul-21 Jun-21
Settlement Analyst 0 1 Jul-21 Aug-22
Compliance 0 or 1 Apr-21 0
IT Analyst 1 or 2 Oct-20 1 Jun-20 Oct-20
IT Analyst 0 1 Jun-20 Jan-21
Total 11 to 13 17
Scope Estimates (as of 08/2020)Charter Estimates (as of 05/2019)
EIM FTE Estimates
Kinney, Di 11
Avista Corporation
As it relates to integration, the new Resource Plan added $1.7 million of capital and $0.85 1
million of expense related integration labor to the project based on the five additional employees 2
and accelerating the hire dates to support software implementation, employee training, system 3
operator NERC certification, and parallel market testing. The original new employee estimate in 4
the EIM Program Charter included only four months of labor costs to support parallel testing and 5
employee training. The original project estimate in the Charter significantly underestimated the 6
required incremental integration labor. The updated estimated incremental labor cost to hire the 7
new employees to support integration effort is $3.3 million, with $2.25 million in capital related 8
work and $1.03 million in expense.4 9
The original Charter estimate for on-going annual O&M labor was $2.5 million attributed 10
to the original labor estimate of 11-13 incremental EIM employees. Labor has since been revised 11
to include the estimated 17 incremental employees resulting in an increased annual labor estimate 12
of $3.2 million (system loaded). 13
Q. Please now describe the revisions made in the EIM Scope document that are 14
not related to labor associated with the additional new hires. 15
A. The significant factors contributing to the non-labor capital project estimate 16
changes in the Scope document are associated with required enhancements to the Avista Decision 17
Support System (ADSS) system optimization software and the inclusion of pre-paid software 18
expenses as capital costs. Prior to making the decision to join the EIM, cost estimates related to 19
enhancements to the current ADSS application were approximately $1.0 million and were included 20
as part of Avista’s productivity business case, not EIM. These enhancements were intended to 21
expand the ADSS software to create intra-hour optimization runs and automated resource bidding. 22

4 The cost includes labor and labor loadings (primarily related to medical and retirement benefits).
Kinney, Di 12
Avista Corporation
As these enhancements were intended to maximize resource optimization prior to the decision to 1
join the EIM, they were deemed productivity related and were therefore not included in the original 2
EIM Charter estimate. Only those costs related to Utilicast support for ADSS enhancements, in 3
the amount of $0.4 million were included in the original cost estimates. 4
However, after selecting the full suite of new market applications and working with the 5
vendors on specific design requirements, it was determined that additional ADSS requirements 6
and enhancements were deemed required in order to support EIM market operations and facilitate 7
data interchange between the different applications. Due to this change in scope, all costs 8
associated with the ADSS enhancements were assigned to the EIM integration project, resulting 9
in an increase in system EIM capital cost estimates by $3.0 million (original $1.0 million plus 10
additional system enhancements for $2.0 million), for a total revised estimate of $3.4 million 11
including Utilicast support. After negotiating software costs with the EIM related software 12
vendors, the planned pre-paid software expenses were determined to be capital costs. Therefore 13
the $1.0 million in pre-paid expense was included in capital spend. 14
Changes to the non-labor expense estimates include Utilicast support costs, updating 15
metering settings at locations that didn’t require replacement, and annual maintenance costs for 16
new software applications. Utilicast expense costs are associated with collecting generation and 17
interchange data to complete required operational and maintenance data templates, system 18
modeling, supporting Avista process changes and providing market training. After completing 19
field assessments and preliminary designs it was determined that the meters at a few substation 20
interconnection sites could be reprogrammed instead of replaced. The costs associated with meter 21
reprogramming is considered expense not capital. The implementation of the EIM business 22
application systems and the associated annual support costs are driven by software vendors 23
Kinney, Di 13
Avista Corporation
changing how they license and deliver software solutions; an example includes moving from an 1
on-premise solution to a cloud-based solution hosted by the software vendor. In addition, software 2
vendors regularly increase the cost of on-going maintenance and support to accommodate the cost 3
of enhancing, fixing and supporting their products, and to align with market driven forces such as 4
annual consumer price index increases. To mitigate the risk of price escalation and attain cost 5
certainty, the Company engaged in aggressive negotiations with each vendor to reduce the non-6
labor expense and secure pricing for five years after market go-live. Details about each software 7
solution can be found in the EIM Scope document. 8
Q. Please provide a brief summary of the components contributing to the overall 9
O&M implementation and ongoing expense. 10
A. The estimate for total implementation O&M expense is approximately $5.4 million. 11
The primary components contributing to the O&M implementation expense are associated with 12
application procurement of approximately $1.2 million, Utilicast EIM consultant integration 13
support costs associated with training, business process design and generation/interchange 14
modeling of approximately $1.1 million, new and existing employee labor expense of 15
approximately $1.8 million associated with business process development and change, NERC 16
operator certification, training, system modeling, and contract development, metering 17
reconfiguration at substations and generating plants of approximately $0.4 million, CAISO 18
implementation fees of approximately $0.3 million, and contingency funds of approximately $0.4 19
million. 20
The primary components of O&M expense for on-going operations (post-implementation) 21
is related to labor ($3.2 million) and software maintenance and support ($0.7 million) with at total 22
estimated expense of $3.9 million. Table No. 5 provides a summary of the total estimated 23
Kinney, Di 14
Avista Corporation
implementation and on-going expenses. 1
Table No. 5 – Implementation and On-Going Expense Summary 2
3
4
5
6
Incremental O&M Expense is currently being deferred in Idaho in accordance with AVU-7
20-E-20-01, Order No. 34606. The Company currently estimates the incremental implementation 8
O&M costs to be approximately $3.6 million (system). The difference between total estimated 9
O&M expense and incremental O&M expense is primarily related to labor costs associated with 10
existing employees and the software selection efforts. This deferral will end in March 2022 on the 11
EIM go-live date. The Company will seek recovery of these costs after the deferral ends. A 12
summary of the estimated incremental implementation and on-going expenses are provided in 13
Table No. 6. 14
Table No. 6– Incremental Expense Summary 15
16
17
18
19
Implementation
Expense
Ongoing
Expense
Labor $ 3,082,966 $ 3,177,467
Non-Labor $ 2,328,060 $ 729,633
Totals: $ 5,411,026 $ 3,907,100
Implementation & On Going Expense
(as of 08/2020)
Scope Estimates
Labor $ 3,234,255
Non-Labor $ 374,625
Totals: $ 3,608,880
EIM Program Incremental Implementation Expense
(as of 08/2020)
Kinney, Di 15
Avista Corporation
IV. EIM BENEFITS 1
Q. Please describe the estimated benefits from joining the EIM. 2
A. Avista contracted with Energy and Environmental Economics (E3)5 in the fall of 3
2017 to perform an EIM benefit analysis. E3 was chosen since they had previously conducted 4
multiple market benefit assessments for other EIM participants and had the best available system 5
model. This allowed Avista to compare results to the other utilities. The E3 assessment estimated 6
Avista could see a range of system annual benefits from $2 million to $12 million by participating 7
in the EIM. The E3 study is provided as Exhibit No. 8, Schedule 11. 8
There are four main study assumptions that drive the range of potential EIM benefits: (1) 9
the amount of flexible hydro Avista bids into the market, (2) the amount of transmission that is 10
made available for market transactions, (3) the amount of renewable generation that is integrated 11
into Avista’s BAA, and (4) the data source of the estimated benefits of other EIM participants, 12
which was used for comparison purposes and a proxy for market price variations. E3 varied the 13
assumption of these critical drivers to create 24 different study scenarios. Avista analyzed the 24 14
different scenarios and anticipates EIM system annual benefits to be approximately $5.8 million, 15
which is an average of four of the 24 benefit scenarios (scenarios 6, 12, 18, 24). These four 16
scenarios assume: Avista maximizes hydro bids into the market; has increased renewable 17
generation into the Avista resource mix, due to new carbon emission policies; uses an average of 18
low and high transmission made available to the market; and an average of EIM benefits based on 19
modeled and actual data to represent price variations. 20

5 Energy+Environmental Economics (or E3) is an energy consulting firm that helps utilities, regulators, policy makers,
developers, and investors make strategic decisions as they implement new public policies, respond to technological
advances, and address customers’ shifting expectations.
Kinney, Di 16
Avista Corporation
There is a high likelihood that Avista could see benefits move closer to the upper end of 1
the study range ($12 million system) based on the actual benefits that have been published for 2
existing EIM participants. Market price volatility experienced in 2018 significantly increased the 3
benefits of current EIM participants, compared to anticipated results from their E3 studies. Both 4
IPC and PGE achieved EIM benefits in 2018 as calculated by the CAISO that were over five times 5
their anticipated benefits determined by E3 studies. Avista’s resource mix and transmission 6
connection to other EIM participants most closely matches IPC and PGE so Avista should 7
observed higher benefits during volatile market conditions. In 2019, CAISO also reported annual 8
benefits for IPC and PGE of $28.2 million and $42.9 million respectively, well above estimated 9
studied values. 10
There are other operational benefits associated with EIM participation that were not 11
quantified in the E3 study. Participation in the EIM will improve system visibility and reliability 12
through improved modeling and new real-time monitoring. EIM participants also experience 13
improved outage coordination, both internal and external. According to the 2020 CAISO second 14
quarter EIM benefit report, a utility’s total flexible ramping requirement can be reduced by 47-15
54% because of the load and generation diversity that exists across the larger EIM footprint. 16
That flexible ramping requirement reduction is shared among the EIM participants. The 17
CAISO also calculates a reduction in renewable curtailments and associated greenhouse gas 18
emission as a result of EIM participation. None of these additional benefits were given an 19
economic value in the E3 study. However, after entering the EIM, Avista’s customers will see 20
some unquantified financial benefit from these operating efficiencies. 21
Kinney, Di 17
Avista Corporation
V. COST BENEFIT ANALYSIS 1
Q. Did Avista conduct an economic analysis to support joining the EIM? 2
A. Yes. Prior to deciding to join the EIM, Avista performed an initial economic 3
analysis to determine the system annual benefits required to breakeven over a ten-year operating 4
period based on initial estimated EIM implementation and on-going costs based on two scenarios. 5
The first scenario assumed integration costs of $21.4 million and on-going costs of $3.5 million 6
(original expected system project costs) and the second scenario assumed integration costs of $26.7 7
million and on-going costs of $4.0 million (expected system with contingency). In order to break 8
even in 10 years, assuming integration costs of $21.4 million, Avista would need to achieve system 9
annual benefits of approximately $5.0 million. Assuming integration costs of $26.7 million, Avista 10
would need to achieve annual system benefits of approximately $6.0 million. As previously 11
discussed, based on the E3 benefit analysis, Avista estimated conservative annual EIM benefits of 12
$5.8 million (system). Therefore, Avista initially anticipated positive revenue from EIM 13
participation in less than 10 years and could achieve breakeven much sooner if observed market 14
benefits are closer to what IPC and PGE have experienced in 2018 and 2019. 15
As previously discussed, the integration and on-going estimates associated with EIM 16
operations were updated based on the preferred Human Resource Plan and the inclusion of all 17
costs associated with required EIM modifications to the ADSS program (previously budgeted in a 18
different capital business case). Avista performed an additional economic analysis with the new 19
costs estimates. Based on the new integration cost of $32.1 million and on-going costs of $3.9 20
million, an annual revenue of $7.8 million is needed to breakeven after 10 years of market 21
operations. This is still well within the range of estimated benefits determined by E3 and quite a 22
bit less than CAISO reported benefits for IPC and PGE in 2018 and 2019. If Avista’s actual EIM 23
Kinney, Di 18
Avista Corporation
system benefits are closer to the potential upper bound of $12 million, as determined by E3 and 1
experienced by other similar situated EIM participating utilities, then Avista customers will see 2
positive revenue in a much shorter time period. The economic analysis did not consider other EIM 3
benefits such as reduced flexible ramping requirements, reliability and system visibility 4
enhancements, and reductions in greenhouse gases. The economic analyses conducted for both 5
the original and updated project cost estimates are provided in my workpapers accompanying this 6
filed case. 7
8
VI. REQUESTED CAPITAL RATE RECOVERY 9
Q. Please provide a summary of the EIM capital projects included in this rate 10
filing? 11
A. In order to prepare for EIM entry, Avista will need to implement a variety of EIM 12
software solutions, perform metering upgrades at a majority of its generation and substation 13
interconnection sites, install generation control systems and upgrade network communications. 14
When planning these capital investments, Avista partnered with Utilicast to leverage their market 15
knowledge and understand the implication of project scope decisions. The Company also sought 16
input from CAISO on market requirements. During the metering upgrade planning process, 17
multiple solutions were discussed for satisfying metering requirements with financial tradeoff 18
implications of reprogramming meters where possible, taking a metering correction factor or the 19
physical location of where a new meter should be installed within a substation, and the likelihood 20
that a generator will be bid into the EIM. During the EIM software procurement and planning 21
process, options for internal development, integrating multiple EIM software vendor solutions and 22
the option of choosing one main EIM software vendor to reduce integration risk was discussed and 23
Kinney, Di 19
Avista Corporation
evaluated prior to making a final selection. 1
After a year into the EIM integration effort and acquiring a better understanding of the 2
market requirements and how Avista planned to accommodate those requirements, Avista updated 3
its cost estimates in the October 2020 Program Scope document. The Scope Document reflected 4
$24.1 million, with $2.6 million planned in contingency, for a total estimated capital spend of 5
$26.7 million. Of the $24.1 million implementation capital, $2.3 million was attributed to the 6
incremental EIM employees that will be hired to support implementation efforts and on-going 7
operations. The risk of not implementing the projects as planned in the Scope document, puts 8
Avista at risk for a delayed market entry and/or incurring unplanned market settlement charges 9
that may decrease Avista’s EIM benefit or operational efficiency in the market. Avista 10
acknowledges the business operational shift the EIM has brought to participating utilities and made 11
project decisions based on the long-term involvement in the market and the best approach to 12
position Avista for operational success. 13
Table No. 7 below provides a summary of the EIM capital projects by business unit and 14
type of work with spend estimates by year. These estimates are representative of the Scope 15
document, with an estimated allocation of contingency across business units and the inclusion of 16
the estimated labor costs associated with the new EIM employees supporting EIM software testing 17
and completing parallel operations within the ET Hardware/Software project area. The costs 18
shown in 2019 and 2020 are actual spend and costs shown in 2021 and 2022 are estimates based 19
on the EIM Scope. 20
Kinney, Di 20
Avista Corporation
Table No. 7 – EIM Capital Project Summary - Spend6 1
2
3
4
5
6
7
Additional detail of the EIM capital projects are included in the EIM Capital Business Case 8
provided as Exhibit No. 8, Schedule 12. 9
Q. Please describe the EIM Transmission Facilities Upgrade project. 10
A. To prepare for EIM operations, Transmission System Operations needed to install 11
a new EIM Operator workstation, along with the associated hardware, for the new 24x7 EIM 12
Operations desk at both the main control center and the backup control center. Based on the EIM 13
Scope estimate, including contingency, Avista planned for two workstation projects with a capital 14
estimate of $0.5 million. 15
Q. Please describe the ET Network projects. 16
A. To ensure the reliable data transmission of 5-minute interval meter data for EIM 17
settlements, network improvement projects were needed at substation interconnection locations 18
and generation sites. Avista’s pre-EIM network capabilities consisted of various network 19
protocols, including dial up communications and the use of SCADA and Plant Information (PI) 20

6 Amounts in Table No. 7 above are based on capital addition spend as described in the EIM Scope document, as of
the filing of this case. See also Table No. 2 above. As noted below, the timing by year and total amounts vary from
Table No. 8 below, as that table reflects transfer-to-plant data, as well as estimated transfer-to-plant amounts available
at time of completion of the Company’s revenue requirement in this case.
2019 2020 2021 2022
EIM Transmission Facilities Upgrade -$ 186,121$ 303,479$ 489,600$
ET Network 322,855$ 1,181,526$ 736,619$ 2,241,000$
ET Hardware/Software 348,589$ 3,685,971$ 6,726,093$ 5,601,847$ 16,362,500$
EIM Low Side Metering Upgrades - Generation 43,949$ 907,084$ 64,767$ 1,015,800$
EIM High Side Metering Upgrades - Generation 263,590$ 1,383,645$ 747,065$ 2,394,300$
EIM Control Upgrades - Generation 437,178$ 789,440$ 688,882$ 1,915,500$
Trans Substation Metering - EIM 16,462$ 590,144$ 462,094$ 1,068,700$
Trans High Side Metering - EIM 77,636$ 641,263$ 496,501$ 1,215,400$
System Ops SCADA Upgrades - EIM -$ -$ 274,500$ 274,500$
EIM HR FTEs -$
Contingecy -$
Other*-$ -$ -$ (285,336)$
Totals 1,510,259$ 9,365,194$ 10,500,000$ 5,601,847$ 26,691,964$
EIM Project Area Capital Budget Year Totals
Kinney, Di 21
Avista Corporation
averages, along with manual processes, to collect data for hourly reconciliation. These processes 1
and the associated data were not scalable or reliable for accurate 5-minute interval EIM metering 2
and settlements. To address this, Avista planned the following type of network upgrades: install 3
Internet Provider (IP) communications through a Network Service Provider (NSP), install IP 4
communications through a wireless cellular option, or increase Avista network capacity at 5
locations where IP connectivity already existed. Based on the EIM Scope estimate, including 6
contingency, Avista planned for approximately 33 network improvement projects across 7
generation and substation interconnection sites with a capital estimate of $2.2 million. 8
Q. Please describe the ET Hardware/Software projects. 9
A. In order to operate in the CAISO EIM, multiple software applications were needed 10
to process 5-minute operational data, comply with the market operating deadlines and satisfy the 11
market requirements needed for successful EIM operations. For Avista, this meant the 12
procurement and installation of nine major software systems, including: 13
• Generation Outage Management System (GOMS) – Performs functions to submit 14
planned and unplanned outages to CAISO for all generation units. 15
16
• Transmission Outage Management System (TOMS) – Performs functions to submit 17
planned and unplanned outages to CAISO for transmission lines. 18
19
• Participating Resource Bidding & Scheduling System (PRSC) – Performs functions 20
to allow Merchant department to submit bids and base schedules to CAISO for 21
participating resources. 22
23
• EIM Entity Scheduling System (EESC) – Performs functions to allow the EIM Entity 24
(Balancing Authority) to submit base schedules for both participating resources and 25
non-participating resources. 26
27
• Energy Accounting System – Performs meter verification, estimation and editing 28
(VEE) for generation and interchange meters to produce and share Settlement Quality 29
Meter Data (SQMD) with CAISO. 30
31
Kinney, Di 22
Avista Corporation
• PRSC Settlement System – Performs Merchant settlement functions for the 1
participating resources and activities. 2
3
• EESC Settlement System – Performs EIM Entity settlement functions for non-4
participating resources and transmission purchases. 5
6
• Performance & Analytics System – Performs near real-time market analysis and 7
monitoring functions to evaluate market performance. 8
• Meter Head-End System – Collects interval meter data from generation and 9
substation interconnection meters for market submission and settlements. 10
11
In addition to these purchased software applications, Avista also planned to enhance the 12
Avista Decision Support System (ADSS) – Avista’s in-house bidding and optimization application 13
– for EIM operations. These enhancements were intended to expand the ADSS software to create 14
intra-hour optimization runs and automated resource bidding, along with required integrations with 15
the OMS, PRSC and EESC. 16
Based on the Scope estimates, contingency and new labor, Avista planned for the major 17
projects listed above, as well as other software and hardware projects, with a capital estimate of 18
$16.4 million. 19
Q. Please describe the EIM Low Side Metering Upgrades for Generation. 20
A. To meet the CASIO requirement of revenue quality metering and the reliable 21
collection of 5-minute interval meter data for EIM settlements, metering improvement projects 22
were needed at some generation sites. Avista’s metering improvement decision was also 23
influenced by the planned resource participation strategy employed at each generation site. Low-24
side meter (LSM) projects planned to install SEL-735 meters at the plant-side of the Generator 25
Step Up (GSU) transformer in accordance with Avista’s most current SEL-735 Combined 26
(interchange and generation) Meter Setting Standard. LSM meters validate market resource 27
configurations and related metering components in alignment with the physical characteristics and 28
Kinney, Di 23
Avista Corporation
the EIM participation level at generating unit or station service. When an LSM is installed, revenue 1
class Current Transformers (CTs)/Potential Transformers (PTs) are added or existing non-revenue 2
class CTs/PTs are utilized with an appropriate compensation factor applied. LSM projects involve 3
SCADA and network communication improvements, as well as configuration in the head-end 4
meter collection system (MV-90). Based on the EIM Scope estimates, including contingency, 5
Avista planned for three LSM capital projects at an estimate of $1.0 million. 6
Q. Please describe the EIM High Side Metering Upgrades for Generation. 7
A. To meet the CASIO requirement of revenue quality metering and the reliable 8
collection of 5-minute interval meter data for EIM settlements, metering improvement projects 9
were needed at some generation sites. Avista’s metering improvement decision was also 10
influenced by the planned resource participation strategy employed at each generation site. High-11
side meter (HSM) projects planned to install SEL-735 meters on the substation-side of the GSU in 12
accordance with Avista’s most current SEL-735 Combined Meter Setting Standard. These meters 13
validate market resource configurations, and related metering components in alignment with the 14
physical characteristics and EIM participation level of all generation units feeding the metered 15
GSU and station service. When an HSM is installed at a participating resource, revenue class 16
CTs/PTs are often installed as part of the project since existing CTs/PTs do not have the required 17
accuracy to meet CAISO standards. HSM projects involve SCADA and network communication 18
improvements, as well as configuration in the head-end meter collection system (MV-90). Based 19
on the EIM Scope estimates, including contingency Avista planned for seven HSM projects with 20
a capital estimate of $2.4 million. 21
Q. Please describe the EIM Control Upgrades for Generation. 22
A. To meet CAISO requirements for market dispatch, some generation sites required 23
Kinney, Di 24
Avista Corporation
Programmable Logic Control (PLC) additions and/or other plant control changes to participate in 1
the market and follow market dispatch signals. The decision to conduct PLC projects were 2
influenced by Avista’s resource participation strategy and existing control equipment capability at 3
market participating resource sites. The EIM PLC projects planned to install a PLC system to act 4
as an interface point between Avista’s Supervisory Control and Data Acquisition (SCADA) 5
system, plant high-side meters, low-side meters and plant unit controllers. The PLC receives plant 6
MW set points from SCADA, from Avista plant operators or the EIM, and delivers the unit MW 7
set point to the existing plant PLC. It also receives HSM, unit, and station service inputs, as well 8
as meter position switch inputs and other plant operating parameters. Based on the EIM Scope 9
estimates, including contingency, Avista planned for two PLC projects with a capital estimate of 10
$1.9 million. 11
Q. Please describe the Transmission Substation and Transmission High Side 12
Metering projects for EIM. 13
A. To meet the CASIO requirement of revenue quality metering and the reliable 14
collection of 5-minute interval meter data for EIM settlements, metering improvement projects 15
were needed at some substation interconnection sites and third-party generation sites. The Scope 16
document estimates represented this work in terms of meter reprograming (expense costs) and 17
meter replacement (capital costs). Through the planning process, it was determined if a meter 18
replacement should occur on the distribution voltage side or the transmission voltage side of the 19
substation transformer. Transmission Substation Metering projects planned to install SEL-735 20
meters on the distribution voltage side of the substation transformer, while Transmission High 21
Side Metering projects planned to install SEL-735 meters on the transmission voltage side of the 22
Kinney, Di 25
Avista Corporation
substation transformer – both in accordance with Avista’s most current SEL-735 Combined Meter 1
Setting Standard. 2
These new meters integrate with the MV-90 billing recorders and provide EIM 3
information to the SCADA and Generation Distributed Network Protocol Maps. In some cases, 4
accompanying integration equipment was also required, such as a Remote Terminal Unit, GPS 5
clock, security appliances, and/or an Ethernet switch. Based on the EIM Scope estimates, 6
including contingency, Avista planned for nine Substation Metering projects at an estimated cost 7
of $1.1 million and 13 Transmission High Side Metering projects at an estimated cost of $1.2 8
million. 9
Q. Please describe the System Ops SCADA Upgrades for EIM. 10
A. In order to receive market dispatch signals from CAISO’s Automated Dispatch 11
System (ADS), Avista needed to procure an add-on dispatch module from General Electric (GE) 12
– its current SCADA software provider. The CAISO ADS provides the market Dispatch Operating 13
Targets (DOTs) which the EIM entity uses to control its generation plants. Resources registered 14
as participating market resources and awarded a market dispatch will be sent operating targets 15
from ADS through this add-on dispatch module, and plant control systems will follow the dispatch 16
targets to achieve the targeted energy output. Based on the EIM Scope estimates, including 17
contingency, Avista planned for one SCADA dispatch project with a capital estimate of $0.3 18
million. 19
The final row in Table No. 7 above labeled “Other” reflects a reduction in overall project 20
scope changes of $285,000 that occurred after the completion of the pro forma adjustments 21
included in the Company’s revenue requirement in this case. This scope change, as well as the net 22
Kinney, Di 26
Avista Corporation
2020 2021 2022 Totals
EIM Transmission Facilities Upgrade 199,700$ 289,900$ -$ 489,600$
ET Network 819,400$ 1,421,600$ -$ 2,241,000$
ET Hardware/Software 449,200$ 4,146,300$ 11,767,000$ 16,362,500$
EIM Low Side Metering Upgrades - Generation 392,800$ 623,000$ -$ 1,015,800$
EIM High Side Metering Upgrades - Generation 1,197,400$ 1,196,900$ -$ 2,394,300$
EIM Control Upgrades - Generation -$ 1,915,500$ -$ 1,915,500$
Trans Substation Metering -EIM 422,500$ 646,200$ -$ 1,068,700$
Trans High Side Metering -EIM 152,600$ 1,062,800$ -$ 1,215,400$
System Ops SCADA Upgrades - EIM -$ 274,500$ -$ 274,500$
Total 3,633,600$ 11,576,700$ 11,767,000$ 26,977,300$
Budget YearEIMProject Area
plant included in the Company’s case will be updated during the pendency of the case, along with 1
actual information that becomes available. 2
Q. What EIM capital investment is the Company seeking recovery for in this rate 3
filing? 4
A. Table No. 8 below provides by project the system pro formed plant additions 5
transferred to plant during 2020 and 2022 included in the Company’s filing. 6
Table No. 8 – Pro Forma Capital Investment – System7 7
8
9
10
11
12
13
As shown in the workpapers supported by Company witness Ms. Schultz, the Company 14
has pro formed gross plant additions of approximately of $8.4 million (Idaho-share) in this case 15
for the period between January 2020 through March 2022 (project completion) on an average-16
monthly-average basis, through the end of the rate-effective period ending August 31, 2023. 17
As discussed by Ms. Andrews, the net plant investment included over the Company’s Two-18
Year Rate Plan, totals approximately $6.4 million (Idaho-share)8, or $5.6 million Rate Year 1, and 19

7 As noted above, the total amount in Table No. 8 varies from Table No.7 and Table No. 2 above. As noted in Table
No. 7, there was a $285,000 overall reduction in the updated EIM Scope estimate for capital additions after completion
of the Company’s revenue requirement. Scope document updates were approved by the EIM Executive Steering
Committee post-filing. Updates for this current information, as well as actual transfer to plant data as available, will
be updated during the pendency of the case.
8 Net plant investment is net of accumulated depreciation and accumulated deferred federal income tax, on an AMA
basis through the rate effective period ending August 31, 2023. See Ms. Schultz workpapers.
Kinney, Di 27
Avista Corporation
$0.8 million Rate Year 2. Depreciation expense associated with this pro forma investment has 1
also been included, resulting in an overall revenue requirement requested in this case of 2
approximately $1.8 million, or $1.3 million in Rate Year 1 and $0.5 million in Rate Year 2. 3
Q. Does this conclude your direct testimony? 4
A. Yes. 5