20210706Application.pdf

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Aviste Cory.
l4l I East Mission P.O. Box3727
Spokane. Washington 99220-4500
Telephone 5D-489-0500
Toll Free 800-727-9170
July 6,2021
Avrr-E- ero6 f nvq- tr- a ro{Diane Hanian, Commission Secretary
Idaho Public Utilities Commission
P O Box 83720
Boise,ID 83720-0074
RE: Application of Avista Corporation for an Accounting Orrder Authorizing Accounting
Treatuent of Costs Related to AFUDC (Allowance for Funds Used During Constnrction).
DearMs. Hanian:
Enclosed is an original and seven (7) copies of Avista's Application for an Accounting Order
Authorizing Accotmting Treatment of Costs Related to AFLTDC (Allowance for Frmds Used During
Constnrction).
Please direct any questions on this matter to Elizabeth Andrews at [phone] or myself at
(soe) 49s-8620.
Pafirick Ehftar
Director of Regulatory Affairs
AvistaUtilities
pat.ehrbar@avi stacom.com
509-495-8620
Enclosurps
DAVID J. MEYER
VICE PRESIDENT AND CHIEF COTJNSEL FOR
REGULATORY AND GOVERNMENTAL AFFAIRS
AVISTA COPJORATION
P.O.BO){3727
14I I EAST MISSION AVENUE
SPOKANE, WASHINGTON 9922A 37 27
TELEPHONE: [phone]
[e-mail]
BEFORE THE IDAIIO PUBLIC UTILITIES COMMISSION
IN TIM MATTER OF THE APPLICATION OF
AVISTA CORPORATION, D/B/A AVISTA
UTILITIES FOR AN ACCOUNTING ORDER
AUT}IORZING ACCOI.]NTING AND
RATEMAKING TREATMENT OF AFUDC
(ALLOWANCE FOR FI.INDS USED DURING
CONSTRUCTION)
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CASE No. AW-E-2I-eh
CASENO. AVU-c-2l-pl
APPLICATION OF AVISTA CORPORATION
1 L INTRODUCTION
Avista Corporation, doing business as Avista Utilities (hereinafter "Avista" or
"Company"), at l,4ll East Mission Avenue, Spokane, Washington, pursuant to Section 61-
524ldaho Code and Rule 52 of the Idaho Public Utilities Commission ("Commission Rules
of Procedure"), hereby applies to the Commission for an order authorizingthe accounting and
ratemaking treatment detailed in this Application related to the deferred portion of its
calculated Allowance for Funds Used During Construction ("AFUDC").
The Company filed an accounting application related to AFUDC on February 1,2019,
which the Commission approved on May 2,2019 (Order No. 34326 in Docket Nos. AVU-E-
t9-02 and AVU-G-19-01).! In that application, the Company requested approval to defer
costs related to AFUDC, for the difference calculated between using the State AFUDC rate
and the FERC AFUDC rate as a regulatory asset (i.e. FERC Account No. 182.3). In that
filing, the Company had requested Commission approval to amortize this regulatory asset
over the composite remaining life of the plant-in-service. This application seeks approval to
amortize the regulatory asset using the approved depreciation rate by plant FERC account
that has been approved by the Commission in the most recent depreciation study and to be
able to update the amortization rate with each depreciation study going forward.
Avista is a utility that provides service to approximately 387,000 electric customers
and 251,000 natural gas customers in a 26,000 square-mile area in eastern Washington and
northem Idaho. Avista Utilities also serves approximately 103,000 natural gas customers in
I Avista submitted a second Application to comply with a recommendation that FERC made in its final audit
report dated September 19,2019. FERC had recommended that Avista reclassifr a portion of AFUDC recorded
from January l, 2010 going forward from plant rate base (FERC Account No. l0l - Plant-in-service) to a
regulatory asset rate base (FERC Account No. 182.3 - Regulatory Asset (AFUDC)). The Commission approved
this second application on April 7,2020 with OrderNo.3462l.
Application of Avista Corporation
Case No. AVU-E-2l- &, AVU-G-2I-
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Oregon. The largest community served by Avista is Spokane, Washington, which is the
location of its main office.
Pursuant to Commission Rule of Procedure 201, the Company requests that this
filing be processed under the Commission's rules for Modifred Procedure.
Communications in reference to this Application should be addressed to:
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David J. Meyer, Esq.
Vice President and Chief Counsel for
Regulatory & Govemmental Affairs
P.O.Box3727
1411 E. Mission Avenue, MSC 13
Spokane, Washington 9922A47 27
Telephone: [phone]
Facsimile: [phone]
E-mail : [e-mail]
Patrick Ehrbar
Director of Regulatory Affairs
Avista Corporation
P. O.Box3727
1411 E. Mission Avenue, MSC 27
Spokane, Washingto n 99220-37 27
Telephone: [phone]
Facsimile: [phone]
E-mail: [e-mail]
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II. BACKGROUND
The Federal Energy Regulatory Commission (FERC) notified Avista in December
2017 that they would be auditing the Company's compliance with Form 1 and 3-Q, and
accounting requirements of the Uniform System of Accounts under CFR part 101. During
the course of the audit (which was completed in September 2Al9), FERC staff made
recommendations regarding the recording of AFUDC. Based on those discussions, the
Company implemented revised accounting in 2018 for AFUDC. The Commission
approved the revised accounting on May 2,2019 (Order No. 34326). The order stated the
following:
"We have reviewed the Application and the comments of Commission
Staff. Based on our review, we find it reasonable to approve the
Application. There will be no impact on the Company's overall rate
base, and the move will align the Company's practices with FERC
procedures."
Application of Avista Corporation
Case No. AVU-E-2l - &, AVU-G-2I-
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UI. EXPLANATION OF CHANGE REQUESTEI)
AFUDC represents the cost of both the debt and equity funds used to finance utility
plant additions during the construction period. As prescribed by regulatory authorities,
AFUDC is capitalized, during construction, as part of the cost of utility plant. The
Company is permitted, under established regulatory practices, to recover the capitalized
AFUDC through its inclusion in rate base and the provision for depreciation after the
related utility plant is placed in service. Avista capitalizes AFUDC in Washington, Idaho
and Oregon on a monthly basis using the Washington Utilities and Transportation
Commission (WUTC) approved Rate of Return (ROR) from the most recent general rate
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On the other hand, the AFUDC FERC rate is calculated based on guidance in the
Uniform System of Accounts under CFR part l0l. FERC has indicated that if the FERC
AFUDC rate is different than the state approved rate, the AFUDC capitalized should be
split between utility plant (FERC Account No. 101) and regulatory asset (FERC Account
No. 182.3). The amount capitalized as utility plant would be based on the FERC AFUDC
rate. The amount included as a regulatory asset would be the difference between the State
AFUDC rate and the FERC AFUDC rate.
For the AFUDC capitalized to plant-in-service, the depreciation rate is determined
by a depreciation study at the individual plant account level that is performed periodically.
Avista's last depreciation study was approved March 19 2019 with Order 34276 (Docket
Nos. AVU-E-18-03 and AVU-G-18-02). When Avista filed the original accounting
application to defer a portion of the AFUDC, Avista asked and was approved to use a
2 The use of Avista's ROR authorizedby the Washington Commission, its major jurisdiction, as the AFUDC
rate has been consistently used in Idaho since the 1980's.
Application of Avista Corporation
Case No. AVU-E-2I- & AVU-G-2I-
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composite rate of depreciation expense for all plant-in-service to amortize the deferred
costs. This was because Avista did not know the capabilities of its software that would
track the deferred AFUDC costs. Avista is currently working with its software vendor to
automate the deferral, tracking and amortization of the defened AFUDC costs. The
software has the capability to amortize the regulatory asset in the same manner as the other
AFUDC capitalized to plant-in-service. Avista believes this is a better method of
amortization and therefore, requests approval from this Commission to use that method. In
2020 Avista had amortization expense of approximately $400,000 for Idaho electric service
and $45,000 for Idaho natural gas service using the current approved method of using the
composite remaining life method of amortization. The annual amortization will not
materially change using the proposed method for calculating amortization.
ry. OTHER CONSIDERATIONS
Avista has obtained approval from the Washington Utilities and Transportation
Commission and will request approval from the Public Utilities Commission of Oregon for
using this method of amortization of the deferred AI.'UDC costs. It is critical that the
Company maintain uniform utility accounts and AFUDC methodology for common plant
that are consistent among the Company's regulatory jurisdictions. In the event different
AFUDC methods were to be ordered for common plant, it would result in multiple sets of
depreciation accounts and records that would need to be adjusted annually for changes in
allocation factors, which would impose a costly administrative burden on the Company and
unnecessary expense for the Company's ratepayers.
Application of Avista Corporation
Case No. AVU-E-2I- &, AVU-G-2l-
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v. REQUEST FOR RELIEF
WHEREFORE, Avista respectfully requests that the Commission issue an Order
approving the requested deferred accounting and ratemaking treatment, as follows:
For the AFUDC that the Company was authorized to defer (which was the
AFUDC difference calculated between using the state AFUDC rate and the FERC
AFUDC rate) as a regulatory asset (i.e. FERC Account No. 182.3), Avista is
authorized to amortize this regulatory asset over the same life for each plant FERC
account as the plant-in-service, as described in this Application. The life and rate
will be determined by a depreciation study that is performed periodically and
approved by this Commission.
The Company requests that the matter be processed under the Commission's
Modified Procedure rules through the use of written comments.
DATED at Spokane, Washington, this(4$'ay of July 2021.
AVISTA CORPORATION
By
Patrick Ehrbar
Director of Regulatory Affairs
Avista Corp
Application of Avista Corporation
Case No. AVU-E-2I - & AVU-G-2I-
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VERIFICATION
STATE OF WASHTNGTON )
)CountyofSpokane )
Patrick Ehrbar, being duly swom, on oath deposes and says:
That he is the Director of Regulatory Affairs of Avista Corporation;
That he has read the foregoing Application, knows the contents thereof, and
believes the same to be true.
Patrick Ehrbar
/tl
Subscribed and sworn to before me this @_ au1 of July 2021
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Notary Public in and for the State
Washington, residing in Spokane
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Application of Avista Corporation
Case No. AW-E-21- &, AVU-G-2I-
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