20210812Comments.pdf

DAYN HARDIE
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, TDAHO 83720.007 4
(208) 334-03t2
IDAHO BAR NO. 9917
Street Address for Express Mail:
I I33 I W CHINDEN BLVD, BLDG 8, SUITE 201-A
BOISE, TD 83714
Attorney for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
: -. !:ll a;. l. {!L ;,: a.'iu
IN THE MATTER OF AVISTA'S
APPLICATION FOR AN ACCOUNTING
ORDER AUTHORIZING ACCOUNTING
AND RATEMAKING TREATMENT OF
COSTS RELATED TO ALLOWANCE FOR
FUNDS USED DURING CONSTRUCTION
CASE NO. AVU.E.2I-O6I
AVU-G-21-05
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COMMENTS OF THE
COMMISSION STAFF
STAFF OF the Idaho Public Utilities Commission, by and through its Attomey of
record, Dayn Hardie, Deputy Attorney General, submits the following comments.
BACKGROUND
On July 6,2021, Avista Corporation dba Avista Utilities ("Company") applied to the
Commission for authorization of accounting and ratemaking treatment related to Allowance for
Funds Used During Construction ("AFUDC").
The Company seeks authority to amortize the regulatory assetl using the approved
depreciation rate by Federal Energy Regulatory Commission ("FERC") plant account 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.
I The Company was authorized to defer the difference calculated between the state regulatory AFUDC rate and the
FERC AFUDC rate and arnortize the balance over the composite remaining life of the plant-in-service in Case Nos.
AVU-E-19-02 and AVU-G-19-01. See OrderNo. 34326.
STAFF COMMENTS AUGUST I2,2O2I
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.2
The Company has received approval from the Washington Utilities and Transportation
Commission ("WUTC") and will request approval from the Oregon Public Utility Commission
of ("OPUC") to use the same method of amortization of the deferred AFUDC costs it seeks
approval to use in Idaho.3
STAFF ANALYSIS
Staff reviewed the Company's Application requesting Commission approval of the
accounting and ratemaking treatment related to AFUDC. Based on its review, Staff recommends
approval of the Company's request to use the Commission approved depreciation rates by FERC
account. The proposed accounting treatment will result in immaterial changes to the Company's
overall rate base and will have no impact on ratepayers.
AFUDC
AFUDC represents the cost of both the debt and equity funds used to finance utility plant
additions during the construction period. AFUDC is capitalized as part of the cost of the utility
plant and is included in rate base. The Company recovers the investment in utility plant, along
with the capitalized AFUDC, through depreciation expense over the expected life of the plant.
During a recent FERC audit, FERC staff recommended that the Company use the
authorized FERC rate to calculate AFUDC on transmission projects under FERC's jurisdiction.
The FERC rate is calculated based on guidance in the Uniform System of Accounts under CFR
part l0l. The Company has been calculating AFUDC based on the most recent Weighted
Average Cost of Capital ("WACC") approved by the WUTC. FERC staff has indicated that if
the FERC rate is different than the state approved rate, the capitalized AFUDC should be split
between utility plant and a regulatory asset. The amount included in the regulatory asset would
be the difference between the AFUDC calculated using the rate approved by the WUTC and the
AFUDC calculated using the FERC rate. After issuance of Order No. 34326, the Company
2 The Company's last depreciation study was approved March 19, 2019, in Case Nos. AVU-E-18-03 and
AVU-G-18-02. See Order No. 3427 6.
3 The Company states it is critical to maintain uniform utility accounts and AFUDC methods for common plant
among the Company's regulatory jurisdictions.
2STAFF COMMENTS AUGUST I2,2O2I
booked a portion of AFUDC to the regulatory asset and began amortizing the regulatory asset
using the composite remaining life of the plant-in-service. This approach ensured customer rates
will not increase and rate base will not change because the different AFUDC rates.
When the Company filed the original accounting application to defer a portion of the
AFUDC in Case Nos. AVU-E-19-02 and AVU-G-I9-01, the Commission approved the
Company's request to amortize the AFUDC regulatory asset using a composite rate of
depreciation expense for all plant-in-service. At that time, the Company did not know the
capabilities of its software that would eventually track the deferred AFUDC costs. The
Company is working with its software vendor to automate the deferral, tracking, and
amortization of the deferred AFUDC costs. The Company states that the software has the
capability to amortize the regulatory asset in the same manner as the other AFUDC capitalized to
plant-in-service. Hence, the Company requests to update the amortization rates with the most
recent depreciation rates approved by the Commission in the last depreciation study.
The Company's proposed accounting treatment has already been approved by the WUTC
and the Company will soon make a similar request with the OPUC. By maintaining uniform
utility accounts and AFUDC methods for common plant consistent among the Company's
regulatory jurisdictions, the Company will not need to keep multiple sets of depreciation
accounts and records that would have to be adjusted annually for changes in allocation factors.
Approval of the Company's recommended accounting treatment eliminates a costly
administrative burden on the Company and unnecessary expense for customers.
STAFF' RECOMMENDATION
Staff recommends the Commission approve the Company's proposed accounting treatment
to amortize the AFUDC regulatory asset over the depreciation life for each FERC plant account
using the Company's current depreciation rates as approved in Order No. 34276. Staff also
recommends the amortization rate be updated periodically as the Company receives approval of
new depreciation rates.
JSTAFF COMMENTS AUGUST 12,2021
lLburrof August 2021Respectfully submitted this
Technical Staff: Travis Culbertson
i:umigc./comment/avw21.6_ryug2l.5dhfirc connnens
DeputyAttomey General
4STAFF COI\{MENTS AUGUST I2,2O2I
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS l2th DAY OF AUGUT 2021,
SERVED THE FOREGOING COMMENTS OF TIIE COMMISSION STAF'f,', IN
CASE NOS. AVU,E-2I-06IAVU-G-21.05, BY E-MAILING A COPY THEREOF, TO
THE FOLLOWING:
PATRICK EHRBAR
DIR OF REGULATORY AFFAIRS
AVISTA CORPORATION
PO BOX3727
SP0KANE WA99220-3727
E-mail : [e-mail]
avistadockets@ avi stacom.com
DAVID J MEYER
VP & CHIEF COUNSEL
AVISTA CORPORATION
PO BO)( 3727
SPoKANE WA99220-3727
E-mail: [e-mail]
SECRET
CERTIFICATE OF SERVICE