20211022Decision Memo.pdf

DECISION MEMORANDUM 1
DECISION MEMORANDUM

TO: COMMISSIONER KJELLANDER
COMMISSIONER RAPER
COMMISSIONER ANDERSON
COMMISSION SECRETARY
COMMISSION STAFF
LEGAL

FROM: RILEY NEWTON
DEPUTY ATTORNEY GENERAL

DATE: OCTOBER 22, 2021

SUBJECT: IN THE MATTER OF THE COMMISSION STAFF’S APPLICATION TO
UPDATE AVISTA CORPORATION’S COST OF CAPITAL INPUTS IN
THE SURROGATE AVOIDED RESOURCE METHOD; CASE NO. AVU-
E-21-16.

On October 22, 2021, the Commission Staff (“Staff”) applied to the Commission
requesting approval of an update to the cost of capital inputs in the Surrogate Avoided Resource
method (“SAR Method”) for Avista Corporation (“Avista”). Staff requests its Application be
processed by Modified Procedure under the Commission’s Rules of Procedure.
APPLICATION
The Commission has approved the SAR Method for calculating the avoided cost rates
for Public Utilities Regulatory Policies Act of 1978 qualifying facilities (“QFs”) paid by Idaho
Power, Avista, and Rocky Mountain Power. Application at 1.
Staff asserts that the Commission calculates and publishes SAR Method rates for QFs
that are under the applicable resource type project eligibility cap. Id. Staff states the SAR Method
uses each utility’s approved cost of capital from their last general rate case. Id. Avista’s current
cost of capital used in the SAR Method was determined in Case No. AVU-E-19-04. See Order
No. 34499.
On September 1, 2021, the Commission issued Order No. 35156 in Avista’s most
recent general rate case (Case No. AVU-E-21-01) triggering an update to Avista’s SAR method
cost of capital inputs. Staff states the cost of debt has changed from 5.2% to 4.70%, and the cost
of common equity has changed from 9.5% to 9.40%. See Order No. 35156 at 3. As a result, the
weighted cost of capital has changed from 7.35% to 7.05%. Id.
DECISION MEMORANDUM 2

STAFF RECOMMENDATION
Staff recommends the Commission issue a Notice of Application and Notice of
Modified Procedure establishing a 21-day comment period and a 7-day reply period.
COMMISSION DECISION
Does the Commission wish to issue a Notice of Application and Notice of Modified
Procedure and establish a 21-day comment period and a 7-day reply period?

__________________________
Riley Newton
Deputy Attorney General

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