HomeMy WebLinkAbout20230710Application_Cover Letter.pdf
Avista Corp.
1411 East Mission P.O. Box 3727
Spokane, Washington 99220-0500
Telephone 509-489-0500
Toll Free 800-727-9170
July 10, 2023
Jan Noriyuki, Secretary
Idaho Public Utilities Commission
11331 W. Chinden Blvd.
Bldg. 8, Suite 201-A
Boise, Idaho 83714
Re: Case No. AVU_23- - Avista Corporation Application for an Accounting Order
Dear Ms. Noriyuki:
Avista Corporation, dba Avista Utilities (Avista or the Company) hereby provides the
enclosed application for an order authorizing the accounting and ratemaking treatment related to
Avista’s investment in Advanced Metering Infrastructure (AMI). Please direct any questions
related to this filing to Liz Andrews at 509-495-8601 or Pat Ehrbar at 509-495-8620.
Sincerely,
/S/Elizabeth Andrews
Elizabeth Andrews
Sr. Manager of Revenue Requirements
RECEIVED
2023 JULY 10, 2023 4:12PM
IDAHO PUBLIC
UTILITIES COMMISSION
CASE NO. AVU-E-23-07/AVU-G-23-04
Application of Avista Corporation Page 1
Case Nos. AVU-E-23-___ and AVU-G-23-__
DAVID J. MEYER 1
VICE PRESIDENT AND CHIEF COUNSEL FOR 2
REGULATORY AND GOVERNMENTAL AFFAIRS 3
AVISTA CORPORATION 4
P.O. BOX 3727 5
1411 EAST MISSION AVENUE 6
SPOKANE, WASHINGTON 99220-3727 7
TELEPHONE: (509) 495-4316 8
EMAIL: DAVID.MEYER@AVISTACORP.COM 9
10
11
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION 12
13
14
15
IN THE MATTER OF THE APPLICATION ) CASE NO. AVU-E-23-__ 16
OF AVISTA CORPORATION FOR ) CASE NO. AVU-G-23-__ 17
AN ACCOUNTING ORDER AUTHORIZING ) 18
ACCOUNTING AND RATEMAKING ) APPLICATION OF AVISTA 19
TREATMENT OF COSTS ASSOCIATED WITH ) CORPORATION FOR 20
THE COMPANY’S INVESTMENT IN AMI ) DEFERRAL COSTS 21
(ADVANCED METERING INFASTRUCTURE) ) ASSOCIATED WITH AMI 22
23
I.INTRODUCTION24
Avista Corporation, doing business as Avista Utilities (hereinafter Avista or Company), 25
at 1411 East Mission Avenue, Spokane, Washington, pursuant to Section 61-524 Idaho Code 26
and Rule 52 of the Idaho Public Utilities Commission (“Commission Rules of Procedure”), 27
respectfully requests that the Commission issue an order authorizing the accounting and 28
ratemaking treatment related to Avista’s investment in Advanced Metering Infrastructure 29
(AMI). In this filing, the Company is requesting Commission approval of the following: 30
1.Deferral of the undepreciated net book value of existing electric meters, natural gas31
communicating modules (ERTs) and Automated Meter Reading (AMR)32
communication equipment. Since AMR equipment is currently included in rate33
base earning the authorized rate of return, this regulatory asset will be included in34
rate base until fully amortized. Amortization of the regulatory asset will begin35
immediately upon transferring from plant-in-service to a regulatory asset in the36
amount equal to the depreciation expense included in customers’ rates on the AMR37
equipment.38
39
07
04
Application of Avista Corporation Page 2
Case Nos. AVU-E-23-___ and AVU-G-23-__
2. Adoption of the proposed depreciable life of the AMI electric meters and the AMI 1
natural gas digital monitors. 2
3
3. Deferral of depreciation expense on AMI investment beginning in the month that 4
the first transfer to plant of the AMI investment occurs and continuing monthly 5
until such plant is included in retail rates in a future general rate case proceeding. 6
This regulatory asset will accrue a carrying charge equal to the Company’s 7
authorized rate of return set in Case Nos. AVU-E-23-01 and AVU-G-23-01 and 8
will continue until fully amortized. 9
10
Avista will seek a prudence determination and recovery method of the deferred costs 11
in future Commission proceedings. Pursuant to Commission Rule of Procedure 201, the 12
Company requests that this filing be processed under the Commission’s Modified Procedure 13
rules through the use of written comments. 14
Avista is a utility that provides service to approximately 406,000 electric customers 15
and 373,000 natural gas customers in a 26,000 square-mile area in northern Idaho, eastern 16
Washington, and Oregon. The largest community served by Avista is Spokane, Washington, 17
which is the location of its corporate headquarters. Communications in reference to this 18
Application should be addressed to: 19
David J. Meyer, Esq. Patrick D. Ehrbar 20
Vice President and Chief Counsel for Director of Regulatory Affairs 21
Regulatory and Governmental Affairs Avista Corporation 22
Avista Corporation P.O. Box 3727 23
P.O. Box 3727 1411 E. Mission Avenue, MSC-27 24
1411 E. Mission Avenue, MSC-7 Spokane, WA 99220-3727 25
Spokane, WA 99220-3727 Phone: (509) 495-8620 26
Phone: (509) 495-4316 patrick.ehrbar@avistacorp.com 27
david.meyer@avistacorp.com 28
29
Avista Dockets (Electronic Only) - AvistaDockets@avistacorp.com 30
31
II. BACKGROUND 32
As described in the Idaho Advanced Metering Refresh Project Status Report (Report), 33
provided as Exhibit A, Avista’s AMR system in Idaho was installed beginning in 2005 and has 34
been maintained in service beyond its expected 15-year life. Avista is now at the point where 35
Application of Avista Corporation Page 3
Case Nos. AVU-E-23-___ and AVU-G-23-__
a decision is necessary to replace the AMR system in-kind, or look to a new system, AMI to 1
maintain our meter reading solution. 2
Having operated an AMR system for almost two decades, we are now seeing that key 3
components of this system are no longer being manufactured or supported, and this system 4
needs to be timely replaced or “refreshed” to avoid excessive replacement costs and provide 5
continuing reliable service supporting the Company’s electric and natural gas operations in 6
Idaho. 7
As described in the Report, Avista evaluated the costs and benefits of both AMR and 8
AMI metering solutions to refresh the end-of-life AMR system currently used in Idaho. Based 9
on this analysis, the combination of providing the right solution for Avista’s customer service 10
objectives, at a lower total cost, combined with the greater financial benefits for customers, 11
makes both straightforward and prudent Avista’s decision to refresh its Idaho AMR system 12
with new AMI metering. 13
AMI includes advanced electric meters that are digital meters capable of two-way 14
communication, and which are equipped with the ability to measure the incoming and outgoing 15
flow of electricity from a customer’s premise in configurable intervals that range from five 16
minutes to an hour. This communication capability means the meter can remotely transmit 17
energy-use information to the utility and the customer and can also receive and respond to 18
signals sent from the utility to the meter. Advanced meters themselves are only part of an 19
integrated metering system. The meter must be connected with specialized communication 20
networks and information management systems in order to deliver value to the consumer. This 21
entire system of meters, communications, and digital hardware and software systems is 22
referred to as AMI. 23
The Report provides initial baseline estimates of the costs and benefits of replacing the 24
Application of Avista Corporation Page 4
Case Nos. AVU-E-23-___ and AVU-G-23-__
Company’s existing end-of-life AMR system with either new AMR or AMI metering 1
technology. A comparison of these costs and benefits, as well as the applicability of AMI for 2
meeting Avista’s current and long-term customer service objectives, demonstrates the overall 3
superiority of AMI. These facts clearly support the Company’s decision to move forward with 4
deployment of a new AMI system in Idaho. This analysis supports this accounting application 5
requesting the tracking and recovery of the unamortized value of existing AMR equipment to 6
be removed and replaced during the AMI deployment. Finally, the Report provides a high-7
level overview of the Company’s planned AMI project, including forecasts of expected capital 8
and operating costs and incremental financial and non-financial customer benefits to be 9
delivered by the new system. 10
11
III. SUMMARY OF AVISTA’S AMI PLAN 12
The AMI system is comprised of the following components: 13
AMI Meters - AMI meters measure the incoming and outgoing flow of energy in 14
configurable intervals that range from 5 minutes to an hour. This energy use data is 15
remotely transmitted to the utility, and the meter can also receive and respond to 16
incoming signals and commands. The many other capabilities of AMI meters important 17
in achieving customer benefits are discussed throughout the Report. 18
19
Metering Communications Network - A specialized and secure communication system 20
is required to carry data and communications between the AMI meter and the utility. 21
While there are various options for providing this communication linkage, it often 22
consists of three integrated systems referred to as the Neighborhood Area Network, the 23
Field Area Network and the Wide Area Network. 24
25
Meter Data Collection System (Head End System) - This system is composed of 26
computer hardware and software applications that control and coordinate the meter 27
communication networks. In addition to this function, the system aggregates the usage 28
data from the AMI meters in the field and routes this data to the Meter Data 29
Management system and other specialized software applications. The meter data 30
collection system software is designed and provided by the manufacturer of the 31
advanced meters. 32
33
Meter Data Management System - This system includes computer hardware and 34
Application of Avista Corporation Page 5
Case Nos. AVU-E-23-___ and AVU-G-23-__
software applications that store, validate, edit, and analyze the interval consumption 1
data, as well as coordinate specified metering commands. Meter data information from 2
this system is also routed to other specialized software applications that perform a range 3
of business functions such as customer billing, use of specialized rate options including 4
time-of-use, or the web presentment of customer usage data. The system also serves as 5
the ‘system of record’ for meter consumption data, including out-of-cycle billing and 6
validation. 7
8
Data Analytics - This component of the AMI system includes applications that provide 9
deeper analysis of the advanced metering data. Meter data is compiled in these systems 10
from both the Meter Data Management System as well as the Meter Data Collection 11
System and is used to derive customer benefits including operational awareness, theft 12
detection, conservation voltage reduction, outage management, or utility engineering 13
studies, to name a few. 14
15
The current planned deployment schedule for the AMI system in Idaho is shown in 16
Figure No. 1 below. 17
Figure No. 1 – Initial Deployment Schedule for Idaho’s AMI Refresh Project 18
19
20
21
22
23
24
25
26
27
28
29
The Report provides much more detail on all of the estimated costs and benefits from 30
the AMI deployment. Table 1-4, excerpted from the Report and shown below, summarizes the 31
Project Phase
2023
M eter Data Management
Head End System
Collection Infrastructure
Meter Deployment
Idaho Advanced Meter Refresh Project
Planned Deployment
2024 2025 2026 2027 2028
End of Project
AMI Takeout Routers
Initial Deployment
Application of Avista Corporation Page 6
Case Nos. AVU-E-23-___ and AVU-G-23-__
costs and incremental financial benefits for customers for the alternatives of installing a new 1
AMR or AMI system. The summary includes both capital and incremental expense costs for 2
each system as well as the incremental financial benefits provided by AMI alone. 3
1TABLE 1-4. NET PRESENT VALUE (NPV) OF INITIAL FORECASTED COSTS AND INCREMENTAL 4
FINANCIAL BENEFITS FOR THE REPLACEMENT ALTERNATIVES OF AN AMR AND AMI SYSTEM FOR 5
AVISTA’S ADVANCED METERING REFRESH PROJECT. PROJECT COSTS ARE THE LIFECYCLE TOTAL 6
OF BOTH CAPITAL AND INCREMENTAL EXPENSES FOR EACH ALTERNATIVE. 7
8
These data are further illustrated below in Figure 1-1 (also excerpted from the Report) where 9
the Net Cost of AMI is represented by the total of capital and incremental expenses minus the 10
value of the incremental financial benefits. 11
1 Total forecasted lifecycle capital costs of $103,834,744 and lifecycle incremental expenses of $13,601,371 on a
net present value basis, as summarized in Tables 1-1 and 1-2.
2 Total forecasted lifecycle capital costs of $75,475,546 and lifecycle incremental expenses of $23,139,832 on a
net present value basis, as summarized above in Tables 1-1 and 1-2.
3 Please see the discussion above regarding incremental customer financial benefits for AMR and AMI.
4 Net Customer Cost is the Net of Total Capital and Incremental Expense costs ($98.6 million) minus the offsetting
value of the incremental financial benefits ($48.5 million) provided solely by AMI.
AMR Alternative AMI Alternative
Project Costs
$117.4 million1
Project Costs
$98.6 million2
Incremental Customer Financial Benefits
$03
Incremental Customer Financial Benefits
$48.5 million
Net Customer Cost
$117.4 million
Net Customer Cost
$50.1 million4
Application of Avista Corporation Page 7
Case Nos. AVU-E-23-___ and AVU-G-23-__
FIGURE 1-1. NET COST OF AMR AND AMI IS REPRESENTED BY THE TOTAL OF CAPITAL AND 1
INCREMENTAL EXPENSES MINUS THE VALUE OF THE INCREMENTAL FINANCIAL BENEFITS. 2
3
4
5
6
7
8
9
10
11
12
13
The primary incremental benefits discussed in the Report are those quantified for inclusion in 14
the financial cost-benefit analysis comparing the AMR and AMI alternatives for replacing the 15
Company’s end-of-life AMR system in Idaho. Additional benefits, which have real value to 16
our customers, such as safety, power quality, convenience, and service, can be more difficult 17
to assign a financial value but they should be properly included in the consideration of the 18
prudence of our investment. As Avista has gained experience in the operation of its existing 19
Washington AMI system, we have identified a range of additional customer benefits not 20
initially envisioned. The Company reasonably expects this range of AMI benefits to continue 21
to expand in the future. 22
~ VI C .2
·e
~
~ VI 8
-;;;
~ {2.
140
Idaho Advanced Metering Refresh Project• Net Cost
of AMR and AMI Alternatives
Net Savings w ith AMI
120 - - - - - --/-----$18.S M /
100 ----
$67.3 M
80 $48.S M
"' 60 ---$50.l M
40 \ 20
0
AMR AMI
■ Capital Expenses
Difference between
Combined Capital
and Expense Costs
for AMR &AMI
Value of AMI
Incremental
Financial Benefits
AMI "Net· Cost
(Total Cost) -
{Incremental
Financial Benefits)
Application of Avista Corporation Page 8
Case Nos. AVU-E-23-___ and AVU-G-23-__
2023 2024 2025 2026 2027 Total
Meter Data Management 0.10$ 2.40$ 0.20$ -$ -$ 2.70$
Head End System - 2.50 1.60 - - 4.10
Collector Infastructure 0.20 4.20 5.00 1.10 0.60 11.10
Electric Meters/Natural Gas Digital Moniters 1.20 5.60 18.20 24.00 24.20 73.20
Total 1.50$ 14.70$ 25.00$ 25.10$ 24.80$ 91.10$
Idaho Advanced Meter Refresh Project
Planned Capital Costs (millions)
IV. COST SUMMARY 1
The Company has forecasted both capital costs and operating expenses, which are 2
detailed in the Report. A summary of the capital costs by major component for each year of 3
the project is provided in Table No. 1 below (further detail included in Table 3-1 in the Report). 4
Table No. 1 – Idaho AMI Planned Capital Costs 5
6
7
8
9
10
11
Avista installed AMI in its Washington jurisdiction and the project was fully deployed in early 12
2021. For that project, the Company installed a meter data management system and a head 13
end system. The meter data management system was installed in late 2017 and replaced a 14
billing system used by all three of Avista’s service territories (Washington, Idaho, and 15
Oregon). Therefore, those costs of approximately $33 million are allocated to all three 16
jurisdictions. The additional costs of $2.7 million to enhance the system with the Idaho AMI 17
refresh project will also be allocated to the three jurisdictions. 18
The head end system deployed in late 2018 for the Washington AMI project was only 19
being used in Washington, therefore, all of those costs were assigned to Washington customers. 20
With the Idaho AMI refresh project, the Company plans to upgrade the head end system at a 21
cost of approximately $4.1 million. Since that system will be used by both Washington and 22
Idaho customers, those additional costs, in addition to the undepreciated net book value of the 23
original head end system, will be allocated to both Washington and Idaho customers using 24
Application of Avista Corporation Page 9
Case Nos. AVU-E-23-___ and AVU-G-23-__
Commission approved allocation methodologies. As of December 31, 2022, the undepreciated 1
net book value of the original head end system was approximately $4.3 million. Idaho’s share 2
of the original investment is approximately $1.5 million and will be reallocated to Idaho when 3
the system becomes operational for Idaho customers. 4
5
V. PROPOSED ACCOUNTING AND RATEMAKING TREATMENT 6
In this Application, the Company is requesting an Order allowing the Company the 7
following: 8
1. Deferral of the undepreciated net book value of existing electric meters, natural gas 9
communicating modules (ERTs) and AMR communication equipment. Since 10
AMR equipment is currently included in rate base earning the authorized rate of 11
return, this regulatory asset will be included in rate base until fully amortized. 12
Amortization of the regulatory asset will begin immediately upon transferring from 13
plant-in-service to a regulatory asset in the amount equal to the depreciation 14
expense included in customers’ rates on the AMR equipment. 15
16
2. Adoption of the proposed depreciable life of the AMI electric meters and the AMI 17
natural gas digital monitors. 18
19
3. Deferral of depreciation expense on AMI investment beginning in the month that 20
the first transfer to plant of the AMI investment occurs and continuing monthly 21
until such plant is included in retail rates in a future general rate case proceeding. 22
This regulatory asset will accrue a carrying charge equal to the Company’s 23
authorized rate of return set in Case Nos. AVU-E-23-01 and AVU-G-23-01 and 24
will continue until fully amortized. 25
Application of Avista Corporation Page 10
Case Nos. AVU-E-23-___ and AVU-G-23-__
1. Deferral of Existing Equipment 1
As mentioned earlier in this Application, implementation of AMI will involve, among 2
other things, the replacement of the existing electric meters, natural gas ERTs and AMR 3
communication equipment. The Company plans to begin changing out the communication 4
equipment in 2024 and plans to execute an agreement with a meter vendor in 2023 in order to 5
do so. When Avista executes an agreement with a meter vendor, it will be committing to 6
remove and replace the existing AMR equipment with AMI equipment. This commitment 7
triggers, and requires, certain accounting to occur under Generally Accepted Accounting 8
Principles (GAAP). The relevant accounting provision is Accounting Standard Codification 9
(ASC) 980-360-35. The full text of ASC 980-360-35 is attached as Exhibit B. ASC 980-360-10
35-1 states the following: “When it becomes probable (likely to occur) that an operating asset 11
or an asset under construction will be abandoned, the cost of that asset shall be removed from 12
construction work-in-process or plant-in-service.” 13
When Avista executes an agreement with a vendor to replace the existing AMR 14
equipment, it will be “probable (likely to occur)” that the AMR equipment will be removed 15
from service. In fact, after Avista executes an agreement, the Company will, absent some 16
unusual event, replace the AMR equipment, and the old equipment will be sold for scrap and 17
recycled, because there is no market for this volume of old AMR equipment. In accordance 18
with ASC 980-360-35, the execution of an agreement which involves a commitment for the 19
replacement and disposition of the existing AMR equipment requires that the investment in 20
the AMR equipment be “removed from plant in service.” Unless Avista has justification to 21
record the investment in another asset account (i.e., a regulatory asset), it must be written off 22
in the current period. 23
Therefore, Avista is requesting to defer the undepreciated net book value of the AMR 24
Application of Avista Corporation Page 11
Case Nos. AVU-E-23-___ and AVU-G-23-__
equipment as a regulatory asset. Avista proposes to record the deferred amounts in accordance 1
with the Code of Federal Regulations to Federal Energy Regulatory Commission (“FERC”) 2
Account 182.3 (Other Regulatory Assets). The net book value of the AMR equipment that 3
will be replaced with AMI equipment is provided in Table No. 2 below. 4
Table No. 2 – Net Book Value of Existing AMR Equipment 5
6
7
8
9
10
11
Since AMR equipment is currently included in rate base earning the authorized rate of 12
return, the Company is proposing that this regulatory asset will be included in rate base until 13
fully amortized. Amortization of the regulatory asset will begin immediately upon transferring 14
from plant-in-service to a regulatory asset in the amount equal to the depreciation expense, 15
currently approximately $2.938 million annually, included in customers’ rates on the AMR 16
equipment. 17
The one-time accounting entry for the deferral of the existing AMR equipment as a 18
regulatory asset is provided in Table No. 3 below. The Company will record this entry in 2023 19
when the project has been approved and vendor contracts have been signed. 20
Orignal Cost
Accumulated
Depreciation
Net Book
Value
Current
Depreciation
Rate
Annual Depreciation
Expense
Electric Meters 26.004$ (18.270)$ 7.734$ 9.06%2.356$
Natural Gas ERTs 7.173$ (2.344)$ 4.829$ 2.18%0.156
AMR Communication Equipment 6.375$ (2.871)$ 3.504$ 6.67%0.425
Total 39.552$ (23.485)$ 16.067$ 2.938$
Existing AMR Equipment
As of December 31, 2022 (millions)
+
Application of Avista Corporation Page 12
Case Nos. AVU-E-23-___ and AVU-G-23-__
Table No. 3 – Accounting Entry to Defer AMR Equipment 1
2
3
4
5
6
7
8
The monthly accounting entries for the amortization of the regulatory asset of the 9
existing AMR equipment are provided in Table No. 4. These entries will begin being recorded 10
in the same month that the AMR costs are transferred to a regulatory asset. 11
Table No. 4 – Accounting Entries to Record Amortization of AMR Equipment 12
13
14
15
16
17
18
19
20
2. Proposed Depreciable Life of the AMI Electric Meters and the AMI Natural Gas 21
Digital Monitors 22
23
The Commission is empowered to ascertain and determine the proper and adequate 24
rates of depreciation of the Company's property used in the rendering of retail electric and 25
Account Description FERC Account Debit Credit
Regulatory Asset-Electric AMR Meters 182.3XX 7.734$
Regulatory Asset-Natural Gas AMR ERTs 182.3XX 4.829$
Regulatory Asset-AMR Communication Equip.182.3XX 3.504$
Plant in Service 101.000 39.552$
Accumulated Depreciation 108.000 23.485$
The accounting enties will include standard deferred federal income tax entires.
Accounting Entries to Record Deferral of Net Book Value of AMR Equipment
(millions)
Account Description FERC Account Debit Credit
Regulatory Debit-Amortization Electric AMR Meters 407.3XX 0.196$
Regulatory Debit-Amortization Natural Gas AMR ERTs 407.3XX 0.013$
Regulatory Debit-Amortization AMR Communication Equip.407.3XX 0.035$
Regulatory Asset-Electric AMR Meters 182.3XX 0.196$
Regulatory Asset-Natural Gas AMR ERTs 182.3XX 0.013$
Regulatory Asset-AMR Communication Equip.182.3XX 0.035$
The accounting enties will include standard deferred federal income tax entires.
Accounting Entries to Record Monthly Amortization of Deferred AMR Equipment
(millions)
Application of Avista Corporation Page 13
Case Nos. AVU-E-23-___ and AVU-G-23-__
natural gas service under the provisions of Idaho Code Section 61-525. Each utility under the 1
Commission's jurisdiction is required to conform its depreciation accounts to the rates so 2
ascertained and determined by the Commission. The Commission may make changes in such 3
rates of depreciation from time to time as the Commission may find necessary. 4
The Company periodically completes a depreciation study and requests modifications 5
to its depreciation rates. The Company proposed to change its electric and natural gas 6
depreciation rates in Idaho in Case Nos. AVU-E-23-02 and AVU-G-23-02 filed February 22, 7
2023. The detailed Depreciation Study prepared by Gannett Fleming, Inc. was included 8
with the Company's Depreciation Study filing as Attachment C. 9
On page 69 of 800 of Attachment C, the depreciation rate of 7.03% was proposed 10
for Idaho AMI metering equipment. This was based on a 15-year life, S2.5 survivor curve 11
and a negative two salvage value. This life is consistent with the life being used for 12
Washington AMI metering equipment and is appropriate in this case. 13
14
3. Deferral of Depreciation Expense on AMI Investment 15
AMI is a major, multi-year project, but the dollars invested in the project will be 16
transferred to plant-in-service as certain components are completed along the way. For 17
example, when the MDM system upgrades and the head end system upgrades are completed 18
in 2024, it will be transferred to plant-in-service and will be used immediately to manage meter 19
usage data. And as new AMI electric meters and natural gas ERTs are installed they will 20
transfer to plant-in-service on a month-to-month basis. Once the investment is transferred to 21
plant-in-service, allowance for funds used during construction (AFUDC) stops, and 22
depreciation begins on the investment. Unless the depreciation and other costs are included in 23
retail rates on a timely basis, or certain costs are deferred for later recovery, the Company will 24
Application of Avista Corporation Page 14
Case Nos. AVU-E-23-___ and AVU-G-23-__
not recover the costs, and will suffer negative financial impacts. 1
The Company filed a 2-year general rate case (Case Nos. AVU-E-23-01 and AVU-G-2
23-01) on February 1, 2023. If approved, rates would be effective September 1, 2023, and 3
September 1, 2024. None of the AMI investment was included in that general rate case. So, 4
the earliest the Company may include the AMI investment would be September 1, 2025. 5
Because of this, the Company is requesting to defer the depreciation expense on AMI 6
investment beginning in the month that the first transfer to plant of the AMI investment occurs 7
and would continue monthly until such plant is included in retail rates in a future general rate 8
case proceeding. This regulatory asset will accrue a carrying charge equal to the Company’s 9
authorized rate of return set in Case Nos. AVU-E-23-01 and AVU-G-23-01 and will continue 10
until the regulatory asset is fully amortized. 11
The monthly accounting entry for the deferral of the depreciation expense on the AMI 12
equipment as a regulatory asset is provided in Table No. 5 below. The Company will record 13
this entry beginning in the month that the first transfer to plant of the AMI investment occurs. 14
15
Table No. 5 – Accounting Entries to Record Deferral of AMI Equipment Depreciation 16
17
18
19
20
21
22
23
24
Account Description FERC Account Debit Credit
Regulatory Asset-Electric AMI Meters 182.3XX XXX
Regulatory Asset-Natural Gas AMI ERTs 182.3XX XXX
Regulatory Asset-AMI Communication Equip.182.3XX XXX
Regulatory Credit-Amortization Electric AMI Meters 407.4XX XXX
Regulatory Credit-Amortization Natural Gas AMI ERTs 407.4XX XXX
Regulatory Credit-Amortization AMI Communication Equip. 407.4XX XXX
The accounting enties will include standard deferred federal income tax entires.
(millions)
Accounting Entries to Record Monthly Deferral of Depreciation Expense of AMI Equipment
~ ► ►
Application of Avista Corporation Page 15
Case Nos. AVU-E-23-___ and AVU-G-23-__
The monthly accounting entries for the deferral of the carrying charge on the regulatory 1
asset of the deferred depreciation expense on the AMI equipment are provided in Table No. 6. 2
These entries will begin being recorded when the depreciation expense on the AMI equipment 3
begins being deferred. 4
5
Table No. 6 – Accounting Entries to Record Carrying Charge (ROR) on Deferred AMI 6
Depreciation Expense 7
8
9
10
11
12
13
14
15
16
17
18
The monthly accounting entries for the amortization of the regulatory asset of the 19
deferred depreciation expense on the AMI equipment and the deferred carrying charge are 20
provided in Table No. 7. These entries will begin being recorded when the costs are included 21
in customers’ base rates. 22
23
24
Account Description FERC Account Debit Credit
Regulatory Asset-Electric AMI Meters 182.3XX XXX
Regulatory Asset-Natural Gas AMI ERTs 182.3XX XXX
Regulatory Asset-AMI Communication Equip.182.3XX XXX
Regulatory Credit-Deferral Electric AMI Meters 407.4XX XXX
Regulatory Credit-Deferral Natural Gas AMI ERTs 407.4XX XXX
Regulatory Credit-Deferral AMI Communication Equip.407.4XX XXX
Regulatory Liability-Equity Return on Depreciation Deferrals-Electric*254.XXX XXX
Regulatory Liability-Equity Return on Depreciation Deferrals-Gas*254.XXX XXX
Regulatory Liability-Equity Return on Depreciation Deferrals-Common*254.XXX XXX
The accounting enties will include standard deferred federal income tax entires.
Accounting Entries to Record Monthly Deferral of Carrying Charge (ROR) on AMI Equipment
(millions)
*In accordance with FASB ASC 980-340, Avista would capitalize the deferred revenue requirement of the AMI
deferred depreciation expense in FERC Account No. 182.3. The portion that represents incurred costs that
would otherwise be charged to expense (i.e. interest) would be recorded in FERC Account No. 407.4. The
portion that represents the earnings on shareholders’ investment would be recorded in a regulatory liability
(FERC Account No. 254) until recovery occurs in future years.
Application of Avista Corporation Page 16
Case Nos. AVU-E-23-___ and AVU-G-23-__
Table No. 7 – Accounting Entries to Record Amortization of Deferred AMI Depreciation 1
2
3
4
5
6
7
8
9
10
11
The prudence and recovery of the costs associated with the Company’s AMI 12
Investment would be addressed in future regulatory proceedings. With deferred accounting, 13
the Commission will have the opportunity to review the costs after-the-fact and make a 14
prudency determination prior to the Company receiving recovery of the prudently incurred 15
costs through retail rates. 16
VI. CONCLUSION 17
Approval by this Commission to defer the existing undepreciated net book value of the 18
AMR equipment and the depreciation expense on the new AMI equipment, would allow the 19
Company to set these costs aside for an opportunity to recover these costs in a future rate 20
proceeding. Furthermore, the Commission will have the opportunity to review the costs after-21
the-fact and make a prudence determination prior to the Company receiving recovery of the 22
prudently incurred costs through retail rates. In a future proceeding, Avista would address the 23
prudence of the costs incurred and request recovery of the deferred costs, including a carrying 24
Account Description FERC Account Debit Credit
Customer Accounts Receivable 142.100 XXX
Customer Revenues 44X.XXX XXX
Regulatory Debit-Amortization Electric AMI Meters 407.3XX XXX
Regulatory Debit-Amortization Natural Gas AMI ERTs 407.3XX XXX
Regulatory Debit-Amortization AMI Communication Equip.407.3XX XXX
Regulatory Asset-Electric AMI Meters 182.3XX XXX
Regulatory Asset-Natural Gas AMI ERTs 182.3XX XXX
Regulatory Asset-AMI Communication Equip.182.3XX XXX
Regulatory Liability-Equity Return on Depreciation Deferrals-Electric 254.XXX XXX
Regulatory Liability-Equity Return on Depreciation Deferrals-Gas 254.XXX XXX
Regulatory Liability-Equity Return on Depreciation Deferrals-Common 254.XXX XXX
The accounting enties will include standard deferred federal income tax entires.
Accounting Entries to Record Monthly Amortization of Deferred AMI Depreciation Expense and Equity ROR
(millions)
Application of Avista Corporation Page 17
Case Nos. AVU-E-23-___ and AVU-G-23-__
charge on the deferral equal to the Company’s authorized rate of return set in Case Nos. AVU-1
E-23-01 and AVU-G-23-01. At that time, the Company would also propose an amortization 2
period to recover the costs from Idaho customers over a future period. 3
Avista respectfully requests that this Application be processed under Modified 4
Procedure, through the use of written comments. RP 201, et seq. 5
6
VII. REQUEST FOR RELIEF 7
WHEREFORE, Avista respectfully requests that the Commission issue an Order 8
authorizing the following: 9
1. Deferral of the undepreciated net book value of existing electric meters, natural gas 10
communicating modules (ERTs) and AMR communication equipment. Since 11
AMR equipment is currently included in rate base earning the authorized rate of 12
return, this regulatory asset will be included in rate base until fully amortized. 13
Amortization of the regulatory asset will begin immediately upon transferring from 14
plant-in-service to a regulatory asset in the amount equal to the depreciation 15
expense included in customers’ rates on the AMR equipment. 16
17
2. Adoption of the proposed depreciable life of the AMI electric meters and the AMI 18
natural gas digital monitors. 19
20
3. Deferral of depreciation expense on AMI investment beginning in the month that 21
the first transfer to plant of the AMI investment occurs and continuing monthly 22
until such plant is included in retail rates in a future general rate case proceeding. 23
This regulatory asset will accrue a carrying charge equal to the Company’s 24
authorized rate of return set in Case Nos. AVU-E-23-01 and AVU-G-23-01 and 25
will continue until fully amortized. 26
27
The existing undepreciated net book value of the AMR equipment and the depreciation 28
expense on the new AMI equipment would be deferred to preserve the opportunity in a future 29
Application of Avista Corporation Page 18
Case Nos. AVU-E-23-___ and AVU-G-23-__
proceeding to address the prudence and recovery of these costs, with this Application being 1
processed under Modified Procedure, through the use of written comments. 2
3
DATED at Spokane, Washington, this 10TH day of July 2023. 4
AVISTA CORPORATION 5
6
By 7
Patrick Ehrbar 8
Director of Regulatory Affairs 9
Avista Corp. 10