20231229Final_Order_No_36044.pdf

ORDER NO. 36044 1

Office of the Secretary
Service Date
December 29, 2023
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION

On July 10, 2023, Avista Corporation, dba Avista Utilities (“Company”), applied for
an order approving the following: (1) “[d]eferral of the undepreciated net book value of existing
electric meters, natural gas communicating modules . . . and Automated Meter Reading (“AMR”)
communication equipment[;]” (2) adoption of the depreciable lives proposed for electric
Automatic Metering Infrastructure (“AMI”) electric meters and gas digital monitors; and (3)
deferral of AMI-related depreciation expenses until their inclusion in rates through a future rate
case. Application at 1-2.
On August 10, 2023, the Commission issued a Notice of Application and Notice of
Modified Procedure. Order No. 35885. Commission Staff (“Staff”) submitted comments to which
the Company replied. No public comments were received. Having reviewed the record, the
Commission issues this Order approving the Company’s Application as follows.
BACKGROUND
The Company represents that its existing AMR infrastructure has exceeded its 15-year
expected service life and components of the system are either out of production or otherwise no
longer supported. Accordingly, the system must be updated to avoid excessive replacement costs
and to continue providing reliable electric and natural gas operations in Idaho. After conducting a
cost-benefit analysis, the Company determined that replacing its existing AMR system with a new
AMI system would be prudent and cost-effective to meet the Company’s long-term customer
service objectives.
THE APPLICATION
The Company indicated that transitioning to an AMI system requires, among other
things, replacement of existing electric meters, natural gas communicating modules, and AMR
communication equipment. As there is no market for the volume of equipment to be replaced, the
IN THE MATTER OF THE APPLICATION
OF AVISTA CORPORATION FOR AN
ACCOUNTING ORDER AUTHORIZING
ACCOUNTING AND RATEMAKING
TREATMENT OF COSTS ASSOCIATED
WITH THE COMPANY’S INVESTMENT IN
AMI (ADVANCED METERING
INFRASTRUCTURE)

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CASE NO. AVU-E-23-07
AVU-G-23-04

ORDER NO. 36044
ORDER NO. 36044 2

existing AMR equipment will be removed and recycled during the transition to an AMI system.
Accordingly, the Company requests authority to defer the undepreciated net book value of existing
AMR equipment as a regulatory asset to avoid writing off its investment in that equipment. The
Company proposes to record the deferred amounts as a regulatory asset in Federal Energy
Regulatory Commission (“FERC”) Account 182.3 – Other Regulatory Assets. As the AMR
equipment is currently included in rate base earning the authorized rate of return, the Company
seeks to include the AMR equipment regulatory asset in the base rates until fully amortized.
The Company further requests that the Commission adopt the 7.03% depreciation rate
for electric and natural gas AMI metering equipment contained in the Company’s recent
depreciation study filed in Case Nos. AVU-E-23-02 and AVU-G-23-02. Although transitioning to
an AMI system will occur over multiple years, the Company indicated that certain components of
the system will be put in service prior to completion of the entire AMI system. Because
depreciation and other costs related to the AMI system cannot be included in a general rate case
until 2025, the Company seeks deferral of the depreciation expense on AMI investment from the
beginning of the month in which the first transfer to plant of the AMI investment occurs until such
plant is included in the Company’s next general rate case. The Company proposes a rate of return
on this regulatory asset equal to the rate of return authorized in Case Nos. AVU-E-23-01 and AVU-
G-23-01 until the asset is fully amortized.
STAFF COMMENTS
Based upon its review of the Company’s Application, accompanying exhibits, and
responses to production requests, Staff believed that the Company’s accounting and some of its
proposed rate making treatments are reasonable. Furthermore, Staff believed that the Company
demonstrated the need for transitioning to an AMI system based on the age and obsolescence of
current AMR infrastructure and the future need for advanced technology that AMI will provide.
Staff noted that prior experience with other utilities implementing AMI in Idaho has shown that
the technology enables (1) instantaneous price signals reflecting the time-value of delivered
energy; (2) better rate design; (3) net-billing of customers exporting energy; (4) more accurate
avoided costs for Demand-Side Management programs; (5) dynamic distribution grid and
customer battery management; (6) better cost of service characterization based on more exacting
class-wide load profiles throughout the year. According to Staff, AMI is necessary to much of
what other utilities are currently implementing. Consequently, Staff concluded that the Company’s
cost-benefit analysis of transitioning to an AMI system, including the estimated $67.3 million in
ORDER NO. 36044 3

total savings from switching to such a system over “refreshing” the existing AMR system, is
reasonable. However, Staff indicated that it would examine how cost-effectively the Company
implements the project when the Company seeks cost recovery through its retail rates, as proposed
by the Company.
Accordingly, Staff recommended the Commission accept the Company’s proposal to
defer the undepreciated net book value of the existing AMR system into FERC Account 182.3
without allowing a rate of return on the account. As of December 31, 2022, the Company reported
$16 million in undepreciated net book value for AMR system. Because the current AMR system
is already embedded in customer rates, Staff observed that the Company’s request to amortize the
undepreciated book value over the remaining depreciable life of the assets will not impact customer
rates until the next general rate case. During the Company’s next general rate case, the amortization
period of the regulatory asset for the AMR system can be revisited.
Depreciable Life of AMI Electric Meters and Natural Gas Digital Monitors
Staff also believes the Company’s proposed composite depreciation rate of 7.03% is a
reasonable rate of recovery for AMI system investments and recommends its approval.
Deferral and Carrying Charge on AMI Systems
Staff opposed authorizing deferral of depreciation expenses on AMI investments or
allowing a return on any deferred amounts. Normally, plant investment between rate cases
depreciates upon placement into service. Additionally, older plant retires, and the Company
continues to recover the depreciation expense associated with that retired plant until the next rate
case.
In a general rate case, the depreciation expense allowed for recovery resets, ensuring
that the Company recovers the appropriate level of depreciation expense for its plant in service.
Staff saw no valid reason for an exception in this case to allow deferral of depreciation expense
associated with AMI investment without also deferring as a regulatory liability all depreciation
expense currently embedded in rates for plant retirements prior to the Company’s next rate case.
Furthermore, Staff opposed recovery of depreciation expense prior to a review of the prudency of
all capital additions in the Company’s next general rate case. Accordingly, Staff recommended the
Company continue to follow routine accounting treatment by depreciating assets as they are placed
in service and become used and useful.

ORDER NO. 36044 4

COMPANY REPLY
The Company generally agreed with Staff’s recommendations—but identified two
remaining issues. First, the Company acknowledged that the issues of whether to authorize deferral
of depreciation expenses related to the installation of the AMI system is unripe and better
addressed in the Company’s next general rate case. Second, the Company disagreed with Staff
regarding the denial of a rate of return on AMR related deferrals. The Company noted that denial
of a rate of return on the deferral of unamortized balances would result in a potential write-off of
that unrecovered return. To avoid this, the Company proposed the Commission expressly state that
the issue of whether a return component is appropriate is unripe, but can be taken up in the
Company’s next general rate case. According to the Company, this would allow further discussion
and development of a record regarding the transition to an AMI system, AMR deferrals, and other
related issues.
DISCUSSION AND FINDINGS
The Commission has jurisdiction over the Company’s Petition and the issues in this
case under Title 61 of the Idaho Code including, Idaho Code §§ 61-501, 502, and -503. Based on
our review of the record, we find it reasonable to grant the Company’s Application as set forth
below. Installation of the Company’s existing AMR system began in 2005. Now, not only has the
existing AMR system exceeded its 15-year expected service life, but many components of the
system are no longer manufactured or supported. To continue providing reliable service to gas and
electric customers without excessive replacement costs, the Company had to choose between
“refreshing” the AMR system or replacing it. After performing a cost-benefit analysis of these two
options, the Company determined that transitioning to an AMI system was the most prudent and
cost-effective course of action. As set forth below, we find this decision reasonable.
In addition to its AMR system’s age and flagging support necessitating re-investment,
the Company’s existing AMR system lacks potentially cost-saving functionality of AMI systems.
In particular, the superior data transferring capabilities of AMI systems offers collection of
granular information on customer utility consumption, better customer battery and overall grid
management, and improved rate design over AMR systems. Considering the additional
functionality of AMI systems and dwindling AMR support, we agree with Staff’s opinion that the
Company’s estimated $67.3 million in total savings from switching to such a system over
“refreshing” the existing AMR system is reasonable. Similarly, the financial assumptions the
Company made regarding the disposal and salvage of its existing AMR system are reasonable.
ORDER NO. 36044 5

Accordingly, we find the Company reasonably determined that investing in an AMI system was a
necessary and cost-effective solution.
Considering the above, we approve the Company’s request to defer the undepreciated
net book value of its existing electric meters, natural gas communication modules (ERTs), and
AMR communication equipment. Additionally, as the Company’s investment in its existing AMR
system is already embedded into base rates, amortization of this deferral over the remaining
depreciable life of the removed equipment will not affect customer rates until the Company’s next
rate case. We therefore find the Company’s request to amortize the deferred amounts over the
remaining depreciable life of the removed equipment reasonable. Although we decline to authorize
the Company to earn a rate of return on any deferred amounts at this time, both this issue and the
amortization period of the deferral may be revisited during the Company’s next general rate case.
We next address the Company’s request that we establish a depreciation rate for its
investment in new AMI system investments. In its most recent depreciation cases (Case Nos.
AVU-E-23-02 and AVU-G-23-02), the Company proposed a 7.03% depreciation rate for AMI
investments and proposes the same rate in this case. Considering these prior requests and Staff’s
comments, we find the Company’s proposed 7.03% composite depreciation rate based on a 15-
year life, S2.5 survivor curve, and negative 2% salvage value to be a reasonable rate of depreciation
for AMI system investments.
As Staff noted, plant investment between rate cases depreciates upon placement into
service. In a general rate case, depreciation expense allowed for recovery resets to ensure recovery
of the proper level of depreciation for plant servicing customers. Thus, until the Company’s next
general rate case, there will not be a final determination on the prudence of its actual investment
in AMI. Accordingly, we reject the Company’s proposal to defer and allow a rate of return on AMI
system investments until the prudence of such investment is reviewed in the Company’s next
general rate case.
O R D E R
IT IS HEREBY ORDERED that the Company’s request to defer as a regulatory asset
the undepreciated net book value of its existing electric meters, natural gas communication
modules (ERTs), and AMR communication equipment, to be amortized over the remaining
depreciable life of the removed equipment, is approved. Although no rate of return on the deferral
account is authorized, this issue may be revisited during the Company’s next general rate case.
ORDER NO. 36044 6

IT IS FURTHER ORDERED that the Company’s proposed 7.03% composite
depreciation rate based on a 15-year life, S2.5 survivor curve, and negative 2% salvage value for
AMI metering equipment is approved.
IT IS FURTHER ORDERED that the Company’s request to defer depreciation
expenses and earn a return on its AMI system is denied. This issue may be revisited during the
Company’s next general rate case when Staff can review the prudence of the Company’s actual
investment in AMI.
THIS IS A FINAL ORDER. Any person interested in this Order may petition for
reconsideration within twenty-one (21) days of the service date of this Order about any matter
decided in this Order. Within seven (7) days after any person has petitioned for reconsideration,
any other person may cross-petition for reconsideration. See Idaho Code § 61-626.
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this 29th day
of December 2023.

ERIC ANDERSON, PRESIDENT

JOHN R. HAMMOND JR., COMMISSIONER

EDWARD LODGE, COMMISSIONER

ATTEST:

Monica Barrios-Sanchez
Interim Commission Secretary

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