20071116Decision memo.pdf

DECISION MEMORANDUM
TO:COMMISSIONER REDFORD
COMMISSIONER SMITH
COMMISSIONER KEMPTON
COMMISSION SECRETARY
COMMISSION STAFF
FROM:DON HOWELL
DATE:NOVEMBER 15, 2007
SUBJECT:A VISTA'S APPLICATION FOR A CHANGE IN ITS ELECTRIC AND
NATURAL GAS DEPRECIATION RATES, CASE NOS. AVU-07-
AND A VU-07-
On November 1 , 2007, A vista Corporation dba A vista Utilities filed an Application
requesting that the Commission approve changes to the Company s depreciation rates for electric
and natural gas property. Avista serves customers in Washington , Idaho and a small portion of
Oregon. The Company seeks an effective date for the proposed changes to its depreciation rates
of January 1 2008.
BACKGROUND
A vista last changed its Idaho depreciation rates in September 2004 in accordance
with Order No. 29602. In that Order, the Commission adopted an agreement between the
Company and Staff to synchronize depreciation rates so that Idaho rates would become effective
with new depreciation rates approved by the Washington Utilities and Transportation
Commission (WUTC).
In April 2007, A vista filed an application with the WUTC to increase its rates for
electric and natural gas service. Included in the Company s Application was a proposal to
change its depreciation rates based upon a depreciation study completed by Gannett Fleming,
Inc. The depreciation study was based upon depreciable electric, gas and common plant in-
service as of December 31 , 2004. Application at 2.
In October 2007, A vista, the WUTC staff, and other intervenors in the Washington
rate case agreed to accept the depreciation rates proposed in the depreciation study with four
exceptions proposed by the WUTC staff. The WUTC staff proposed reductions in negative net
DECISION MEMORANDUM
salvage values A vista uses to determine new depreciation rates in four electric accounts -
changes which result in lowered depreciation accrual rates than were proposed in the study. The
four accounts include: Account 311 - Structures & Improvements; Account 312 - Boiler Plant
Equipment; Account 356 - Overhead Conductor and Devices; and Account 369 - Services. Id.
at 3. On October 29, 2007, the parties in the Washington case settled all remaining issues in the
general rate case including an agreement for an effective date of January 1 , 2008. The Company
notes that neither the stipulated depreciation rates nor the settlement of all the remaining issues
has yet been approved by the Washington Commission.
PROPOSED CHANGES IN DEPRECIATION RATES
The Company s current depreciation application updates the Company s depreciation
study based upon all plant in-service as of December 31 , 2006. ,Commensurate with the
depreciation settlement in Washington, the Company asserts that the annual depreciating expense
for electric property in Idaho should be increased by approximately $128 000; and decreased by
approximately $132 000 for its natural gas property. Id. at 4. Approval of the new depreciation
rates would be for accounting purposes only and the Company does not seek a change in
customer service rates at this time. If approved, the new depreciation rates would become
effective January 1 2008 and the net change in depreciation rates "would be reflected in Avista
next general rate case.Id. at 4-5. Staff anticipates that the Company s next general rate case
will be filed in the spring of2008.
The Company requests that the Commission process its depreciation application
under Modified Procedure. In support of its Application, the Company has submitted prefiled
testimony of David DeFelice, Senior Business Analyst, with four exhibits.
ST AFF RECOMMENDATION
Staff concurs that Modified Procedure is an appropriate means to process A vista
depreciation application. Staff recommends that the Commission issue a Notice of Application
and establish a deadline for intervention. Once intervention is passed, the parties may informally
meet to review the Company s proposed changes in depreciation rates.
Staff further agrees that it is reasonable to coordinate depreciation rates with
Washington and the proposed effective date for the new depreciation rates should be January 1
2008.
DECISION MEMORANDUM
COMMISSION DECISION
Does the Commission find that Modified Procedure with a deadline for intervention
is an appropriate means to process this case?
Don Howell
bls/M:A VU-O7-11 A VU-O7-03 dh
DECISION MEMORANDUM