20080403Andrews Direct.pdf

DAVID J. MEYER
VICE PRESIDENT, GENERAL COUNSEL,
GOVERNNTAL AFFAIRS
AVISTA CORPORATION
P.O. BOX 3727
1411 EAST MISSION AVENUE
SPOKAE, WASHINGTON 99220-3727TELEPHONE: [phone]FACSIMILE: [phone]
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION )
OF AVISTA CORPORATION FOR THE )
AUTHORITY TO INCREASE ITS RATES )
AN CHAGES FOR ELECTRIC AN )
NATURA GAS SERVICE TO ELECTRIC )
AN NATURA GAS CUSTOMERS IN THE )STATE OF IDAHO )
)
CASE NO. AVU-E-08-01
CASE NO. AVU-G-08-01
DIRECT TESTIMONY
OF
ELIZABETH M. ANREWS
FOR AVISTA CORPORATION
(ELECTRIC AN NATURA GAS)
1
2
CONTENTS
Section Page
3
4
5
6
7
8
9
10
I Introduction 2
II Combined Revenue Requirement Sumary 5
III Electric Section 6
Revenue Requirement 15
Standard Commission Basis Adjustments 17
Pro Forma Adjustments 27
IV Natural Gas Section 39
41Revenue Requirement
11
12
13
Standard Commission Basis Adjustments 42
Pro Forma Adjustments 48
V Allocation Procedures 56
1415 Exhibit No. 13:
16 Schedule 1 - Electric Revenue Requirement and
17
18
19
Results of Operations (pgs 1-9)
Schedule 2 - Natural Gas Revenue Requirement and
Resul ts of Operations (pgs 1-7)
Andrews, Di 1
Avista Corporation
1
2
I.INTRODUCTION
Q.Please state your nam, business address, and
3 present position with Avista Corporation.
4 A.My name is Elizabeth M. Andrews.I am employed
5 by Avista Corporation as Manager of Revenue Requirements in
6 the State and Federal Regulation Department.My business
7 address is 1411 East Mission, Spokane, Washington.
8 Q.Would you please describe your education and
9 business experience?
10 A.I am a 1990 graduate of Eastern Washington
11 University with a Bachelor of Arts Degree in Business
12 Administration, majoring in Accounting.That same year, I
13 passed the November Certified Public Accountant exam,
14 earning my CPA License in August 1991.I worked for
15 Lemaster & Daniels, CPAs from 1990 to 1993, before joining
16 the Company in August 1993.I served in various positions
17 within the sections of the Finance Department, including
18 General Ledger Accountant and Systems Support Analyst until
19 2000.In 2000, I was hired into the State and Federal
20 Regulation Department as a Regulatory Analyst until my
21 promotion to Manager of Revenue Requirements in early 2007.
22 i have also attended several utility accounting, ratemaking
23 and leadership courses.
24 Q.As Manager of Revenue Requirements, what are your
25 responsibilities?
Andrews, Di 2
Avista Corporation
1 A.As Manager of Revenue Requirements, aside from
2 special proj ects, I am responsible for the preparation of
3 normalized revenue requirement and pro forma studies for
4 the various jurisdictions in which the Company provides
5 utility services.During the last eight years I have
6 assisted or lead the Company's electric and/or natural gas
7 general rate filings in Idaho, Washington, and Oregon.
8 Q.What is the scope of your testimony in this
9 proceeding?
10 A.My testimony and exhibits in this proceeding will
11 generally cover accounting and financial data in support of
12 the Company's need for the proposed increase in rates.I
13 will explain pro formed operating results including expense
14 and rate base adjustments made to actual operating results
15 and rate base.
16 I incorporate the Idaho share of the proposed
17 adjustments of several witnesses in this case.For
18 example, Company witnesses Mr. DeFelice sponsors and
19 describes the Company's pro forma 2007 and 2008 capital
20 additions adjustments and Mr. Howard discusses the Spokane
21 River Relicensing efforts by the Company.Other Company
22 witnesses, for example Mr. Vermillion, explains other
23 issues impacting the Company, like the Clark Fork River
24 dissolved gas issue, the Montana Riverbed lease expense,
25 and the Colstrip mercury, emissions O&M expense. Mr. Kinney
Andrews, Di 3
Avista Corporation
1 discusses the transmission net expenses, Asset Management
2 program expenses, and the transmission capital expenditures
3 included in Mr. DeFelice's pro forma capital adjustments,
4 and Mr. Paulson discusses the impact of the completion of
5 the Advanced Meter Reading (AM) proj ect investment.
6 Lastly, Company witnesses Mr. Johnson, prepared the total
7 system pro forma power supply adjustment, while Ms. Knox
8 sponsors the revenue normalization and pro forma production
9 property adjustments.
10 Q.Are you sponsoring any exhibits to be introduced
11 in this proceeding?
12
13
14
A.Yes.I am sponsoring Exhibit No. 13, Schedule 1
(Electric) and Schedule 2 (Natural Gas), which were
prepared under my direction.These Exhibi t Schedules
15 consist of worksheets, which show actual 2007 operating
16 results, pro forma, and proposed electric and natural gas
17 operating results and rate base for the State of Idaho, the
18 Company's calculation of the general revenue requirement,
19 the derivation of the net operating income to gross revenue
20 conversion factor, and the pro forma adjustments proposed
21 in this filing.
22
Andrews, Di 4
Avista Corporation
1
2
II.COMBINED RE REQUIRE SUMY
Q.Would you please sumarize the results of the
3 Company's pro form study for both the electric and natural
4 gas operating systems for the Idaho jurisdiction?
5 A.Yes.After taking into account all standard
6 Commission Basis adjustments, as well as additional pro
7 forma and normalizing adjustments, the pro forma electric
8 and natural gas rates of return (UROR") for the Company's
9 Idaho jurisdictional operations are 4.97% and 5.21%,
10 respectively.Both return levels are below the Company's
11 requested rate of return of 8.74%. The incremental revenue
12 requirement for base retail rates, necessary to give the
13 Company an opportunity to earn its requested ROR is
14 $32,328,000 for the electric operations and $4,725,000 for
15 the natural gas operations.The overall base electric
16 increase is 16.73%, while the proposed bill increase for
17 customers, as explained by Mr. Hirschkorn, is 15.8%.
18 Whereas, the base natural gas increase, as well as the
19 overall bill increase, is 5.77%.
20 Q.What is the Company's rate of return that was
21 last authorized by this Commission for it'S electric and
22 natural gas operations in Idaho?
23 A.The Company's currently authorized rate of return
24 for its Idaho operations is 9.25%, effective September 9,
25 2004 for both our electric and natural gas systems.
Andrews, Di 5
Avista Corporation
1 ELECTRIC SECTIONIII.
2 Changes Since the 2002 Test Period
3 On what test period is the Company basing itsQ.
4 need for additional electric revenue?
5 The test period being used by the Company is theA.
6 twelve-month period ending December 31, 2007, presented on
7 a pro forma basis.Currently authorized rates are based
8 upon the 2002 test year utilized in Case No. AVU-E-04-1,
9 that were later adjusted to include the second half of
10 Coyote Springs 2 generating plant in Case No, AVU-E-05-1.
11 By way of sumry, could you please explain theQ.
12 different rates of return that you will be presenting in
13 your testimony?
14 As shown in Chart No. 1 below, there areA.Yes.
15 three different rates of return that will be discussed.
16 The actual ROR earned by the Company during the test
17
18
19
20
21
22
23
24
25
period, the Pro Forma ROR determined in my Exhibit No. 13,
Schedule 1, and the requested ROR.
Chart No.1
AvistaCorp
Rates of Retrn
10.00%
8,00"10
6.00%
4,00"10
2,00"10
0.00"10
Actua Pro For Reqes
Andrews, Di 6
Avista Corporation
driving theprimaryfactors1theWhatQ.are
2 Company's need for an electric increase?
Chart No. 2 below, shows the primary factors3A.
4 driving the electric revenue requirement in this case.
5 Additional detail regarding these items are explained in
more detail later in my testimony.6
Chart No.27
8 Primary Electric Revenue Requirement Factors
9
10
Production &
Transmission
Expense
48%
11
Increased Net Plant
Investmenil
32%
*Generation Upgrades
-Hydro & Theral
*Transmission Upgrades
*Distribution
-5 Years of New Customer Growth
-Advanced Meter Reading Project
12
*Increased Loads
*Theri~ Fuel Expenses
-Colstrip, Kettle Falls & CS2
*Mid Columbia Purchases
13
14
15
16 Distribution & Other
Expense
8%
*Distrbution Operation &
Maintenance Costs Hydro Relicensing &
* Administrative & General Expenses Compliance Issues
12%
17
18 Such as:
*Spokane River Relicensing
*Montana Riverbed Lease
Settlement
19
¡Includes return on investment, depreciation and
taes, offset by the tax benefit of interest.20
21
Please describe the primary factors driving the22Q.
23 Company's need for an electric increase?
There are numerous factors that have impacted the24A.
25 Company's Idaho electric results of operations since the
Andrews, Di 7
Avista Corporation
1 2002 test year. Net Operating Income (UNOI") has declined
2 approximately $14 million, or 34%, and total rate base has
3 increased approximately $l02. 5 million, or 23%.During
4 this same time period, the average numer of customers has
5 increased approximately 11%.The Company's electric
6 request is driven by changes in various operating cost
7 components, but as shown by the pie chart (Chart No. 2
8 above), primarily power supply costs, plant investment or
9 rate base growth associated with generation, transmission
10 and distribution plant (including pro forma capital
11 spending requirements during 2008) and by various hydro
12 relicensing efforts impacting the Utility.
13 Q.Please explain each of the four components or
14 segment s shown in Chart No. 2 above.
15
16
17
A.The first segment, Production and Transmission
expense increases,as explained below,comprise
approximately 48% of the overall request.As already
18 noted, net rate base for the Idaho jurisdiction increased
19 approximately $102.5 million, primarily due to additional
20 plant investment in generation, both hydro and thermal, and.
21 transmission plant.In addition, gross distribution plant
22 increased significantly due to the 11% customer growth
23 since the Company's previous general rate case in Idaho and
24 due to the inclusion of rate base in this case of the AMR
25 project investment planned for completion in fourth quarter
Andrews, Di 8
Avista Corporation
1 of 2008. The depreciation recovery, taxes associated with
2 plant, and the return on additional plant investment offset
3 by the tax benefit of interest (excluding rate base
4 associated with hydro relicensing efforts noted below),
5 make up approximately 32% of the Company request.
6 The hydro relicensing and compliance efforts pro
7 formed into this case make up approximately 12% of the
8 overall request, and include, the intangible and production
9 net rate base and expenses associated with the Spokane
10 River relicensing, and other hydro compliance related
11 issues, for example the Montana Riverbed Settlement lease
12 expense.
13 The remaining cost category, Distribution and Other
14 expense, which includes increases to all other operating
15
16
categories,such as distribution expenses,customer
service,taxes and administrative and general,total
17 approximately 8% of the overall request.
18 Q.Please describe the impact of the next segment,
19 increased net power supply expense.
20 A.As discussed in detail in Mr.Johnson's
21 testimony, the level of Idaho's share of power supply
22 expense has increased by approximately $33.4 million ($94.3
23 million on a system basis) from the level currently in base
24 rates.
Andrews, Di 9
Avista Corporation
1 This significant increase in power supply expense over
2 the expense currently in base rates is based on numerous
3 factors, including higher retail loads, reduced hydro
4 generation, increased fuel costs, increased Mid Columia
5 purchase costs, and increased transmission expense.
6 Higher retail loads are the most significant factor
7 contributing to higher power supply expense.Pro forma
8 retail loads are 128.6 aMW (system) higher than 2002 loads
9 that current rates are based on. Hydro generation is also
10 lower than the level in current base rates by a reduction
11 of 6.8 aM (system).
12 Fuel expense (i. e. thermal fuel expense for coal, wood
13 fuel and natural gas) is approximately 50 percent higher on
14 a dollars per MW basis in the 2009 pro forma (increasing
15 from $20.26 per MW in current base rates to $30.33 per MW
16 in the 2009 pro forma) compared to the fuel expense in
17 current base rates.Mr. Johnson provides addi tional
18 explanation of these increases.
19 Finally,transmission expense has increased by
20 approximately $1.0 million (Idaho allocation) related to
21 transmission costs for Coyote springs 2.
22 Offsetting these costs, as also further explained by
23 Mr. Kalich and Mr. Johnson, is the approximately $4.5
24 million urate mitigation adjustment" being proposed in this
25 case.
Andrews, Di 10
Avista Corporation
1 Q.Could you please identify the main components of
2 the "Distribution &: Other" segment shown in the chart
3 above?
4
5
A.Yes.A numer of expense items have increased
since 2002, which have been included in this case.For
6 example, wages and benefits have increased, as well as
7 other administrative and general expenses.
8 We are utilizing a 2007 test year since that is the
9 most recent normalized financial information the Company
10 has available,however,new general electric rates
11 resul ting from this filing are not expected to go into
12 effect until late 2008.Accordingly, the Company' has
13 included a numer of pro forma adjustments to capture some
14 of the measurable cost changes that the Company will
15 experience from the 2007 test year.
16 Q.What were the major components of the $102.5
17 million increase in total rate base?
18 A.Looking at the changes to Ugross" plant in
19 service shows that gross plant increased almost $236.5
20 million (Idaho), or 32%, as compared to what is currently
21 included in rates. Included in this Ugross" plant total is
22 $27.6 million pro forma capital recorded in intangible and
23 production plant associated with the Spokane River
24 relicensing and compliance issues, or approximately 11.7%
25 of the total change to Ugross" plant.
Andrews, Di 11
Avista Corporation
1 To continue to meet the energy and reliability needs
2 of our customers, the Company has invested additional
3 amounts in thermal and hydro generating facilities (see
4 Table No. 1 below), as well as additional transmission
5 investment (see Table No. 2 below).Excl uding the
6 relicensing compliance issues mentioned separately above,
7 the production and transmission plant investment shown in
8 Table Nos. 1 & 2 below, plus additional pro forma
9 production and transmission investment included in this
10 case (discussed later in my testimony)totaled
11 approximately $82.6 million or 35%1 of the total change to
12 Ugross" plant.
13
14 Table NO.1 - Generation Project Costs
Cost: System 110
Generation Projects (1)(OOOs)In-Service Date
Cabinet Gorge Unit 4 $6,200 / $2,119 Mar-07
Noxon Rapids Unit 4 $7,189/ $2,456 Sep-07
Colstrip Unit 4 $2,949/ $1,008 Jun-06
Colstrip Unit 3 $3,760 / $1 ,285 Jun-07
Total $20,098 / $6,868
-rr) The additional generation from the Cabinet Gorge Unit 4 and Colstrip Units 3 & 4 project
upgrades has been included in the AURORA model as discussed by Company witness Mr.
Kalich.
15
16
17
18
1 Also included in the 35% of gross plant additions is the $19.5
million of Idaho's share of the purchase of the Rathdrum CT project in
September 2005, previously leased by the Company. The Rathdrum CT is
fully reflected in the Company's 2007 test period results.
Andrews, Di 12
Avista Corporation
1 Table No. 2- Transmission Project Costs
2
3 5.Year Transmission Upgrade Projects completed through December 31,2007
Transmission Projects Cost: System 110 (OOOs) (2)
Pine Creek Substation $4,7451 $1,637
Beacon-Rathdrum 230 kV $19,991 1 $6,912
Dry Creek Substation $14,4541 $5,016
Beacon-Bell #4 230 kV $1,431 1 $496
Beacon-Bell #5 230 kV $3,657 1 $1,271
Spokane Valley Reinforcement $23,623 1 $$8,191
WoH Telecom $8,1841 $2,843
WoH Telecom Line Upgrades $9661 $$331
Clark Fork RAS $1,071 1 $371
Palouse Reinforcement (1)$54,6581 $19,016
Lolo Substation (1)$2,1391 $755
Total $134,919 1 $46,840
\1) Additional costs of approximately $1.5 (System) for Palouse Reinforcement ($800k)
and Lolo Substation ($700k) are planned for 2008 and included in the Pro Forma
Capital Additions 2008 adjustment (PF7) explained later in my testimony.(2) Amount allocated to Idaho varies bv year costs olaced in service.
4
5 The specific historical and pro forma capital
6 expendi tures undertaken by the Company to upgrade its
7 generation and transmission facilities,and improve
8 operating efficiency and reliability, are discussed further
9 by Mr. Vermillion regarding production assets, and Mr.
10 Kinney regarding transmission assets.Mr. Kinney also
11 discusses the pro forma distribution proj ects .
12 Q.What other rate base additions are included in
13 Total Rate Base?
14 A.Distribution Ugross" plant increased $107.2
15 million or 41.7% above the current level included in rates,
16 mostly due to 11% average customer growth from 2002 through
Andrews, Di 13
Avista Corporation
1 2007 and the inclusion of the AM project investment, while
2 general Ugross" plant increased $19.1 million or 52.2%2.
3 Later in my testimony, i will address each of the
4 relicensing and compliance pro forma adjustments, and the
5 additional net rate base adjustments labeled "Pro Forma
6 Capital Additions 2007" and "Pro Forma Capital Additions
7 2008" included in Exhibit No. 13, Schedule 1 page 8, which
8 explains the detail behind the normalizing and pro forma
9 net operating income and rate base adjustments.
10 The figures listed above are Ugross" plant investment
11 changes.Again,taking into account increases to
12 Accumulated Depreciation and Amortization and Deferred
13 Federal Income Tax offsets,produces the net $102.5
14 million, or 23% increase to Total Rate Base.Depreciation
15 expense, which has largely followed the 32% growth in gross
16 plant-in-service, has increased $8.8 million.
17 Q.comany witness Mr. DeFelice sponsors the pro
18 form capital adjustments included in this case. Could you
19 please briefly describe the conclusions drawn by Mr.
20 DeFelice on the reasons for increased capital investment?
21 A.Yes. As described in Mr. DeFelice's testimony,
2 Included in the $19.1 million of General "gross" plant additions is
the $4.5 million of Idaho's share of the purchase of the main office
building in Novemer 2005, previously leased by the Company. The main
office building is fully reflected in the Company's 2007 test periodresults.
Andrews, Di 14
Avista Corporation
1 the Company is facing high levels of capital investment in
2 its electric and gas system infrastructure to address
3 customer growth, replacement and maintenance of Avista' s
4
5
aging system,and increased reliability and safety
requirements.As soon as this new plant is placed in
6 service, the Company must start depreciating the new plant
7 and incur other costs related to the investment. However,
8 the Company does not begin to recover the cost of the new
9 plant or a return on that investment in rates until the
10 next rate case after it makes the investment. Unless this
11 new investment is reflected in retail rates in a timely
12 manner, it has a negative impact on Avista's earnings,
13 particularly because the new plant is typically far more
14 costly to install than the cost of similar plant that was
15 embedded in rates decades earlier.
16
17 Revenue Requirement
18 Q.Would you please explain what is shown in Exibit
19 No. 13, Schedule 1?
20 A.Yes. Exhibit No. 13, Schedule 1 shows actual and
21 pro forma electric operating results and rate base for the
22 test period for the State of Idaho.Colum (b) of page 1
23 of Exhibit No. 13, Schedule 1 shows 2007 operating results
24 and components of the average-of-monthly-average rate base
25 as recorded; colum (c) is the total of all adjustments to
Andrews, Di 15
Avista Corporation
1 net operating income and rate base; and colum (d) is pro
2 forma results of operations, all under existing rates.
3 Colum (e) shows the revenue increase required which would
4 allow the Company to earn an 8.74% rate of return. Colum
5 (f) reflects pro forma electric operating results with the
6 requested increase of $32,328,000.The restating
7 adjustments shown in colums c through v, of pages 4
8 through 7 of Exhibit No. 13, Schedule 1, are consistent
9 with the treatment reflected in the prior Commission Order
10 in Case No. AVU-E-04-1 and current regulatory principles.
11 Q.Would you please explain page 2 of Exhibit No.
12 13, Schedule 1?
13 A.Yes.Page 2 shows the calculation of the
14 $32,328,000 revenue requirement at the requested 8.74% rate
15 of return.
16 Q.Would you now please explain page 3 of Exhibit
17 No. 13, Schedule 1?
18
19
A.Yes.Page 3 shows the derivation of the net
operating income to gross revenue conversion factor.The
20 conversion factor takes into account uncollectible accounts
21 receivable, Commission fees and Idaho State excise taxes.
22 Federal income taxes are reflected at 35%.
23 Q.Now turning to pages 4 through 9 of your Exhibit
24 No. 13, Schedule 1, would you please explain what those
25 pages show?
Andrews, Di 16
Avista Corporation
1 A.Yes. Page 4 begins with actual operating results
2 and rate base for the 2007 test period in colum (b).
3 Individual normalizing adjustments that are standard
4 components of our annual reporting to the Commission begin
5 in colum (c) on page 4 and continue through colum (v) on
6 page 7.Individual pro forma and additional normalizing
7 adjustments begin in colum (PFl) on page 7 and continue
8 through colum (PFI5) on page 9. The final colum on page
9 9 (PFT) is the total pro forma operating results and rate
10 base for the test period.
11
12 Standard Comission Basis Adjustments
13 Q.Would you please explain each of these
14 adjustments, the reason for the adjustment and its effect
15 on test period state of Idaho net operating income and/or
16 rate base?
17 A.Yes, but before I begin, I will note that in
18 addition to the explanation of adjustments provided herein,
19 the Company has also provided workpapers outlining
20 additional details related to each of the adjustments.
21 The first adjustment, colum (c) on page 4, entitled
22 Deferred FIT Rate Base, reflects the rate base reduction
23 for Idaho's portion of deferred taxes.The adj us tmen t
24 reflects the deferred tax balances arising from accelerated
25 tax depreciation (Accelerated Cost Recovery System, or
Andrews, Di 17
Avista Corporation
1 ACRS, and Modified Accelerated Cost Recovery, or MACRS) ,
2 bond refinancing premiums, and contributions in aid of
3 construction.These amounts are reflected on the average
4 of monthly average balance basis. The effect on Idaho rate
5 base is a reduction of $80,527,000.
6 The adjustment in colum (d), Deferred Gain on Office
7 Building, reflects the rate base reduction for Idaho's
8 portion of the net of tax, unamortized gain on the sale of
9 the Company's general office facility.The facility was
10 sold in December 1986 and leased back by the Company.
11 Al though the Company repurchased the building in November
12 2005, the Company opted to continue to amortize the
13 deferred gain over the remaining amortization period
14 scheduled to end in 2011. The effect on Idaho rate base is
15 a reduction of $196,000.
16
17
18
19
The adjustment in colum (e), Colstrip 3 AF
Elimination,is a reallocation of rate base and
depreciation expense between jurisdictions.In Cause Nos.
U-81-15 and U-82-10,the Washington Utili ties and
20 Transportation Commission (WUTC) allowed the Company a
21 return on a portion of Colstrip unit 3 construction work in
22 progress (UCWIP"). A much smaller amount of Colstrip unit
23 3 CWIP was allowed in rate base in Case U-I008-144 by the
24 IPUC. The Company eliminated the AFUDC associated with the
25 portion of CWIP allowed in rate base in each jurisdiction.
Andrews, Di 18
Avista Corporation
1 Since production facilities are allocated on the
2 Production/Transmission formula, the allocation of AFUDC is
3 reversed and a direct assignent is made.The rate base
4 adjustment reflects the average of monthly averages amount
5
6
for 2007.The effect on Idaho net operating income is a
decrease of $225,000.The effect of the reallocation on
7 Idaho rate base is an increase of $2,342,000.
8 The adjustment in colum (f), Colstrip Commn AF,
9 is also associated with the Colstrip plants in Montana, and
10 increases rate base.Differing amounts of Colstrip common
11 facili ties were excluded from rate base by this Commission
12 and the WUTC until Colstrip Unit 4 was placed in service.
13 The Company was allowed to accrue AFUDC on the Colstrip
14 common facilities during the time that they were excluded
15 from rate base.It is necessary to directly assign the
16 AFUDC because of the differing amounts of common facilities
17 excluded from rate base by this Commission and the WUTC.
18 In September 1988, an entry was made to comply with a
19 Federal Energy Regulatory Commission ("FERC" )Audit
20 Exception, which transferred Colstrip common AFUDC from the
21 plant accounts to account 186.These amounts reflect a
22 direct assignent of rate base for the appropriate average
23 of monthly averages amounts of Colstrip common AFUDC to the
24 Washington and Idaho jurisdictions.Amortization expense
25 associated with the Colstrip common AFUDC is charged
Andrews, Di 19
Avista Corporation
1 directly to the Washington and Idaho jurisdictions through
2 Account 406 and is a component of the actual results of
3
4
operations.The rate base adjustment reflects the average
of monthly averages amount for 2007.The effect on Idaho
5 rate base is an increase of $976,000.
6 The adjustment in colum (g), Kettle Falls &: Boulder
7 Park Disallowances, decreases ra te base.The amounts
8 reflect the Kettle Falls generating plant disallowance
9 ordered by this Commission in Case No. U-I008-18-5 and the
10 Boulder Park plant disallowance ordered by the IPUC in case
11 No. AVU-E-04-L.This Commission disallowed a rate of
12 return on $3,009,445 of investment in Kettle Falls, and
13 $2,600,000 million of investment in boulder Park.The
14 disallowed investment and related accumulated depreciation
15 are removed.These amounts are a component of actual
16 results of operations. The effect on Idaho rate base is a
17 decrease of $2,349,000.
18 The adjustment in colum (h), Customer Advances,
19 decreases rate base for moneys advanced by customers for
20 line extensions, as they will most likely be recorded as
21 contributions in aid of construction at some future time.
22 The effect on Idaho rate base is a decrease of $765,000.
23 Q.Please turn to page 5 and explain the adjustments
24 shown there.
Andrews, Di 20
Avista Corporation
1 A.Page 5 starts with the adjustment in colum (i),
2 Weatherization and DSM Investment, which includes in rate
3 base balances (net of amortization) of weatherization
4 grants, the model conservation program costs and electric
5 demand side management (DSM) program costs upon which AFUCE
6 is no longer being accrued and full amortization was
7
8
implemented beginning August 1994.These amounts are a
component of actual results of operations.The effect on
9 Idaho rate base is an increase of $2,630,000.
10 Q.Would you please explain how energy efficiency-
11 related expenditures impact the revenue requirement in this
12 case?
13 A.Yes.The unamortized balance of energy
14 efficiency management investment incurred prior to 1995 is
15 included in the results of operations and is a rate base
16 item in the colum (i) adjustment just described.DSM
17 expenditures incurred after March 13, 1995 have been offset
18 by revenues from the Company's energy efficiency tariff
19 rider, Schedule 91, and are not included in the revenue
20 requirement.
21 As the Commission is aware, the Company's tariff rider
22 under Schedule 91 was the first non-bypassable distribution
23 charge in the United States to fund energy efficiency. Mr.
24 Folsom provides additional detail and addresses the
25 prudence of the expenditures under this tariff.
Andrews, Di 21
Avista Corporation
1 Q.Please continue with your explanation of the
2 adjustments on page 5.
3 A.The next colum entitled Subtotal Actual
4 represents actual operating results and rate base plus the
5 standard rate base adjustments that are included in
6 Commission Basis reporting.
7 The adjustment in column (j), Depreciation True-up,
8 reflects a decrease in depreciation expense due to the
9 utilization of new depreciation rates effective January 1,
10 2008 as approved by Order No. 30498 in Case No. AVU-E-07-
11 11.This adjustment increases Idaho net operating income
12 by $492,000.
13 The adjustment in colum (k), Eliminate B & 0 Taxes,
14 eliminates the revenues and expenses associated with local
15 business and occupation (B & 0) taxes, which the Company is
16 allowed to pass through to its Idaho customers.The
17 adjustment eliminates any timing mismatch that exists
18 between the revenues and expenses by eliminating the
19 revenues and expenses in their entirety.B & 0 taxes are
20 passed through on a separate schedule, which is not part of
21 this proceeding. The effect of this adjustment is to
22 decrease Idaho net operating income by $5,000.
23 The adjustment in colum (l), property Tax, restates
24 the 2007 test period accrued levels of property taxes to
25 the most current information available and eliminates any
Andrews, Di 22
Avista Corporation
1 adjustments related to the prior year. The effect of this
2 particular adjustment is to increase Idaho net operating
3 income by $164,000.
4 The adjustment in colum (m), Uncollectible Exense,
5 restates the accrued expense to the actual level of net
6 write-offs for the test period.The effect of this
7 adjustment is to increase Idaho net operating income by
8 $77 ,000.
9 The adjustment in colum (n), Regulatory Expense,
10 restates recorded 2007 regulatory expense to reflect the
11 IPUC assessment rates applied to revenues for the test
12 period and the actual levels of FERC fees paid during the
13 test period. The effect of this adjustment is to decrease
14 Idaho net operating income by $20,000.
15 Q.Please turn to page 6 and exlain the adjustments
16 shown there.
17 A.The adjustment in colum (0) , Injuries and
18 Damges, is a restating adjustment that replaces the
19 accrual with the six-year rolling average of actual
20 injuries and damages payments not covered by insurance. A
21 six-year rolling average and the reserve method of
22 accounting for injuries and damages, net of insurance
23 proceeds, is a practical methodology to deal wi th these
24 normal utility operating expenses that happen to occur on
25 an irregular basis and differ markedly in materiality.
Andrews, Di 23
Avista Corporation
1 This methodology was accepted by the Idaho Commission in
2 Case No. WWP-E-98-11. The effect of this adjustment is to
3 decrease Idaho net operating income by $22,000.
4 The adjustment in colum (p), FIT, adjusts the FIT
5 calculated at 35% within Results of Operations by removing
6 the effect of certain Schedule M items, matching the
7 jurisdictional allocation of other Schedule M items to
8 related Results of Operations allocations and to adjust the
9 production tax credits for pro forma qualified generation.
10 This adjustment also reflects the proper level of deferred
11 tax expense for the test period.The net effect of this
12 adjustment, all based upon a Federal tax rate of 35%, is to
13 increase Idaho net operating income by $91,000.
14 The adjustment in colum (q), Idaho PCA, removes the
15 effects of the financial accounting for the Power Cost
16 Adjustment (PCA).The PCA normalizes and defers certain
17 power supply costs on an ongoing basis between general rate
18 filings.When the deferral balance reaches a certain
19 trigger level, the balance is either returned (refunded) or
20
21
charged ( surcharged)to cus tomers through a special
temporary tariff.Revenue adjustments due to the special
22 tariff and the power cost deferrals affect actual results
23 of operations and need to be eliminated to produce a normal
24 period.Actual revenues and power supply costs are
25 normalized in adjustments in colum (u) and colum (PFl),
Andrews, Di 24
Avista Corporation
1 respectively. The effect of this adjustment is to decrease
2 Idaho net operating income by $10,888,000.
3 The adjustment in colum (r), Nez Perce Settlement
4 Adjustment, reflects a decrease in Production operating
5 expenses.An agreement was entered into between the
6 Company and the Nez Perce Tribe to settle certain issues
7
8
regarding earlier owned and operated hydroelectric
generating facilities of the Company.This adjustment
9 directly assigns the Nez Perce Settlement expenses to the
10 Washington and Idaho jurisdictions. This is necessary due
11 to differing regulatory treatment in Idaho Case No. WWP-E-
12 98-11 and washington Docket No. UE-991606.The effect of
13 this adjustment is to increase Idaho net operating income
14 by $8,000.
15 The adjustment in colum (s), Eliminate AIR Expenses,
16 A/R representing Accounts Receivable, removes expenses
17 associated with the sale of customer accounts receivable.
18 The effect of this adjustment is to increase Idaho net
19 operating income by $337,000.
20 The adjustment in colum (t), Clark Fork PM&E, adjusts
21 the level of amortization expense based on the balancing
22 account method currently authorized by the Commission for
23 the Clark Fork Protection, Mitigation, and Enhancement
24
25
(PM&E) expenses,to the Company's proposed level of
expense.In this case, the Company is requesting the
Andrews, Di 25
Avista Corporation
1 Commission approve its proposed change to the Idaho
2 accounting for Clark Fork PM&E expenses to allow for flow
3 through of actual expenditures, and include a 5-year
4 amortization of the remaining expected outstanding balance
5 in the balancing account at December 31, 2008. The effect
6 of this adjustment is to decrease Idaho net operating
7 income by $336,000.
8 The adjustment in colum (u), Revenue Normalization,
9 is a 3-fold adjustment taking into account known and
10 measurable changes that include revenue normalization,
11 weather normalization and a recalculation of unbilled
12 revenue.Revenues associated with the Schedule 91 Tariff
13 Rider and Schedule 59 Residential Exchange are excluded
14 from pro forma revenues, and the related amortization
15 expense is eliminated as well. Ms. Knox is sponsoring this
16 adjustment. The effect of this particular adjustment is to
17 decrease Idaho net operating income by $632,000.
18 Q.Please continue on page 7 with your explanations
19 of the adjustments.
20 A.The adjustment in colum (v) , Restate Debt
21 Interest, restates debt interest using the Company's pro
22 forma weighted average cost of debt, as outlined in the
23 testimony and exhibits of Company witness Mr. Malquist, and
24 applied to Idaho's pro forma level of rate base, produces a
25 pro forma level of tax deductible interest expense.The
Andrews, Di 26
Avista Corporation
1 Federal income tax effect of the restated level of interest
2 for the test period decreases Idaho net operating income by
3 $683,000.
4 The adjustment in the colum entitled Restated Total,
5 subtotals all the preceding colums (b) through colum (v),
6 exclusive of the previously discussed subtotal colum.
7 These totals represent actual operating results and rate
8 base plus the standard normalizing adjustments that the
9 Company includes in its Commission Basis reports except
10 power supply.
11
12 Pro Form Adjustments
13 Q.Please explain the significance of the 15 colums
14 subsequent to colum entitled Restated Total that begin at
15 page 7 in your Exhibi t No. 13, Schedule 1.
16 A.The adjustments subsequent to the Restated Total
17 colum are pro forma adjustments that recognize the
18 jurisdictional impacts of items that will impact the pro
19 forma operating period levels for known and measurable
20 changes. They encompass revenue and expense items as well
21 as additional capital projects.These adjustments bring
22 the operating results and rate base to the final pro forma
23 level for the rate year.
Andrews, Di 27
Avista Corporation
1 Q.Please continue with your explanation of the
2 adjustments starting on page 7, subsequent to the Restated
3 Total colum.
4 A.The adjustment in colum (PFl), Pro Forma Power
5 Supply, was made under the direction of Mr. Johnson and is
6 explained in detail in his testimony.This adjustment
7 includes pro forma power supply related revenue and
8 expenses (net of the Urate mitigation adjustment" explained
9 by Company witness Mr. Kalich) to reflect the twelve-month
10 period January 1, 2009 through December 31, 2009.Mr.
11 Johnson's testimony outlines the system level of pro forma
12 power supply details that are included in this adjustment.
13 This adjustment calculates the Idaho jurisdictional share
14 of those figures included in the base Results of
15 Operations. The net effect of the power supply adjustments
16 decreases Idaho net operating income by $222,000.
17 The adjustment in colum (PF2), Pro Form Production
18 Property Adjustment, adjusts production and transmission
19 revenues, expenses, and rate base by a factor that is the
20 ratio of 2007 Idaho test year retail load divided by 2009
21 Idaho pro forma rate year retail load.The adjustment is
22 made to avoid the over-recovery of production and
23 transmission costs,since the revenue requirement
24 associated with those costs is being spread to test year
25 retail load.Ms. Knox sponsors this adjustment and
Andrews, Di 28
Avista Corporation
1 discusses its calculation in more detail in her testimony.
2 The effect of this adjustment on Idaho net operating income
3 is an increase of $3,845,000.The effect on Idaho rate
4 base is a decrease of $15,426,000.
5 The adjustment in colum (PF3), Pro Form Labor-Non-
6 Exec, reflects known and measurable changes to test period
7 union and non-union wages and salaries, excluding executive
8 salaries, which are handled separately in PF4. Test period
9 wages and salaries are restated as if the wage and salary
10 increases through March 2009 were in place during the
11 entire pro forma test period. The methodology behind this
12 adjustment is consistent with that used in the last general
13 case, Case No. AVU-E-04-1.The effect of this adjustment
14 on Idaho net operating income is a decrease of $777,000.
15
16
The adjustment in colum (PF4) , Pro Form Labor-
Executive,reflects known and measurable changes to
17 executive compensation, restating their salaries as if wage
18 and salary increases through March 2009 were in place for
19 the entire pro forma test period. This adjustment takes
20 into account changes in executive staffing made during 2007
21 and includes compensation for the planned executive team in
22 Compensation costs for non-utility operations2009 only.
23 are excluded as executives routinely charge a portion of
24 their time to non-utility operations, commensurate with the
25 amount of time spent on such activities.The current
Andrews, Di 29
Avista Corporation
1 executives' salary allocations are set at their expected
2 pro forma test period utility/non-utility percentage
3 splits.The methodology behind this adjustment is
4 consistent with that used in the last general case, Case
5 No. AVU-E-04-1. The impact of this adjustment on Idaho net
6 operating income is a decrease of $85,000.
7 The adjustment in colum (PF5) , Pro Form Transmission
8 Rev/Ex, was made under the direction of Mr. Kinney and is
9 explained in detail in his testimony.This adjustment
10 includes pro forma transmission-related revenues and
11 expenses to reflect the twelve-month period January 1, 2009
12 through December 31, 2009.The net effect of the
13 transmission revenue and expense adjustments decreases
14 Idaho net operating income by $265,000.
15 Q.Please turn to page 8 and explain the adjustments
16 shown there.
17 A.The adjustment in colum (PF6), Pro For.a Capital
18 Additions 2007, pro forms in the capital cost and expenses
19 associated with adjusting the 2007 average-monthly-average
20 plant related balances to actual end-of-period balances for
21 plant in service at Decemer 31, 2007.The capi tal cos ts
22 have been included for December 31, 2007 pro forma period
23 with the associated depreciation expense and property tax,
24 as well as the appropriate accumulated depreciation and
25 deferred income tax rate base offsets. This adjustment was
Andrews, Di 30
Avista Corporation
1 made under the direction of Mr. DeFelice and is described
further in his testimony.The production property2
3 adjustment is also applied to the production and
4 transmission components of these additions as discussed
5 further by Ms. Knox.This adjustment decreases Idaho net
6 operating income by $120,000 and increases rate base by
7 $17,776,000.
8 The adj us tmen t in co 1 um ( PF7), Pro Form Capital
9 Additions 2008, pro forms in the capital cost and expenses
10 associated with pro forming in capital expenditures for
11 2008. This adjustment includes projects completed during
12 2008, and thus were normalized to reflect annual amounts,
13 and proj ects expected to be completed and transferred to
14 plant-in-service by December 31, 2008, near the time of
15 approval of new retail rates in this case.The capital
16 costs have been included for the appropriate pro forma
17 period with the associated depreciation expense and
18 property tax, as well as the appropriate accumulated
19 depreciation and deferred income tax rate base offsets.
20 This adjustment also reduces the 2007 vintage plant net
21 rate base (including accumulated depreciation and deferred
22 FIT) to an end of period December 31, 2008 adjusted
23 balance. This adjustment was also made under the direction
24 of Mr. DeFelice and is described further in his testimony.
25 The production property adjustment is also applied to the
Andrews, Di 31
Avista Corporation
CONFIDENTIAL
Eliabeth M. Andrews
Direct Testimony
THIS PAGE ALLEGEDLY CONTAIS TRAE SECRETS OR CONFIENTIA
MATERI AND IS SEPARTELY FILED.
Andrews, Di 32
A vista Corporation
CONFIDENTIA
Elizabeth M. Andrews
Direct Testimony
TIDS PAGE ALLEGEDLY CONTAIS TRAE SECRETS OR CONFIDENTIAL
MATERI AND IS SEPARTELY FILED.
Andrews, Di 33
A vista Corporation
CONFIDENTIA
Eliabeth M. Andrews
Direct Testimony
THIS PAGE ALLEGEDLY CONTAIS TRAE SECRETS OR CONFIDENTIA
MATERI AN IS SEPARTELY FILED.
Andrews, Di 34
A vista Corporation
1 incentive payout that was unot" based on the Customer
2 Satisfaction and Reliability targets.This pro forma
3 adjustment further adjusts incentive expenses to a 6 year
4 average.The impact of this adjustment on Idaho net
5 operating income is a decrease of $137,000.
6 Q.Please explain how the Company computed its 6-
7 year average.
8 A.Actual incentives paid and the associated payroll
9 taxes accrued for years 2002 through 2006 were adjusted by
10 the Consumer Price Index (CPI) annual average for the
11 calendar year the incentives were paid, to reflect those
12 costs in 2007 dollars.The computed six-year average of
13 2002 through 2007 incentives was compared to 2007 test year
14 incentives paid to determine the pro forma adjustment.
15 Q. Please explain other examples where the use of an
16 average has been used by the Company to determine the
17 appropriate level of revenue or expense to include in its
18 general rate case filings?
19 A.A few examples come to mind regarding
20 transmission revenue adjustments. For example, the Company
21 uses a five-year average for OASIS wheeling revenues
22 because these revenues vary year to year depending on
23 electric energy market conditions.Avista has, in the
24 current and previous rate cases, used the most recent five-
25 year average as being representative of future expectations
Andrews, Di 35
Avista Corporation
1 unless there are known events or factors that occurred
2 during the period that would cause the average to not be
3 representative of future expectations.
4 A second transmission revenue example includes the
5 adjustment for Dry Gulch revenue.The current methodology
6 used to normalize Dry Gulch revenue is a five-year average
7 of actual revenue.A five-year average is used since the
8 revenue can vary from year to year.The revenue is
9 calculated using a 12-month rolling ratchet based on
10 monthly peak demands.Load peaks are very sensitive to
11 temperatures, which vary from year to year.
12 A third example,regarding inj uries and damages
13 expense,includes the restating adjustment described
14 earlier in my testimony that replaces the amount accrued in
15 the test period with a six-year rolling average of actual
16 payments for injuries and damages not covered by insurance.
17 Q.Why did the Company choose to use a 6 -year
18 average?
19 A.Since company incentive plan payouts often can
20 vary year-to-year, the Company has chosen to propose an
21 average of annual payouts.Besides the other examples
22 noted above where a five or six year average has been used,
23 the deciding factor on the use of a 6-year average is that
24 the Company changed its incentive plan in 2002 to be based
25 on Customer Satisfaction and Reliability targets, and the
Andrews, Di 36
Avista Corporation
1 requirement that O&M savings must occur in order for there
2 to be any payout.This is significantly different than
3 the plans prior to 2002 based on earnings targets of the
4 Company.Therefore, a 6-year average using years 2002
5 though 2007 seems most appropriate.
6 Q.Please continue your explanation of the
7 adjustment colums on page 9.
8 A.The adjustment in colum (PFI4), Pro Form Idaho
9 Advanced Meter Reading (AM), includes the capital costs
10 associa ted wi th the Company's Idaho AM proj ect .These
11 costs include actual life-to-date expenditures from January
12 2005 through December 31, 2007, and 2008 pro forma
13 expendi t ures through December 31 , 2008 .In the IPUC ' s
14 Order No. 29602, in Case No. AVU-E-04-01, the Commission
15 supported the Company's plans to install AM and authorized
16 the Company-requested deferral accounting treatment for its
related investment.Mr. Paulson provides additional17
18 details regarding these costs.This adjustment decreases
19 Idaho net operating income by $689,000 and increases rate
20 base by $21,852,000.
21 The adjustment in colum (PFI5) , Pro Form CS2
22 Levelized Adjustment, defers a portion of the return on
23 Coyote Springs 2 (CS2) in early years for recovery in later
24 years in order to levelize the revenue requirement on CS2
25 plant investment over a ten-year period.In the Company i s
Andrews, Di 37
Avista Corporation
1 last electric general rate case, Case No. AVU-E-04-1, this
2 method was approved by the IPUC in Order No. 29602.This
3 adjustment restates the test period amount of negative
4 amortization expense, inclusive of the carrying charge on
5 the deferred return, to the amount that will be recorded in
6 the 2009 rate year.The change in deferred income tax
7 expense from the test period to the rate period is also
8 reflected.In the 2009 rate year the deferred return
9 begins to be recovered, although the carrying cost on the
10 deferred return exceeds the recovery of the deferred return
11 for that period. The levelization adjustment is necessary,
12 since the CS2 net plant upon which the levelization
13 adjustment is based, is proformed to the rate period.
14 Hence, the levelization adjustment also needs to be
15 proformed to the rate period. This adjustment reduces net
16 operating income by $140,000.
17 The last colum, Pro Forma Total, reflects total 2007
18 pro forma results of operations and rate base consisting of
19 2007 actual results and the total of all adjustments.
20 Q.Referring back to page 1, line 42, of Exhibit No.
21 13, Schedule 1, what was the actual and pro form electric
22 rate of return realized by the Company during the test
23 period?
24 A.For the State of Idaho, the actual test period
25 rate of return was 7.20%. The pro forma rate of return is
Andrews, Di 38
Avista Corporation
1 4.97% under present rates. Thus, the Company does not, on
2 a pro forma basis for the test period, realize the 8.74%
3 rate of return requested by the Company in this case.
4 Q.How much additional net operating income would be
5 required for the State of Idaho electric operations to
6 allow the Company an opportunity to earn its proposed 8.74%
7 rate of return on a pro form basis?
8 A.The net operating income deficiency amounts to
9 $20,676,000, as shown on line 5, page 2 of Exhibit No. 13,
10 Schedule 1. The resulting revenue requirement is shown on
11 line 7 and amounts to $32,328,000, or an increase of 16.73%
12 over pro forma general business revenues.
13
14
15
IV.NATUR GAS SECTION
Q.On what test period is the Company basing its
16 need for additional natural gas revenue?
17 A.The test period being used by the Company is the
18 twelve-month period ending December 31, 2007, presented on
19 a pro forma basis.Currently authorized rates are based
20 upon the 2002 test year utilized in case No. AVU-G-04-1.
21 Q.Could you please explain the different rates of
22 return shown in your natural gas results presented in your
23 testimony?
24
25
A.Yes.As discussed previously in the Electric
Section,there are three different rates of return
Andrews, Di 39
Avista Corporation
1 calculated.The actual ROR earned by the Company during
2 the test period, the Pro Forma ROR determined in my Exhibit
3 No. 13, Schedule 2, and the requested ROR. For convenience
4 of comparison, please refer to Chart No. 3 below depicting
5 these results for the Natural Gas Section:
67 Chart No.3
8
9
Avista Corp
Rates of Retu
10
11
12
13
14
15
10.00%
8.00%
6.00%
4.00%
2.00%
0.00%
Actual ProForma Request
Q.What are the primary factors driving the
16 Company's need for additional natural gas revenues?
17 A.The Company's natural gas request is driven by
18 changes in various operating cost components, but primarily
19 the addition of the Jackson Prairie expansion and the
20 completion of the Advanced Meter Reading proj ects, both
21 planned for completion in the fourth quarter of 2008. This
22 causes an increase in the fixed costs of providing gas
23 service to customers. Mr. Vermillion further discusses the
24 JP Expansion project in his testimony, while Mr. Paulson
Andrews, Di 40
Avista Corporation
1 discusses the AMR project.I describe the pro forma
2 adjustments included in this case later in my testimony.
3
4 Revenue Requirement
5 Q.Would you please explain what is shown in Exhibit
6 No. 13, Schedule 2?
7 A.Exhibi t No. 13, Schedule 2 shows actual and pro
8 forma gas operating results and rate base for the test
9 period for the State of Idaho.Colum (b) of page 1 of
10 Exhibit No. 13, Schedule 2 shows 2007 operating results and
11 components of the average-of-monthly-average rate base as
12 recorded; colum (c) is the total of all adjustments to net
13 operating income and rate base; and colum (d) is pro forma
14 resul ts of operations, all under existing rates.Colum
15 (e) shows the revenue increase required which would allow
16 the Company to earn an 8.74% rate of return.Colum (f)
17 reflects pro forma gas operating results with the requested
18 increase of $4,725,000.
19 Q.Would you please explain page 2 of Exibit No.
20 13, Schedule 2?
21 A.Yes.Page 2 shows the calculation of the
22 $4,725,000 revenue requirement at the requested 8.74% rate
23 of return.
24 Q.Would you now please explain page 3 of Exhibit
25 No. 13, Schedule 2?
Andrews, Di 41
Avista Corporation
1
2
A.Yes.Page 3 shows the derivation of the net
operating income to gross revenue conversion factor.The
3 conversion factor takes into account uncollectible accounts
4 receivable, Commission fees and Idaho State excise taxes.
5 Federal income taxes are reflected at 35%.
6 Q.Now turning to pages 4 through 7 of your Exibit
7 No. 13, Schedule 2, would you please explain what those
8 pages show?
9 A.Yes. Page 4 begins with actual operating results
10 and rate base for the 2007 test period in colum (b).
11 Individual normalizing adjustments that are standard
12 components of our annual reporting to the Commission begin
13 in colum (c) on page 4 and continue through colum (q) on
14 page 6.Individual pro forma and additional normalizing
15 adjustments begin in colum (PFl) on page 6 and continue
16 through colum (PF7) on page 7. The final colum on page 7
17 is the total pro forma operating results and rate base for
18 the test period.Additional details related to each
19 adjustment described below are provided in accompanying
20 work papers.
21
22 Standard Commssion Basis Adjustments
23 Q.Would you please explain each of these
24 adjustments, the reason for the adjustment and its effect
Andrews, Di 42
Avista Corporation
1 on test period State of Idaho net operating income and/or
2 rate base?
3 A.Yes, but before I begin, I will note that in
4 addition to the explanation of adjustments provided herein,
5 the Company has also provided workpapers outlining
6 additional details related to each of the adjustments. The
7 restating adjustments shown in colums c through q are
8 consistent with methodologies employed in our prior cases
9 and current regulatory principles.
10 The first adjustment, colum (c) on page 4, entitled
11 Deferred FIT Rate Base, reflects the rate base reduction
12 for Idaho's portion of deferred taxes.The adjustment
13 reflects the deferred tax balances arising from accelerated
14 tax depreciation (Accelerated Cost Recovery System, or
15 ACRS, and Modified Accelerated Cost Recovery, or MACRS) ,
16 bond refinancing premiums, and contributions in aid of
17 construction.These amounts are reflected on the average
18 of monthly average balance basis. The effect on Idaho rate
19 base is a reduction of $13,209,000.
20 The adjustment in colum (d), Deferred Gain on Office
21 Building, reflects the rate base reduction for Idaho's
22 portion of the net of tax, unamortized gain on the sale of
23 the Company's general office facility.The facility. was
24 sold in December 1986 and leased back by the Company.
25 Although the Company repurchased the building in November
Andrews, Di 43
Avista Corporation
1 2005, the Company opted to continue to amortize the
2 deferred gain over the remaining amortization period
3 scheduled to end in 2011. The effect on Idaho rate base is
4 a reduction of $63,000.
5 The adjustment in colum (e), Gas Inventory, reflects
6 the adjustment to rate base for the average of monthly
7 average value of gas stored at the Company's Jackson
8 Prairie underground storage facility. The effect on Idaho
9 rate base is an increase of $2,171,000.
10 The adjustment in colum (f), Weatherization and DSM
11 Investment, includes in rate base the balance (net of
12 amortization) of company investments in natural gas demand
13
14
side management (DSM) program costs.These amounts are a
component of actual results of operations.The effect of
15 this adjustment is to increase Idaho rate base by $355,000.
16
17
The adjustment in colum (g) , entitled Customer
Advances,decreases rate base for funds advanced by
18 customers for line extensions, as they are generally
19 recorded as contributions in aid of construction at some
20 future time.The effect of this adjustment on Idaho rate
21 base is a decrease of $74,000.
22 The colum labeled Subtotal Actual, is a subtotal of
23 colums (b) through (g) and reflects the standard rate base
24 adjustments that are included in Commission Basis
25 reporting.
Andrews, Di 44
Avista Corporation
1 Q.Please turn to page 5 and exlain the adjustments
2 shown there.
3 A.The first adjustment on page 5 in colum (h),
4 enti tled Depreciation True-up, reflects a decrease in
5 depreciation expense due to the utilization of new
6 depreciation rates effective January 1, 2008 as approved in
7 Order No. 30498 in Case No. AVU-G-07-03.This adjustment
8 increases Idaho net operating income by $97,000.
9 The adjustment in colum (i) ,enti tled Weather
10 Normalization &: Gas Cost Adjustment, is a 3-fold adjustment
11 taking into account known and measurable changes that
12 include revenue normalization, which reprices customer
13 usage under presently effective rates, as well as weather
14 normalization and an unilled revenue calculation.
15 Associated gas costs are replaced with gas costs computed
16 using normalized volumes at the currently effective
17 "weighted average cost of gas, II or WACOG rates.Revenues
18 associated with the Schedule 191 Tariff Rider are excluded
19 from pro forma revenues, and the related amortization
20 expense is eliminated as well. Ms. Knox is sponsoring this
21 adjustment. The effect of this particular adjustment is to
22 decrease Idaho net operating income by $42,000.
23 The adjustment in colum (j), Eliminate B & 0 Taxes,
24 eliminates the revenues and expenses associated with local
25 business and occupation taxes, which the Company passes
Andrews, Di 45
Avista Corporation
1 through to customers. The adjustment eliminates any timing
2 mismatch that exists between the revenues and expenses by
3 eliminating the revenues and expenses in their entirety. B
4 & 0 Taxes are passed through on a separate schedule, which
5 is not part of this proceeding.The effect of this
6 adjustment is to decrease Idaho net operating income by
7 $1,000.
8 The adjustment in colum (k), Property Tax, restates
9 the 2007 test period accrued levels of property taxes to
10 the most current information available and eliminates any
11 adjustments related to the prior year. The effect of this
12 particular adjustment is to increase Idaho net operating
13 income by $12,000.
14 The adjustment in colum (l), Uncollectible Expense,
15 restates the accrued expense to the actual level of net
16 write-offs for the test period.The effect of this
17 adjustment is to increase Idaho net operating income by
18 $94,000.
19
20
The adjustment in colum (m), entitled Regulatory
Expense Adjustment,restates recorded 2007 regulatory
21 expense to reflect the IPUC assessment rates applied to
22 revenues for the test period.The effect of this
23 adjustment is to increase Idaho net operating income by
24 $1,000.
Andrews, Di 46
Avista Corporation
1 Q.Please turn to page 6 and explain the adjustments
2 shown there.
3 A.The first adjustment on page 6 in colum (n),
4 entitled injuries and Damges, is a restating adjustment
5 that replaces the accrual with actuals to obtain the six-
6 year rolling average of injuries and damages payments not
7 covered by insurance. This methodology was accepted by the
8 Idaho Commission in Case No. WWP-E-98-11.The effect of
9 this adjustment is to decrease Idaho net operating income
10 by $53,000.
11 The adjustment in colum (0), entitled FIT, adjusts
12 the FIT calculated at 35% within Results of Operations by
13 removing the effect of certain Schedule M items and matches
14 the jurisdictional allocation of other Schedule M items to
15 related Results of Operations allocations. This adjustment
16 also reflects the proper level of deferred tax expense for
17 the test period. The effect of this adjustment, all based
18 upon a Federal tax rate of 35%, is to increase Idaho net
19 operating income by $9,000.
20 The adjustment in colum (p), Eliminate AIR Expenses,
21 A/R representing Accounts Receivable, removes expenses
22 associated with the sale of customer accounts receivable.
23 The effect of this adjustment is to increase Idaho net
24 operating income by $48,000.
Andrews, Di 47
Avista Corporation
1 The adjustment in colum (q), Restate Debt Interest,
2 restates debt interest using the Company's pro forma
3 weighted average cost of debt, as outlined in the testimony
4 and exhibits of Mr. Malquist, and applied to Idaho's pro
5 forma level of rate base, produces a pro forma level of tax
6 deductible interest expense. The federal income tax effect
7 of the restated level of interest for the test period
8 decreases Idaho net operating income by $26,000.
9 The next colum on page 6, entitled Restated Total,
10 subtotals all the preceding colums (b) through colum (q),
11 exclusive of the previously discussed subtotal colum.
12 These totals represent actual operating results and rate
13 base plus the standard normalizing adjustments that the
14 Company includes in its annual Commission Basis reports.
15
16 Pro Form Adjustments
17 Q.Please explain the significance of the 7 colums
18 subsequent to the Restated Total colum on pages 6 and 7 of
19 your Exibit No. 13, Schedule 2.
20 A.The adjustments starting on page 6 are pro forma
21 adjustments to reflect known and measurable changes between
22 the test period and the pro forma period. In this case,
23 they encompass revenue and expense items, and natural gas
24 capi tal proj ects .These adjustments bring the operating
Andrews, Di 48
Avista Corporation
1 results and rate base to the final pro forma level for the
2 test year.
3 Q.Please continue with your explanation of the
4 adjustments on page 6.
5 A.The adjustment in colum (PFl), Pro Forma Labor-
6 Non-Exec, reflects known and measurable changes to test
7 period union and non-union wages and salaries, excluding
8 executive salaries, which are handled separately in PF2.
9 Test period wages and salaries are restated as if the wage
10 and salary increases through March 2009 were in place
11 during the entire pro forma test period.The methodology
12 behind this adjustment is consistent with that used in Case
13 No. AVU-G-04-1. The effect of this adjustment on Idaho net
14 operating income is a decrease of $191,000.
15
16
The adjustment in colum (PF2), Pro Form Labr-
Executive,reflects known and measurable changes to
17 executive compensation, restating their salaries as if wage
18 and salary increases through March 2009 were in place for
19 the entire pro forma test period. This adjustment takes
20 into account changes in executive staffing made during 2007
21 and includes compensation for the planned executive team in
22 2009 only.Compensation costs for non-utility operations
23 are excluded as executives routinely charge a portion of
24 their time to non-utility operations, commensurate with the
25 amount of time spent on such activities.The current
Andrews, Di 49
Avista Corporation
1 executives' salary allocations are set at their expected
2 pro forma test period utility/non-utility percentage
3 splits.The impact of this adjustment on Idaho net
4 operating income is a decrease of $21,000.
5 Q.Please turn to page 7 and exlain the adjustments
6 shown there.
7 A.The first adjustment on page 7, in colum (PF3),
8 Pro Forma JP Storage, decreases Idaho net operating income
9 by $521,000 and increases rate base by $7,238,000.
10 Q.Could you please exlain the purpose and the
11 breakdown of the Jackson Prairie Storage Pro Form
12 Adjustment components?
13 A.Yes.The JP Storage adjustment is necessary
14 because the storage capacity and deliverability associated
15 with the Jackson Prairie (JP) Storage facility will
16 increase markedly from the 2007 test year.The increased
17 storage has implications on revenues, expenses, rate base,
18 and inventory levels associated with this filing.
19 Q.Please describe the capaci ty portion of the
20 storage Adjustment.
21 A.In April of 2007, Avista ended its natural gas
22 storage release contract with Cascade Natural Gas,
23 effectively recouping storage capacity of its JP Storage
24 facility.Similarly, Avista will end its release contract
25 with Terasen Gas in April of 2008. The revenues from these
Andrews, Di 50
Avista Corporation
1 two release contracts have been eliminated from the test
2 period.The net effect of the elimination of these
3 contracts is to decrease Idaho uother revenues" by
4 $695,000.
5 Q. How much 2009 storage will the Company have and
6 how was the JP Storage inventory valued?
7 A.The Company will be able to store approximately
8 5.2 million Dth during the 2009 pro forma period, a
9 significant increase over the 2007 test year.The JP
10 inventory adjustment puts a valuation on the total JP
11 Storage inventory and adjusts the pro forma rate base
12 accordingly.Monthly gas purchases are assumed from April
13 to September, and are based on an estimated daily Dth
14 inj ection schedule.The cost of the purchased gas is
15 estimated using 60-day historical average (Nov. 16, 2007 to
16 Feb. 14, 2008) forward monthly prices (including fuel cost
17 adders) .The acquisition amount/percentage by gas supply
18 basin (AECO, Sumas, Rockies) was estimated using estimated
19 load requirements and available pipeline transportation
20 capacity each day during the injection period.The
21 resulting gas inventory is valued each month using the
22 weighted average cost method.
23 The net effect of the adjustment is to increase gas
24 inventory by $4 million, from $2.2 million to $6.2 million
25 for the 2009 pro forma period.
Andrews, Di 51
Avista Corporation
1 Q.Please describe the deliverability portion of the
2 Storage Adjustment.
3 A.In addition to the recouped storage, a multi-year
4 expansion project at the JP Storage facility is expected to
5 go into service Novemer of 2008.The $16.2. million
6 deliverability component of the project is 75% assignable
7 to the Washington and Idaho service territories, and is
8 allocated to Idaho at 27.91% based on system contract
9 demand.Assuming an in-service date of November 2008 and
10 related depreciation and deferred taxes through the 2009
11 pro forma period, the Idaho portion of rate base is $3.4
12 million.Depreciation and property tax expense increased
13 Idaho expense by approximately $115,000.
14 The benefits to customers associated with the recall
15 of storage from Cascade and Terasen, as well as the
16 deliverability expansion,will be flowed through to
17 customers, dollar-for-dollar, (100%) through the Purchased
18 Gas Adjustment (PGA) mechanism.
19 Mr. Vermillion discusses the JP Expansion project in
20 more detail in his direct testimony.
21 Q.Please continue with your explanation of the
22 adjustments on page 7.
23 A.The adjustment in colum (PF4), Pro Form Capital
24 Additions 2007, pro forms in the capital cost and expenses
25 associated with adjusting the 2007 average-monthly-average
Andrews, Di 52
Avista Corporation
1 plant related balances to actual end-of-period balances for
2 plant in service at December 31, 2007.The capi tal cos ts
3 have been included for December 31, 2007 pro forma period
4 with the associated depreciation expense and property tax,
5 as well as the appropriate accumulated depreciation and
6 deferred income tax rate base offsets. This adjustment was
7 made under the direction of Mr. DeFelice and is described
8 further in his testimony. This adjustment increases Idaho
9 net operating income by $94,000 and decreases rate base by
10 $2,102,000.
11 The adjustment in colum (PF5), Pro Form capital
12 Additions 2008, pro forms in the capital cost and expenses
13 associated with pro forming in capital expenditures for
14 2008. This adjustment includes projects completed during
15 2008, and thus were normalized to reflect annual amounts,
16 and proj ects expected to be completed and transferred to
17 plant-in-service by December 31, 2008.The capi tal cos ts
18 have been included for their appropriate pro forma period
19 with the associated depreciation expense and property tax,
20 as well as the appropriate accumulated depreciation and
21 deferred income tax rate base offsets.This adjustment
22 also reduces the 2007 vintage plant net rate base
23 (including accumulated depreciation and deferred FIT) to an
24 end of period December 31, 2008 adjusted balance.This
25 adjustment was also made under the direction of Mr.
Andrews, Di 53
Avista Corporation
1 DeFelice and is described further in his testimony.This
2 adjustment decreases Idaho net operating income by $183,000
3 and increases rate base by $1,232,000.
4 The adjustment in colum (PF6), entitled Pro Form
5 Incentives, adjusts 2007 test year incentive expense to the
6 actual 2007 incentive expense paid in 2008 for the 2007
7 incentive plan and removes any part of the 2007 executive
8 incentive payout that was not based on the Customer
9 Satisfaction and Reliability targets (as further explained
10 in the Electric Section).This adjustment also pro forms
11 in a 6 year average (as further explained in the Electric
12 Section) .The impact of this adjustment on Idaho net
13 operating income is a decrease of $32,000.
14 The adj us tmen t in co 1 um ( PF7), Pro Form Idaho
15 Advanced Meter Reading (AD), includes the capital costs
16 associated with the Company's Idaho AM project.These
17 costs include actual life-to-date expenditures from January
18 2005 through December 31, 2007, and 2008 pro forma
19 expenditures through December 31, 2008.In the IPUC' s
20 Order No. 29602, in Case No. AVU-G-04-01, the Commission
21 supported the Company's plans to install AM and authorized
22 the Company-requested deferral accounting treatment for its
23
24
related investment.Mr.Paulson provides additional
details regarding these costs.This adjustment decreases
Andrews, Di 54
Avista Corporation
1 Idaho net operating income by $228,000 and increases rate
2 bas e by $ 6 , 276 , 000 .
3 The last colum on page 7, Pro Forma Total, reflects
4 total 2007 pro forma results of operations and rate base
5 consisting of 2007 actual results and the total of all
6 normalizing and pro forma adjustments.
7 Q.Referring back to page 1, line 43, of Exhibit No.
8 13, Schedule 2, what was the actual and pro form gas rate
9 of return realized by the Company during the test period?
10 A.For the State of Idaho, the actual test period
11 rate of return was 6.45%. The pro forma rate of return is
12 5.21% under present rates. Thus, the Company does not, on
13 a pro forma basis for the test period, realize the 8.74%
14 rate of return requested by the Company in this case.
15 Q.How much additional net operating income wo~ld be
16 required for the State of Idaho gas operations to allow the
17 Company an opportunity to earn its proposed 8.74% rate of
18 return on a pro form basis?
19 A.The net operating income deficiency amounts to
20 $3,022,000, as shown on line 5, page 2 of Exhibit No. 13,
21 Schedule 2.The resul ting revenue requirement is shown on
22 line 7 and amounts to $4,725,000, or an increase of 5. 77%
23 over pro forma general business and transportation
24 revenues.
25
Andrews, Di 55
Avista Corporation
1
2
v.ALLOCATION PROCEDURS
Q.Have there been any changes to the Company's
3 system and jurisdictional procedures since the Company's
4 last general electric and natural gas cases, Case Nos. AVU-
5 E-04-01 and AVU-G-04-01?
6 A.No.For ratemaking purposes,the Company
7 allocates revenues, expenses and rate base between electric
8 and gas services and between washington, Idaho, and Oregon
jurisdictions where electric and/or gas service is9
10
11
provided.The current methodology was implemented in 1994
and has not changed.Consistent with the accepted
12 allocation methodology, starting in 2005, the Company
13 reflected the reallocation of costs resulting from the sale
14 of the Company's California gas distribution properties in
15 April 2005.To accomplish the reallocation, the Company
16 did not change its 4-Factor allocation methodology; it only
17 eliminated the impact of the California jurisdiction from
18 the gas allocations.
19 Q.Does that conclude your pre-filed direct
20 testimony?
21 A.Yes, it does.
Andrews, Di 56
Avista Corporation
DAVID J. MEYER zmm lfíPR - 3 ~ìl i: 09
VICE PRESIDENT, GENERA COUNSEL, REGULATORY &
GOVERNENTAL AFFAIRS
AVISTA CORPORATION
P.O. BOX 3727
1411 EAST MISSION AVENUE
SPOKAE, WASHINGTON 99220-3727
TELEPHONE: [phone]
FACSIMILE: [phone]
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION )
OF AVISTA CORPORATION FOR THE )
AUTHORITY TO INCREASE ITS RATES )
AND CHARGES FOR ELECTRIC AN )
NATUR GAS SERVICE TO ELECTRIC )
AN NATURAL GAS CUSTOMERS IN THE )STATE OF IDAHO )
)
CASE NO. AVU-E-08-01
CASE NO. AVU-G-08-01 I
EXHIBIT NO. 13
ELI ZABETH M. ANREWS
FOR AVISTA CORPORATION
(ELECTRIC AN NATURA GAS)
AVITA um
ELCIC RESULTS OF OPERTION
IDAHO PRO FORM REULTS
lWVE MONI ENED DECER 31,2007
(OOO'S OF DOlLS)
WI PRESENT RATES WI PROPOSED RATES
Acal Per Proposed ProForm
ILmel
Results Tota I ProForma Revenues & Proposed
No.DESCRITION Report Adjuslments Tota RelateExp Tota
a
RES
1 Total Geer Busiess
2 Interdeparental Sales
3 Sales for Resale
4 Tota Sales of Electrcity
5 Oter Revue
6 Tota Electc Revue
EXENSES
Production and Trasmssion
7 Operting Expenses
8 Purchased Power
9 Depiation and Amortization
10 Taxes
11 Tota Production & Trasmsson
Distrbution
12 Operting Expenses
13 Depeciation
14 Taxes
15 Total Distrbution
16 Customer Accounting
17 Customer Serce & Informtion
18 Sales Expenses
Adistrtive & Geer
19 Opertig Expenses
20 Depeciation
21 Taxes
22 Total Ad. & Geer
23 Total Electrc Expenses
24 OPERTIG INCOME BEFORE FI
FEER INCOME TAX
25 Current Accral
26 Defered Income Taxes
27 Amortize Inveent Tax Cret
28 SET EXCHGE POWE
29 NEOPERTIG INCOME
RAlEBASE
PLA IN SERVICE
30 Intagible
31 Production
32 Trsmssion
33 Distribution
34 Geerl
35 Total Plant in Serce
36 ACCUlE DEPRETION
37 ACCU. PROVIION FOR AMORTION
38 Total Ac Depreciation & Amor
39 GA ON SAL OF BUlING40 DEF TAX
41 TORAlE BAE
42 RA OF RE
b dc
$203,600 $ (10,447)$193,153
117 117
49,082 (20,920)28,162
252,799 (31,367)221,432
9,801 (6,574)3,227
262,600 (37,941)224,659
62,402 (4,279)58,123
80,506 (14,480)66,026
12,22 3,372 15,601
4,809 (80)4,729
159,946 (15,467)144,479
7,924 613 8,537
7,007 2,152 9,159
4,045 (2,047)1,998
18,976 718 19,694
3,850 (559)3,291
3,892 (2,374)1,518
268 8 276
19,420 689 20,109
3,709 133 3,842
102 102
23,129 924 24,053
210,061 (16,750)193,311
52,539 (21,191)31,348
3,779 (2,749)1,030
7,044 (3,968)3,076
e
$32,328
32,328
32,328
368
368
81
519
f
$225,481
117
28,162
253,760
3,27
256,987
o
58,123
66,026
15,601
4,729
144,479
8,537
9,159
2,366
20,062
70 3,361
1,518
276
81 20,190
3,842
102
24,134
193,830
31,809
11,133
63,157
12,163
3,076
$41,716 ($14,474)$27,22 $47,918$20,676
$11,113 $13,553 $24,666 $24,666
353,922 16,173 370,095 370,095
142,282 19,168 161,450 161,450
325,452 38,914 364,366 364,366
46,727 8,806 55,533 55,533
879,496 96,614 976,110 0 976,110
296,956 35,522 332,478 332,478
3,364 519 3,883 3,883
300,320 36,041 336,361 0 336,361
(301)(301)(301)
(91,182)(91,182)(91,182)
$579,176 ($30,910)$548,266 $0 $548,266
7.20%4.97%8.74%Exhibit No. 13
Case No. AVU-E-Qe-Q1 and AVU-G-e-Q1
E. Andrew, Avista
Schedule 1, p. 1 of 9
AVISTA UTILITS
Calculation of General Revenue Requirement
IDAHO - Electnc System
TWLVE MONTS ENED DECEMBER 31, 2007
Line
No.Description
1 Pro Forma Rate Base
2 Proposed Rate ofRet
3 Net Operatig Income Requiement
4 Pro Forma Net Operati Income
5 Net Operatig Income Deficiency
6 Conversion Factor
7 Revenue Requiement
8 Tota General Business Revenues
9 Percentage Revenue Increae
(OOO's of
Dollars)
$548,266
8.74%
$47,918
$27,242
$20,676
0.6395623
$32,328 ~
$193,270
16.73%
Exhibit No. 13
Case No. AVU-E-08-01 and AVU-G-08-01
E. Andrews, Avista
Schedule 1, p. 2 of 9
AVISTA UTITIS
CALCULATION OF CONVRSION FACTOR: IDAHO ELECTRIC
TWLVE MONTHS ENDED DECEMBER 31, 2007
Revenue:1.000000
Expense:
Uncollectibles (1)0.002151
Commsion Fee (2)0.002491
Idaho Income Tax (3)0.011416
Tota Expense 0.016058
Net Operatig Income Before FIT 0.983942
Federal Incon 0.35 0.344380
RENU CONVRSION FACTOR 0.639562
Exhibit No. 13
Case No. AVU-E-08-01 and AVU-G-08-01
E. Andrews, Avista
Schedule 1, p. 3 of 9
AVITA UIS
ELCIC RESULTS OF OPERTION
IDAHO RESTA1E RETS
'IVE MONT ENED DECER 31, 2007
(OOO'S OF DOll)
Kete FaD &
Boulder Park
DESCRTION Disalow.
a e gRE
1 Tota Geer Business $203,600
2 Intereparenta Sales 117
3 Sales for Rese 49,082
4 Total Sales of Electrcity 252,799 0 0 0 0 0 0
5 Oter Revue 9,801
6 Total Electrc Revue 262,600 0 0 0 0 0 0
EXENSES
Production and Trsmssion
7 Operting Expenses 62,402
8 Puchased Power 80,506
9 Depreiation and Amrtzation 12,229 22
10 Taxes 4,809
II Tota Production & Trasmssion 159,946 0 0 225 0 0 0
Distrbution
12 Operting Expenses 7,924
13 Depeciation 7,007
14 Taxes 4,045
15 Tota Distrbution 18,976 0 0 0 0 0 0
16 Customer Accounting 3,850
17 Customer Serce & Informtion 3,892
18 Sales Expenses 268
Adistrative & Geer
19 Operting Expenses 19,420
20 Depreciation 3,709
21 Taxes
22 Tota Ad. & Geer 23,129 0 0 0 0 0 0
23 Total Elecc Expenses 210,061 0 0 22 0 0 0
24 OPERTIG lNCOME BEFORE FI 52,539 0 0 (225)0 0 0
FEERlNCOME TA
25 Cuent Accral 3,779
26 Defer Income Taxes 7,044
27 NE OPERTIG lNCOME $41,716 $0 $0 ($225)$0 $0 $0
RAlEBASE
PLAlN SERVICE
28 Intangible $11,113
29 Production 353,922 7,452 976 (5,609)
30 Trasmssion 142,282
31 Distribution 325,452 (765)
32 Geer 46,727
33 Total Plant in Serce 879,496 0 0 7,452 976 (5,609)(765)
34 ACCU1E DEPRETION 296,956 5,110 (2,551)
35 ACCU. PROVIION FOR AMORTITION 3,364
36 Tota Acew. Depreciation & Amort.300,320 0 0 5,110 0 (2,551)0
37 GA ON SAL OF BUIlNG (301)
38 DEF TAX (80,527)105 709
39 TOTALRAlE BAE $579,176 ($80,527)($196)$2,342 $976 ($2,349)($765)
40 RAlE OF RE 7.20%
Exhibit No. 13
Case No. AVU-E-Q8-1 and AVU-G-8-1
E. Andres, Avista
Schedule 1, p. 4 of 9
AVITA umS
ELC RESULTS OF OPERON
IDAHO RETATE RETS
1WVE MONI ENED DECEER 31, 2007
(OOO'S OF DOllS)
DESCRITION
aRE
1 Tota Geer Business $203,600 $ (2,434)
2 Interdepartal Sales 117
3 Sales for Resale 49,082
4 Total Sales of Electrcity 0 252,799 0 (2,434)0 0 0
5 Oter Revue 9,801
6 Total Elecc Revue 0 262,600 0 (2,434)0 0 0
EXENSES
Production and Trsmssion
7 Operting Expenses 62,402
8 Puchased Power 80,506
9 Depeciation and Amortzation 12,454 (1,525)
10 Taxes 4,809 (248)
11 Total Production & Trasmssion 0 160,171 (1,525)0 (248)0 0
Distrbution
12 Operting Expenses 7,924
13 Depeciation 7,007 1,235
14 Taxes 4,045 9 (2,427)
15 Tota Distbution 0 18,976 1,244 (2,427)0 0
16 Customer Acunting 3,850 (119)
17 Cutomer Serce & Infomition 3,892
18 Sales Expenses 268
Adstrtive & Geer
19 Operting Expenses 19,420 31
20 Depreciation 3,709 (476)
21 Taxes (4)
22 Tota Adn. & Geer 0 23,129 (476)0 (4)0 31
23 Total Elecc Expenses 0 210,286 (757)(2,427)(252)(118)31
24 OPERG INCOME BEFORE FI 0 52,314 757 (7)252 118 (31)
FEER INCOME TAX
25 Cuent Accral 3,779 265 (2)88 41 (11)
26 Defered Incoe Taxes 7,044
27 NE OPERTIG INCOME $0 $41,491 $492 ($5)$164 $77 ($20)
RAlEBASE
PLAIN SERVICE
28 Intangible $11,113
29 Production 2,630 359,371
30 Trasmission 142,282
31 Distrbution 324,687
32 Geer 46,727
33 Total Plant in Serce 2,630 884,180 0 0 0 0 0
34 ACCUTE DEPRECITION 299,515
35 ACCU. PROVIION FORAMORllATION 3,364
36 Total Acm. Depreiation & Amor.302,879 0 0 0 0 0
37 GA ON SAL OF BUIING (301)
38 DEF TAXS (79,713)
39 TOTALRAlE BAE $2,630 $501,287 $0 $0 $0 $0 $0
40 RAlE OF RE 8.28%
Exhibit No. 13
Case No. AVU-E-ÛS-Û1 and AVU-G-01
E. Andrews, Avista
Schedule 1, p. 5 of 9
AVITA UI
EICIC RESULTS OF OPERTION
IDAHO RESTA RESULTSlWVEMONl ENED DEC 31, 2007
(OOO'S OFDOll)
Revenue
Normaltion
DESCRITION Adjustment
a uRE
1 Total Geer Busines $ (5,765)$ (2,248)
2 Interdeparental Sales
3 Sales for Resle
4 Total Sales of Electrcity 0 0 (5,765)0 0 0 (2,248)
5 Oter Revue 74
6 Tota Elecc Revue 0 (5,765)0 0 0 (2,174)
EXENSES
Producton and Trsmssion
7 Operting Expense 11,018 (12)523 (198)
8 Puchased Power
9 Depeciation and Amortiztion 1,401
10 Taxes
11 Total Producton & Trasmssion 0 11,018 (12)0 523 1,203
Distrbution
12 Operting Expenses
13 Depiation
14 Taxes $6 (6)(11)
15 Total Distribution 0 0 0 6 (6)(11)
16 Customer Accounting (18)$ (524)(6)
17 Customer Serce & Information (2,382)
18 Sales Expenses
Adistrtiw & Geer
19 Opertig Expenses 34 (15)(5)
20 Depiation
21 Taxes
22 Total Ad. & Geer 34 0 (15)0 0 0 (5)
23 Total Electrc Expenses 34 0 10,985 (12)(518)517 (1,201)
24 OPERTIG lNCOME BEFORE FI (34)0 (16,750)12 518 (517)(973)
FEERlNCOME TAX
2S Cuent Acal (12)(54)(2,006)4 $181 (181)(341)
26 Defered Income Taxes (37)(3,856)
27 NE OPERTIG lNCOME ($22)$91 ($10,888)$8 $337 ($336)($632)
RA1EBASE
PlAlN SEVICE
28 Intangible
29 Production
30 Trsmssion
31 Distrbution
32 Geer
33 Total Plant in Serce 0 0 0 0 0 0 0
34 ACCUlE DEPRETION
35 ACCU PROVIION FOR AMORTITION
36 Tota Aceu Depreiation & Amor.0 0 0 0 0 0
37 GA ON SAI OF BUllNG
38 DEF TA
39 T01ARA1E BASE $0 $0 $0 $0 $0 $0 $0
40 RA OF RE
Exhibit No. 13
Case No. AVU-E-01 and AVU-G-8-1
E. Andrew, Avista
Schedule 1, p. 6 of 9
AVITA UIS
ELC RESULTS OF OPERTION
IDAHO RESTA1E RESUTS
TWVE MONl ENED DECEER 31, 2007
(OOO'S OF DOIL)
DESCRITION
a
RES
1 Total Geer Business $193,153
2 literdeparental Sales 117
3 Sales for Resale 49,082 (20,920)
4 Total Sales of Electrcity 0 242,352 (20,920)0 0 0 0
5 Oter Reveue 9,875 (4,624)(1,550)(474)
6 Total Electrc Revue 0 252,227 (25,54)(1,550)0 0 (474)
EXENSES
Prduction and Trasmssion
7 Operting Expenses 73,733 (10,719)(7,465)446 21 (62)
8 Puchased Power 80,506 (14,480)
9 Depeciation and Amorization 12,330
10 Taxes 4,561
11 Total Production & Trasmssion 171,130 (25,199)(7,465)446 21 (62)
Distrbution
12 Opertig Expenses 7,924 320
13 Depreciation 8,242
14 Taxes 1,617 (4)(14)(2)(5)
15 Total Distrbution 0 17,783 (4)0 306 (2)(5)
16 Customer Accountig 3,183 108
17 Customer Serce & Jnfomition 1,510 8
18 Sales Expenses 268 8
Adistrtive & Geer
19 Opertig Expenses 19,465 319 112
20 Depecation 3,233
21 Taxes (4)
22 Tota Ad. & Geer 0 22,694 0 0 319 112 0
23 Total Electrc Expenses 0 216,568 (25,203)(7,465)1,195 131 (67)
24 OPETIG INCOME BEFORE FI 0 35,659 (341)5,915 (1,195)(13)(407)
FEER INCOME TAX
25 Cuent Accral 683 2,434 (119)2,070 (418)(46)(142)
26 Defered licome Taxes 3,151
27 NE OPERTIG INCOME ($683)$30,074 ($222)$3,845 ($777)($85)($265)
RA1EBASE
PLA IN SERVICE
28 litagible $11,113
29 Production 359,371 (15,426)
30 Trasmission 142,282
31 Distrbution 324,687
32 Geer 46,727
33 Tota Plant in Serce 884,180 0 (15,426)0 0
34 ACCU1E DEPRECITION 299,515
35 ACCU PROVIION FOR AMORTITION 3,364
36 Total Ac. Depiation & Amort.0 302,879 0 0 0 0
37 GA ON SAL OF BUlING (301)
38 DEF TAXS (79,713)
39 TOTA RA1E BASE $0 $501,287 $0 ($15,426)$0 $0 $0
40 RA1E OF RE 6.0%
Exhibit No. 13
Case No. AVU-E-QS-Q1 and AVU-G-S-Q1
E. Andrew, Avista
Schedule 1, p. 7 of 9
CONFIENTIAL
A vista Utities
Electrc Results of Operations
Idaho Restated Results
This page allegedly contains trade secrets or confidential material and is separately ïied.
Exhibit No. 13
Case No. A VU-E-08-01 and A VU-G-08-01
E. Andrews, A vista
Schedule 1, p.8 of 9
AVITA ums
EIC RESULTS OF OPERTION
IDAHO RETAlE RESULTS
TWVE MONI ENED DECER 31, 2007
(OOO'S OF DOlLS)
ProForma ProForm ProForm
Colsp Mecury ID CS2 ProFormaDESCRITIONEDU..O&M AM Level Adj TOTAL
a PF12 PF14 PF15 PFIRES
1 Total Geer Business $193,1532Interdepartental Sales 1173Sales for Resale 28,162
4 Total Sales of Electrcity 0 0 0 0 221,4325Other Revue 3,227
6 Tota Elecc Revue 0 0 224,659
EXENSES
Producton and Trsmssion
7 Operting Expenes 531 58,1238Purcased Power 66,026
9 Depeciation and Amorzation 215 15,60110Taxes4,729
11 Total Production & Trasmssion 531 0 0 215 144,479
Distrbution
12 Operting Expenses 8,53713Depeciation6929,15914Taxes(6)(2)322 1,998
15 Tota Distrbution (6)(2)1,014 19,694
16 Customer Accounting 3,291
17 Customer Serce & Informtion 1,51818Sales Expenses 276
Adisttive & Geer
19 Operting Expenses 213 20,109
20 Depiation 3,842
21 Taxes 102
22 Tota Ad. & Geer 0 213 0 0 24,053
23 Total Elecc Expenses 525 211 1,014 215 193,311
24 OPERTIG INCOME BEFORE FI (525)(211)(1,014)(215)31,348
FEER INCOME TAX
25 Curent Accral (184)(74)(325)1,030
26 Defer Income Taxes (75)3,076
27 NE OPERG INCOME ($341)($13)($689)($140)$27,242
RABASE
PLAIN SERVICE
28 Intangible $24,666
29 Production 370,09530Trasmssion161,450
31 Distrbution 22,253 364,366
32 Geerl 55,53333Total Plant in Serce 0 0 22,253 0 976,110
34 ACCUlE DEPRETION 332,47835ACCU. PROVIION FOR AMORTITION 332 3,883
36 Total Accum. Depreciation & Amor.0 0 332 0 336,36137GA ON SAl OF BUIING (301)38 DEF TAS (69)(91,182)
039TOTALRAlE BASE $0 $0 $21,852 $0 $548,266
40 RAlE OF RE 4.97%
Exhibit No. 13
Case No. AVU-E-QS-Q1 and AVU-G-QS-Q1
E. Andrew, Avista
Schedule 1, p. 9 of 9
Exhibit No. 13
Case No. AVU-E-QS-01 and AVU-G-QS-01
E. Andrews, Avista
Schedule 2, p. 1 of 7
A VISTA UTILITIES
Calculation of General Revenue Requirement
Idaho- Gas
TWELVE MONTHS ENDED DECEMBER 31, 2007
(OOO's OF DOLLAR)
Line
I IDAHO INo.Description
Pro Foria Rate Base $85,690
2 Proposed Rate of Return 8.740%
3 Net Operating Income Requirement $7,489
4 Pro Foria Net Operting Income $4,467
5 Net Operating Income Deficiency $3,022
6 Converion Factor 0.6395623
7 Revenue Requirement $4,7251
8 Total Gener~ Business Revenues $81,860
9 Percentage Revenue Increae 5.77%
Exhibit No. 13
Case No. AVU-E-08-01 and AVU-G-08-01
E. Andrews, Avista
Schedule 2, p. 2 of 7
A VISTA UTILITIES
CALCULATION OF CONVERSION FACTOR: IDAHO GAS
TWELVE MONTHS ENDED DECEMBER 31, 2007
Revenues 1.000000
Expense:
Uncol1ectibles (1)0.002151
Commssion Fees (2)0.002491
Idaho Income Tax (3)0.011416
Total Expense 0.016058
Net Operatig Income Before FIT 0.983942
Federal 1m 35.00%0.344380
REVENU CONVRSION FACTOR 0.639562
Exhibit No. 13
Case No. AVU-E-08-01 and AVU-G-08-01
E. Andrews, Avista
Schedule 2, p. 3 of 7
A VISTA UTliTIES
GAS REULTS OF OPERTION
IDAHO RETATED RESULTS
TWLVE MONTHS ENED DECEMBER 31, 2007
(OOO'S OF DOLl)
DESCRIPTION
g
REVE
I Total Generl Business $84,990 $84,990
2 Total Transporttion 790 790
3 Other Revenues 28,655 28,655
4 Total Gas Revenues 114,435 0 0 0 0 0 114,435
EXENSES
5 Exploration and Development 0 0
Production
6 City Gate Purchases 89,691 89,691
7 Purchased Gas Expense 383 383
8 Net Nat Gas Storage Tra (162)(162)
9 Total Production 89,912 0 0 0 0 0 89,912
Underground Storage
10 Opertig Expenses 174 174
11 Depreciation 120 120
12 Taxes 48 48
13 Total Underund Storage 342 0 0 0 0 0 342
Distrbution
14 Operati Expenses 3,390 3,390
iS Depreiation 2,663 2,663
16 Taxes 2,210 2,210
17 Total Distnbution 8,263 0 0 0 0 0 8,263
18 Customer Accountig 1,937 0 0 1,937
19 Customer Service & Infonntion 1,657 1,657
20 Sales Expenses 207 207
Admstrtive & General
21 Opeting Expenses 4,217 4,217
22 Depreiation 689 689
23 Taxes 12 12
24 Total Admn, & General 4,918 0 0 0 0 0 4,918
25 Total Gas Expense 107,236 0 0 0 0 0 107,236
26 OPERTING INCOME BEFORE FI 7,199 0 0 0 0 0 7,199
FEERL INCOME TAX
27 Currnt Accrual 1,915 1,915
28 Deferr FIT (108)(108)
29 AmortlTC (18)(18)
30 NET OPER TIN9 INCOME $5,410 $0 $0 $0 $0 $0 $5,410
RATE BASE: PlANT IN SERVICE
31 Undergrun Storage 5,327 5,327
32 Distrbution Plant 111,385 355 (74)111,666
33 General Plant 10,025 10,025
34 Total Plant in Servce 126,737 0 0 0 355 (74)127,018
ACCUMULTED DEPREIATION
35 Undergrund Storage 2,875 2,875
36 Distnbution Plant 36,975 36,975
37 General Plant 3,021 3,021
38 Total Accum. Depreiation 42,871 0 0 0 0 0 42,871
39 DEFERED FIT 0 (13,209)34 (13,175)
40 GAS INVENTORY 0 2,171 2,171
41 GAIN ON SALE OF BUIIDING 0 (97)(97)
42 TOTAL RATE BASE $83,866 ($13,209)($63)$2,171 $355 ($74)$73,04
43 RATE OF RETUN 7.41%
Exhibit No. 13
Case No. AVU-E-08-01 and AVU-G-08-01
E. Andrews, Avista
Schedule 2, p. 4 of 7
AVISTA UTIUnES
GAS REULTS OF OPER nON
IDAHO RETATED REULTS
TWLVEMONTS ENED DECEMER 3 I, 2007
(OOO'S OF DOlLRS)
DESCRIPTION
a m
REEN
I Total General Business $ (2,042)$ (I,SOS)
2 Total Transporttion (364)(9)
3 Other Revenues (27,708)
4 Total Gas Revenues 0 (30,114)(I,SI4)0 0 0
EXENSES
Exploration and Development
Production
6 City Gate Purhases (28,771)
7 Puhased Gas Expense
8 Net Nat Gas Storage Trans 162
9 Total Production 0 (28,609)0 0 0 0
Undergrund Storage
10 Operating Expenses
11 Depreciation (23)
12 Taxes (11)
13 Total Undergrund Storage (23)0 0 (11)0 0
Distnbution
14 Operating Expenses
iS Depreiation (99)
16 Taxes 2 (i)(I,SI2)(S)2
17 Total Distrbution (97)(i)(I,SI2)(S)2 0
18 Customer Accountig (S)0 (146)0
19 Customer Seice & Informtion (1,430)
20 Sales Expenses
Admstrtive & General
21 Opratig Expenses (S)(2)
22 Dereciation (29)
23 Taxes (2)
24 Total Admin. & Genera (29)(5)0 (2)0 (2)
2S Total Gas Expense (149)(30,OSO)(I,SI2)(18)(144)(2)
26 OPERTING INCOME BEFORE FIT 149 (64)(2)18 144 2
FEERL INCOME TAX
27 Curent Accrual S2 (22)(i)6 SO
28 Defer FIT
29 AmortITC
30 NET OPERATING INCOME $97 ($42)($1)$12 $94 $1
RATE BASE; PLAT IN SERVICE
31 Undergrund Storage
32 Distrbution Plant
33 General Plant
34 Total Plant in Servce 0 0 0 0 0 0
ACCUMTED DEPREIA nON
3S Underground Storage
36 Distrbution Plant
37 General Plant
38 Total Accum Depreiation 0 0 0 0 0 0
39 DEF FIT
40 GAS INENTORY
41 GAIN ON SAlE OF BUILDING
42 TOTAL RATE BASE $0 $0 $0 $0 $0 $0
43 RATE OF RETU
Exhibit No. 13
Case No. AVU-E-08-01 and AVU-G-08-01
E. Andrews, Avista
Schedule 2, p. 5 of 7
A VISTA UTIUTIES
GAS RESULTS OF OPERTION
IDAHO RETATED REULTS
TWELVE MONTIS ENDED DECEMBER 31, 2007
(OOO'S OF DOLL)
DESCRIPTION
n 0 p q
REVEUE
I Total General Business $81,443
2 Total Transporttion 417
3 Oter Revenues 947
4 Total Gas Reenues 0 0 0 0 82,807 0 0
EXENSES
5 Exploration and Development 0
Production
6 City Gate Purchases 60,920
7 Purchased Gas Expense 383 12 6
8 Net Nat Gas Storage Trans 0
9 Total Production 0 0 0 0 61,303 12 6
Underground Storage
lO Operating Expenses 174
II Depreiation 97
12 Taxes 37
13 Total Undergrund Storage 0 0 0 0 308 0 0
Distrbution
14 Operatig Expenes 3,390 145
15 Depreciation 2,564
16 Taxes (I)696 (3)
17 Total Ditrbution (I)0 0 6,650 142 0
18 Customer Accountig (75)1,711 59
19 Customer Sece & Informtion 227 5
20 Sales Expenses 207 5
Admnistrtive & General
21 Optig Expenses 83 4,293 71 26
22 Depreciation 660
23 Taxes 10
24 Total Admin. & General 83 0 0 0 4,963 71 26
25 Total Gas Expense 82 0 (74)0 75,369 294 32
26 OPERTING INCOME BEFORE FIT (82)0 74 0 7,438 (294)(32)
FEERL INCOME TAX
27 Curnt Accrual (29)25 26 26 2,049 (103)(II)
28 Defer FIT (34)(142)
29 AmortITC (18)
30 NET OPERTING INCOME ($53)$9 $48 ($26)$5,549 ($191)($21)
RATE BASE: PLANT IN SERVICE
31 Undergrund Storage 5,327
32 Ditrbution Plant II 1,666
33 General Plant 10,025
34 Total Plant in Serice 0 0 0 0 127,018 0 0
ACCUMUlTED DEPREIATION
35 Undergound Storage 2,875
36 Distnbution Plant 36,975
37 General Plant 3,021
38 Total Accum Depreiation 0 0 0 0 42,871 0 0
39 DEF FIT (13,175)
40 GAS INVENTORY 2,171
41 GAIN ON SALE OF BUILDING (97)
42 TOTAL RATE BASE $0 $0 $0 $0 $73,046 $0 $0
43 RATE OF RETUR 7.60%
Exhibit No. 13
Case No. AVU-E-08-01 and AVU-G-08-01
E. Andrews, Avista
Schedule 2, p. 6 of 7
A VISTA UTUTIES
GAS RESULTS OF OPERTION
IDAHO RESTATE REULTS
TWVE MONTHS ENED DECEMER 31, 2007
(OOO'S OF DOLLS)
DESCRIPTION
REV
I Total Generl Business $81,4432Total Transporttion 417
3 Other Revenues $ (695)252
4 Total Gas Revenues (695)0 0 0 0 82,112
EXPENSES
Exploration and Development 0
Production
6 City Gate Purchases 60,920
7 Purchased Gas Expense 401
8 Net Nat Gas Storage Trans 0
9 Total Production 0 0 0 0 0 61,321
Undergund Storage
10 Opetig Expenses 174IIDepreciation$64 (9)152
12 Taxes $51 88
13 Total Undergrund Storage 115 (9)0 0 0 414
Distribution
14 Oprating Expenses 3,535
15 Depreciation (259)74 239 2,618
16 Taxes $ (9)2 47 (I)92 824
17 Total Distnbution (9)(257)121 (I)331 6,977
18 Customer Accounting 1,770
19 Customer Service & Infomiation 232
20 Sales Expenses 212
Admnistrtive & Generl
21 Operating Expenes 50 4,440
22 Dereciation 121 136 917
23 Taxes 25 35
24 Total Admin. & General 0 121 161 50 0 5,392
25 Total Gas Expene 106 (145)282 49 331 76,318
26 OPERTIG INCOME BEFORE FIT (801)145 (282)(49)(331)5,794
FEERL INCOME TAX
27 Curt Accrul $ (280)51 (99)(17)(103)1,487
28 Deferred FIT (142)
29 AmrtlTC (18)
30 NET OPERATING INCOME ($521)S94 ($183)(S32)($228)S4,467
RATE BASE: PLANT IN SERVICE
31 Undergund Storage $3,399 $ (17)8,709
32 Distrbution Plat 309 3,377 6,407 121,759
33 Generl Plant 527 1,719 12,271
34 Tota Plat in Service 3,399 819 5,096 0 6,407 142,739
ACCUMULTED DEPREIATION
35 Undgrund Storage $43 59 89 3,066
36 Distrbution Plant 2,307 2,391 115 41,788
37 General Plant 219 849 4,089
38 Total Accum. Depreiation 43 2,585 3,329 0 115 48,943
39 DEFED FIT S (93)(336)(535)(16)(14,155)40 GAS INVETORY $3,975 6,146
41 GAIN ON SALE OF BUILDING (97)
42 TOTAL RATE BASE S7,238 ($2,102)$1,232 SO $6,276 $85,690
43 RATE OF RE 5.21%
Exhibit No. 13
Case No. AVU-E-08-01 and AVU-G-08-01
E. Andrews, Avista
Schedule 2, p. 7 of 7