20100805Norwood Direct in Support of Stipulation and Settlement.pdf

Avista Corp.
1411 East Mission P.O. Box 3727
Spokane. Washington 99220-0500
Telephone [phone]
Toll Free 800-727-9170 R'Ef~F l\jr.nf"c,'.: ..~_.l':" .,~...:",,:-
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2DlO AUG -5 AM 10: l 5
August 4,2010 lÐ'A.HO. P lJ t;3LtÇ_r~ I1~.~ l
UTiliTiES COMMI::;:IVf.¡
Jean D. Jewell
Commission Secretar
Idaho Public Utilties Commission
472 W. Washington Street
Boise, il 83702
Re: Case Nos. A VU-E-lO-Ol and A VU-G-I0-0l
Testimony in Support of the Stipulation and Settlement
Dear Ms. Jewell:
Enclosed for filing with the Commission in the above-referenced docket are the original
and nine (9) copies (one (1) copy designated as reporter's copy) plus a computer disk as
required by Rule 231.05. of Kelly Norwood's Direct Testimony in Support of the
Stipulation and Settlement.
Sincerely,
~. ,J~.-
Kelly O. Norwood
Vice President
Enclosures
c: Service List
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that I have this 4th day of August, 2010, served Avista's Testimony in Support of
the Stipulation and Settlement in Docket No. AVU-E-10-01 and AVU-G-10-01 upon the following
parties, by mailng a copy thereof, properly addressed with postage prepaid to:
Jean D Jewell, Secretary
Idaho Public Utilities Commission
Statehouse
Boise, ID 83720-5983
Jean. jewellaRpuc. idaho. gov
Brad M. Purdy
Attorney at Law
2019 N 1 ih Street
Boise, ID 83720
bmpurdyaRhotmail. com
Kristine Sasser
Donald Howell
Deputy Attorneys General
Idaho Public Utilties Commission
472 W. Washington
Boise, ID 83702-0659
kristine. sasseraRpuc. idaho.gov
donald. howellaRpuc. idaho .gov
Peter J. Richardson
Greg M. Adams
Richardson & O'Leary PLLC
515 N. 2ih Street
PO Box 7218
Boise, ID 83702
peteraRrichardsonandolearv. com
gregaRrichardsondoleary. com
Howard Ray
Clearwater Paper
803 Mil Road
P.O. Box 1126
Lewiston, ID 83501-1126
howard. raylâclearwaterpaper. com
Dean J. Miler
McDevitt & Miler, LLP
420 W. Bannock St.
PO Box 2564-83701
Boise,lD 83701-2564
joelâmcdevitt-miler. com
Scott Atkison
Idaho Forest Products
171 Highway 95 N.
Grangevile, ID 83530
scottalâidahoforestg roup. com
Larry Crowley
Energy Strategies Institute
5549 South Cliffs Edge Avenue
Boise, ID 83716
crowleylalâaol. com
Rowena Pineda
3450 Hill Rd
Boise, ID 83703-4715
Rowenalâidahocan.org
Lee Ann Hall
3518 S. Edmunds St.
Seattle, WA 98118
leannaRnwfco.org
Ken Miler
Snake River alliance
Box 1731
Boise, ID 83701
kmilerlâsnakeriveralliance.org
Rob Pluid, President
Clark Fairchild, Vice President
Tom Ozford, Secretary Treasurer
North Idaho Energy Logs Inc.
P.O. Box 571
Moyie Springs, ID 83845
robpluidaRgmail.com
energylogslâgmail. com
oxfordlâmeadowcrk. com
Benjamin J. Otto
Idaho Conservation league
710 N. 6th S1.
PO Box 844
Boise,ID 83702
bottolâidahoconservation.org p~~~
Rates Coordinator
DEr.c:,i\t¡:r;f' V'-;,,~~,
DAVID J. MEYER
VICE PRESIDENT i CHIEF COUNSEL
GOVERNENTAL AFFAIRS
AVISTA CORPORATION
P.O. BOX 3727
1411 EAST MISSION AVENUE
SPOKAE i WASHINGTON 99220 - 3 727
TELEPHONE: ( 509 ) 495 - 4 316FACSIMILE: [phone]
2110 AUG -5 AM 10: '5FOR REGULATORY &
I
UTiLI
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 AND
NATURAL GAS SERVICE TO ELECTRIC
AND NATURAL GAS CUSTOMERS IN THE
STATE OF IDAHO
CASE NO. AVU-E-10-01
CASE NO. AVU-G-10-01
DIRECT TESTIMONY
OF KELLY O. NORWOOD
IN SUPPORT OF THE
STIPULATION AND
SETTLEMENT
FOR AVISTA CORPORATION
(ELECTRIC AN NATURAL GAS)
1
2
I. INTRODUCTION
Q.Please state your name, employer and business
3 address.
4 A.My name is Kelly O. Norwood and I am employed as
5 the Vice-President of State and Federal Regulation for
6 Avista Utilities ("Company" or "Avista"), at 1411 East
7 Mission Avenue, Spokane, Washington.
8 Q.Would you briefly describe your educational
9 background and professional experience?
10 A.Yes.I am a graduate of Eastern washington
11 University with a Bachelor of Arts Degree in Business
12
13
Administration, majoring in Accounting.I joined the
Company in June of 1981.Over the pas t 29 years, I have
14 spent approximately 18 years in the Rates Department with
15 involvement in cost of service, rate design, revenue
16 requirements and other aspects of ratemaking.I spent
17 approximately 11 years in the Energy Resources Department
18 (power supply and natural gas supply) in a variety of roles,
19 with involvement in resource planning, system operations,
20 resource analysis, negotiation of power contracts, and risk
21 managemen t .I was appointed Vice-President of State &
22 Federal Regulation in March 2002.
23 Q.What is the scope of your pre-filed testimony in
24 this proceeding?
25 A.The purpose of my testimony is to describe and
26 support the Stipulation and Settlement (" Stipulation") ,
Norwood, Di 1
Avista Corporation
1 filed on July 26, 2010 between the Staff of the Idaho Public
2 Utili ties Commission (" Staff" ), Clearwater Paper Corporation
3 ("Clearwater"), Idaho Forest Group, LLC (" Idaho Forest"),
4 the Community Action Partnership Association of Idaho
5 ( "CAPAI " ), the Snake Ri ver Alliance ( " Snake Ri ver" ), the
6 Idaho Conservation League ("Conservation League"), and the
7 Company, which, if approved by the Commission, would resolve
8 all of the issues in the Company's filing.These entities
9 are collectively referred to as the "Parties," and represent
10 all parties in the above-referenced cases that participated
11 in settlement discussions. 1
12 The Stipulation is the product of settlement
13 discussions held in the Commission offices on July 6 and 8,
14 2010, which were attended by signatories to the Stipulation.
15 The Stipulation between the Parties resolved all issues
16 associated with the calculation of the Company's requested
17 revenue requirement, all issues related to rate spread and
18 rate design, provides additional funding for low income
19 energy efficiency measures and education, and also provides
20 for future workshops to address certain customer service-
21 related issues.
22 The Stipulation represents a compromise among differing
23 points of view.Concessions were made by all Parties to
24 reach a balancing of interests. As will be explained in the
i The Idao Community Action Network and Nort Idaho Energy Logs, Inc., as intervenors, were
provided notice of the settlement discussions, but did not paricipate.
Norwood, Di 2
Avista Corporation
1 following testimony, the Stipulation represents a fair, just
2 and reasonable compromise of the issues and is in the public
3 interest.
4 Q.Please explain how the Parties arri ved at the
5 Stipulation in this proceeding.
6 A.The Stipulation is the end result of extensive
7 audi t work conducted through the discovery process and hard
8 bargaining by all Parties in this proceeding. i would like
9 to express my appreciation to all Parties involved in this
10 proceeding for their efforts in arriving at this
11 Stipulation and to this Commission for your willingness to
12 hear this matter promptly, in light of the proposed OCtobe 1
13 effective date.
14
15
Q.Would you briefly sumrize the Stipulation?
A.Yes. Under the terms of the settlement agreement,
16 Avista would be allowed to implement revised tariff
17 schedules designed to recover $21.25 million in additional
18 annual electric revenue, which represents a 9.25% increase
19 in electric annual base tariff revenues. Avista would also
20 be allowed to implement revised tariff schedules designed to
21 recover $1.85 million in additional annual natural gas
22 revenue, which represents a 2.6% increase in natural gas
23 annual base tariff revenues. Included in the Stipulation is
24 a rate impact mitigation plan wherein the increases are
25 partially offset by $17.5 million of Deferred State Income
26 Taxes (DSIT) that would be passed through to customers.
Norwood, Di 3
Avista Corporation
1 This DSIT represents the balance of Idaho state deferred
2 income taxes from prior years, which is discussed below.
3 The Parties agree that this settlement is not
4 contingent upon any specific methodology for individual
5 components of the revenue requirement determination, but
6 all Parties support the overall increase to the Company's
7 revenue requirement, and agree that the overall increase
8 represents a fair, just and reasonable compromise of the
9 issues in this proceeding and that this Stipulation is in
10 the public interest.
11 As part of the Stipulation, the annual funding level
12 of the existing low-income Demand Side Management programs
13 would be increased to $700,000, up from the current
14 $465,000.The funding to assist low-income energy
15 efficiency outreach and education would be increased from
16 $25,000 to $40,000.
17 Q.Would you briefly sumrize the rate impact
18 mitigation plan?
19 A.Yes.The DSIT reflected on the Company's balance
20 sheet totals approximately $11.1 million, and when adjusted
21 for the effect of the revenue conversion factor of 0.63676,
22 totals approximately $17.5 million,repres en t ing
23 normalization of state income taxes for a period of years.
24 As part of this mitigation plan, the Parties agree to credit
25 $17 million of the DSIT to electric customers over two years
26 to help offset the rate impact, and $0.5 million to natural
Norwood, Di 4
Avista Corporation
1 gas customers for one year to help offset a portion of the
2 first year rate increase.
3 The $17 million DSIT credit would offset electric
4 prices for customers for two years, reducing the impact of
5 the electric rate increase effective Oct. 1, 2010, from an
6 overall 9.25 percent to 3.59 percent.With the offsetting
7 credi t, a residential customer using an average of 1,000
8 kilowatt-hours a month would see a $3.50 per month increase,
9 or 4.3 percent, for a revised monthly bill of $84.40.
10 As part of the phase-in of the DSIT, electric rates
11 would increase 3.92 percent Oct. 1, 2011, and 1.74 percent
12 Oct. 1, 2012, after which the temporary credit would expire.
13 This is shown in the following table:
Year 1 Year 2 Year
(October 1,(October 1,
Total Increase 9.25%
Less - DSIT Credit 0.00%
Less - Pror Increa 17.25 7.51%
Net Increase to 3.92%$4.00 millon 1.74%Customers $8.25 3.59%$9.00
14
15
16
The DSIT credit would reduce, for one year, the natural
gas rate increase from 2.6 percent to 1.9 percent.The
17 revised monthly bill for a customer using an average of 65
18 therms a month would increase $1.71 from $57.69 to $59.40.
19 Q.Please elaborate on the DSIT funds that are being
20 used to mitigate the impact of the rate increase.
Norwood, Di 5
Avista Corporation
1 A.Deferred SIT (DSIT) has been on the Company 's
2 books since the mid-1990s. Deferrals ceased when rates were
3 approved in Case Nos. AVU-E-09-01 and AVU-G-09-01 that
4 reflected the flow-through method for state income taxes.
5 The switch to the flow-through method provided the
6 opportuni ty to make the DSIT balances available to partially
7 offset the general rate case electric and natural gas rate
8 increases.
9
10
The DSIT balances were created by the differences
between book and tax depreciation.The tax effect of the
11 difference between book and tax depreciation was deferred
12 and created the balance of deferred state income taxes.
13 The balance of deferred state income taxes is the
14 result of normalizing state income taxes for ratemaking
15 purposes.Case Nos. AVU-E-09-01 and AVU-G-09-01 reflected
16 the switch to the flow-through method for state income
17 taxes.
18 II. HISTORY OF FILING
19 Q.Please describe the Company's general rate case
20 request, as filed.
21 A.On March 23, 2010, Avista filed an Application
22 with the Commission for authority to increase revenue for
23 electric and natural gas service in Idaho by 14% and 3.6%,
24 respectively.If approved, the Company's revenues for
25 electric base retail rates would have increased by $32.1
Norwood, Di 6
Avista Corporation
1 million annually; Company revenues for natural gas service
2 would have increased by $2.6 million annually.
3 The Company proposed to spread the electric revenue
4 increase by rate schedule, utilizing the results of the cost
5 of service study, on a basis which: 1) moved the rates for
6 all the schedules closer to the cost of providing service,
7 and 2) resulted in a reasonable range in the proposed
8 percentage increase across the schedules.The Company also
9 proposed to raise the monthly electric residential basic
10 charge to $6.75 from the current $4.60 charge.
11 The Company proposed utilizing the results of the
12 natural gas cost of service study, as a guide in spreading
13 the overall revenue increase to its natural gas service
14 schedules and proposed to raise the natural gas residential
15 basic charge to $6.75 from the current $4.00.
16 Q.What are the primary factors causing the Company's
17 request for an electric rate increase in this filing?
18 A. The Company's electric request is driven primarily
19 by an increase in production and transmission expenses, due
20 to the addition of the Lancaster plant Power Purchase
21 Agreement (PPA) in base rates, the termination of some low-
22
23
24
cos t power purchases,reduced hydro generation,and
increased fuel costs.These costs equate to approximately
80% of the Company's overall request.In addition, 12% of
25 the request is due to investing large amounts of capital in
26 the Company's hydro and thermal generation projects, and
Norwood, Di 7
Avista Corporation
1 transmission and distribution upgrades.In addition, the
2 Company continues to experience increasing costs related to
3 meeting new reliability standards,from additional
4 compliance requirements, and the need to replace aging
5 infrastructure.It is simply not possible to cut other
6 costs enough to offset these cost increases, as explained in
7 the Company's original filing.
8 Q.What are the primary factors driving the Company's
9 request for a natural gas rate increase?
10 A.The Company's natural gas request is primarily
11 driven by the inclusion in this case of the increased plant
12 investment and inventory associated with the transfer of
13 additional capacity and deliverability in the Jackson
14 Prairie Storage facility from Avista Energy to Avista
15 Utilities, effective May 1, 2011. Other changes are due to
16 various operating cost components, mainly administrative and
17 general expenditures.
18 III. ELEMNTS OF THE STIPULATION
19 Q.Please describe the terms of the Stipulation
20 entered into by the Parties.
21 A.While the Parties to the stipulation agreed that
22 this would be a settlement with no party accepting a
23 specific methodology for certain elements of the revenue
24 requirement determination, the Stipulation does specify an
25 agreed-upon level of power supply costs upon which to set
26 the new base power supply costs for the monthly power cost
Norwood, Di 8
Avista Corporation
1 adjustment (PCA) calculation purposes, and it identifies
2 other specific items that I will address in my testimony
3 below.
4 Q.Where is the new level of power supply costs for
5 the PCA calculation purposes found in the agreement?
6 A.The agreed-upon level of power supply costs for
7 the monthly PCA calculation purposes is provided in
8 Attachment A to the Stipulation.
9 Q.What is the proposed effective date of the
10 Stipulation?
11
12
A.The Parties have requested implementation of the
Stipulation on October 1, 2010.This proposed effective
13 date is an integral part of the Stipulation that was part of
14 the negotiated resolution of all of the issues.
15 Q.Please explain the settlement terms relating to
16 the recovery of Lancaster costs.
17 A.The Lancaster power plant is a 275 MW gas-fired
18 combined-cycle combustion turbine located in Rathdrum,
19 Idaho. Avista Utilities will purchase all of the output of
20 the plant through 2026.In Case No. AVU-E-09-01, a
21 settlement was reached in which the purchase of the output
22 from the Lancaster generating plant was found to be
23 reasonable with the recovery of the fixed and variable costs
24 through the PCA.Those costs have now been incorporated
25 into the base revenue requirement in this case.
Norwood, Di 9
Avista Corporation
1 Q.Please explain the settlement terms relating to
2 cost of service.
3 A.As part of this rate case, the Company prepared an
4 analysis of using a peak credit method of classifying
5 production costs, allocating 100% of transmission costs to
6 demand, and allocating transmission costs to reflect any
7 peak and off-peak seasonal cost differences over seven
8 months, rather than assuming an equal weighting over twelve
9 months. The Parties agree to take into account, for purposes
10 of rate spread in this proceeding, the allocation of 100% of
11 transmission costs to demand. The Parties have otherwise
12 agreed to exchange information and convene a public
13 workshop, prior to the Company's next general rate case,
14 wi th respect to the possible use of a revised peak credit
15 method for classifying production costs,as well as
16 consideration of the use of a 12 CP (whether "weighted" or
17 not)versus a 7 CP or other method for allocating
18 transmission costs.
19 The Parties have also agreed to move all electric rate
20 schedules approximately 25% toward unity (except for the
21 Street and Area Lighting Schedules, which will receive a
22 percentage increase equal to the overall increase in revenue
23 requirement) .
24
25
The Parties agreed to move all natural gas rate
schedules approximately 60% toward unity (except for
Norwood, Di 10
Avista Corporation
1 Transportation Service Schedule 146, which will receive a
2 full decrease to unity) .
3 Q.Please explain the settlement terms relating to
4 prudence of energy efficiency expenditures.
5 A.The Parties agree that Avista's expenditures for
6 electric and natural gas energy efficiency programs from
7 January 1, 2008 through November 30, 2008, and from December
8 1,2008 through December 31,2009 are pruden t and
9 recoverable.
10 Q.Please describe the customer service-related
11 portion of the Stipulation.
12 A.There are three areas that were addressed in the
13 Stipulation, as follows:
14 (a) Low-Income Weatherization Funding - The Parties
15 agree that the annual level of funding of $465,000 to the
16 Community Action Partnership (CAP) agencies for funding of
17 weatherization (which includes administrative overhead)
18 should be increased to $700,000. The continuation and level
19 of such funding will be revisited in the Company's next
20 general rate filing, or other appropriate proceeding . This
21 total amount will be funded through the Energy Efficiency
22 Tariff Rider (Schedules 91 and 191) .
23 (b) Funding for Outreach for Low-Income Conservation -
24 The Parties agree to annual funding of $40,000 to the Idaho
25 CAP for purposes of providing low-income outreach and
26 education concerning conservation. This amount will be
Norwood, Di 11
Avista Corporation
1 funded through the Energy Efficiency Tariff Rider (Schedules
2 91 and 191), and will be in addition to the $700,000 of Low-
3 Income Weatherization Funding. The continuation and level of
4 such funding will be revisited in the Company's next general
5 rate filing or other appropriate proceedings.
6 (c) Other Service Commitments - The Parties agree to
7 several other service commitments as follows:
8
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12
13
14
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(i)The Company will review its policies and
address in its next general rate case the
appropriateness of charging for services it now
provides without charge to customers or other
parties, ~, establishing new accounts or
managing tenant/landlord accounts. The Company
will also reexamine its existing non-recurring
charges to determine whether those amounts
cover a reasonable portion of the Company's
current cost to provide those services.
(ii)The Company will use its best efforts to meet
or exceed its current contact center service
level standards.
(iii)In coordination with Staff, the Company will
develop and conduct a study on Avista'sdeposit
policy and practices with respect to
residential customers. Among the objectives of
the study would be to determine if the current
deposi t policy correctly identifies customers
Norwood, Di 12
Avista Corporation
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( iv)
(v)
(vi)
(vii)
who pose a credit risk to the Company, whether
it encourages customers who pose a credit risk
to improve payment habi ts, and whether it
reduces the amount of credit and collection
activity as well as bad debt associated with
those customer accounts.
The Company will hold at least five Senior
Energy Conservation workshops in different
Idaho communities prior to December 31, 2011.
The Company will begin tracking and reporting
to the Commission monthly data regarding
customer credit activity.
The Company will actively monitor the Low
Income Weatherization and Low Income Energy
Conservation Education Programs to assure that
the stated goals and objectives of these
programs are achieved and that costs associated
with these programs are prudently incurred.
The Company will work with Commission Staff to
address concerns about Avista'sStaff's
policies and practices with respect to: (a)
opening and closing customer accounts, and (b)
offering payment arrangements toterm
customers.
Norwood, Di 13
Avista Corporation
1 Q.Does the Comany have other programs in place to
2 mitigate the impacts on customers of the proposed rate
3 increase?
4 A.Yes. We have a history of making it a priority
5 wi thin our Company to maintain meaningful programs to assist
6 our customers that are least able to pay their energy bills.
7 We also have programs to assist our entire customer base,
8 i. e., not just our low-income customers.Some of the key
9 programs that we offer or support are as follows:
10 Programs designed to assist customers include:
11 . Increased DSM Energy Efficiency Programs and Fuding.
12 In January 2009 Avista proposed, and the IPUC approved,13 modifications to the Company's energy efficiency14 program offerings. The modifications further broadened15 the technical and financial support Avista provides to
16 its customers, and provides customers with increased17 opportunity to manage their energy bills. In 200818 Avista also launched the award-winning "Every Little
19 Bi t" energy efficiency promotional campaign which
20 integrates all of the Company's energy efficiency21 programs into one location.
22
23 . Project Share. Project Share is a voluntary program24 allowing customers to donate funds that are distributed
25 through community action agencies to customers in need.26 In addition to the customer and employee contributions
27 in 2009 of $81,700 in Idaho, the Company contributed28 $111,800, Idaho's share, to the program in 2009.
29
30 . Comfort Level Billing. The Company offers the option
31 for all customers to pay the same bill amount each32 month of the year by averaging their annual usage.
33 Under this program, customers can avoid unpredictable34 winter heating bills.
35
36 . Payment Arrangements. The Company's Contact Center
37 Representatives work with customers to set up payment38 arrangements to pay energy bills.
39
Norwood, Di 14
Avista Corporation
1 . CARS program. Customer Assistance Referral and
2 Evaluation Services provides assistance to special-
3 needs customers through access to specially trained
4 (CARES) representatives who provide referrals to area
5 agencies and churches for help with housing, utilities,
6 medical assistance, etc.
7
8 · Gatekeepers Program. Avista has implemented the
9 Gatekeepers Program, a program that trains field10 personnel to be aware of signs that a customer may be11 having difficulty with daily living tasks (e.g., paper12 or mail not collected, disheveled appearance, etc).13 The CARES representatives conducted training of
14 company-wide field personnel who come into contact15 with residential customers on a regular basis. In the16 event employees identify a customer having difficulty,17 the employee is asked to notify the CARES18 representatives who would contact appropriate19 community resources for assistance.
20
21 · Senior Energy OUtreach. Avista has developed specific22 strategic outreach efforts to reach our more23 vulnerable customers (seniors and disabled customers)24 wi th energy efficiency information that emphasizes25 comfort and safety.
2627 · Senior Publications. Avista has created a one-page28 advertisement that has been placed in senior resource29 directories and targeted senior publications to reach30 seniors with information about energy efficiency,
31 Comfort Level Billing, Avista CARES and energy32 assistance. A brochure with the same information has33 also been created for distribution through senior meal
34 delivery programs and other senior home-care programs.
35
36 · Power to Conserve. In partnership wi th KREM37 television, a half-hour television program is annually38 developed that covers low-cost and no-cost ways to39 save energy at home. The goal of the program is to40 help limited income seniors and other vulnerable41 populations with their energy bills by providing home
42 energy conservation education. The program provides43 helpful energy conservation tips, information on
44 communi ty resources and ways for customers to manage
45 their energy bills. A DVD of the program has also46 been produced which is included as part of energy47 conservation kits provided in senior conservation48 workshops.
49
Norwood, Di 15
Avista Corporation
1 · Every Little Bit House. In partnership with KREM
2 television, the long-running II Power to Conserve II
3 program was updated to profile energy efficiency work
4 done on an actual Avista customer's home utilizing the
5 low income weatherization program provided by SNAP.
6 The program utilizes a series of commercial vignettes7 that are specifically targeted to provide helpful
8 energy conservation tips, information on community
9 resources and ways for customers to manage their10 energy bills. Its primary target audience is limited11 income, senior and vulnerable customers.
12
13 Q.Please describe the accounting treatment agreed to
14 by the Parties for three specific issues.
15 A.The Parties agree to the accounting treatment for
16 the following items:
17
18
(a) Coeur d' Alene Tribe Settlement and Spokane River
Relicensing Deferrals The Parties agree to a ten-year
19 amortization of the remaining balances beginning October 1,
20 2010 of the CDA Settlement Deferral, the Spokane River
21 Deferral, and the Spokane River PM&E Deferral.
22 (b) Colstrip Lawsuit Settlement -The Parties agree to
23 eliminate the amortization of the deferred costs, due to
24 insurance proceeds recei ved subsequent to the original
25 filing of the case.
26 (c) Jackson Prairie (JP) Storage - The parties agree
27 to the revised accounting treatment proposed by the Company
28 for its existing cushion gas using the net book value of the
29 utility assets at February 2010 to record the transfer of
30 the cushion gas from non-recoverable (FERC Account No.
31 352.3), which is a depreciable asset, to recoverable (FERC
Norwood, Di 16
Avista Corporation
1 Account No. 117.1), which is a non-depreciable asset.The
2 JP assets that will transfer from Avista Energy on May 1,
3 2011, will include plant assets, operations and maintenance
4 expenses, as well as cushion gas that will be recorded in
5 both recoverable and non-recoverable FERC accounts using a
6 similar allocation method.
7 iv. RATE SPREAD & RATE DESIGN
8
9
Q.How did the Stipulation address rate spread?
A.The table on Page 3 of Attachment B of the
10 Stipulation shows the impact on the energy rates under each
11 service schedule of the agreed-upon electric increase. The
12 proposed electric revenue increase of $21,250,000
13 represents an overall increase of 9.25% in base rates and
14 is spread based on the Company's proposed methodology of
15 moving all electric rate schedules approximately 25% toward
16 unity (except for the Street and Area Lighting Schedules,
17 which will receive a percentage increase equal to the
18 overall increase in revenue requirement).The application
19 of the DSIT credit to electric customers is spread based on
20 each schedule's contribution to the general increase in
21 this case, which represents a first year reduction in
22 revenue of 5.66%.The first year net increase to electric
23 revenue as a result of the general increase and the DSIT
24 credit is 3.59% of base rates.
Norwood, Di 1 7
Avista Corporation
1 Page 8 of the Stipulation shows the impact on each
2 service schedule of the agreed-upon natural gas increases.
3 The increased natural gas revenue requirement of $1,850,000
4 represents an overall increase of 2.6% in base rates.The
5 natural gas increase is spread based on the Company's
6 proposed methodology of moving all natural gas rate
7 schedules approximately 60% towards unity (except for the
8 Transportation Service Schedule 146, which will receive a
9 full movement to unity).The application of the DSIT
10 credit to natural gas customers is spread based on each
11 schedule's contribution to base revenues including the
12 general increase in this case. The net increase to natural
13 gas revenue as a result of the general increase and the
14 DSIT credit is 1.9% of base rates.
15 Q.What is the basis of the Stipulation relating to
16 the rate design?
17 A.The Stipulation outlined increases in the basic
18 charges, monthly minimum charges, and demand charges in
19 Schedules 11, 21, 25, and 31, as shown in Attachment B,
20 page 3 of the Stipulation. Otherwise, a uniform percentage
21 increase is applied to each energy rate within each
22 electric service schedule excluding Schedule 1, residential
23 service where block differentials remain constant.
24 The Parties also agreed that the current residential
25 electric basic charge of $4.60 would be increased to $5.00
Norwood, Di 18
Avista Corporation
1 per month and the residential natural gas basic charge of
2 $4.00 per month would remain unchanged.
3 V. CONCLUSION
4
5
Q.What is the effect of the Stipulation?
A.The Stipulation represents a negotiated
6 compromise on a variety of issues among the Parties. Thus,
7 the. Parties have agreed that no particular party shall be
8 deemed to have approved the facts, principles, methods, or
9 theories employed by any other in arriving at these
10 stipulated provisions, and that the terms incorporated
11 should not be viewed as precedent setting in subsequent
12 proceedings except as expressly provided.
13 Q.In conclusion, why is this Stipulation in the
14 public interest?
15 A.This Stipulation strikes a reasonable balance
16 between the interests of the Company and its customers,
17 including its low-income customers. As such, it represents
18 a reasonable compromise among differing interests and
19 points of view.
20 The Parties have agreed tha t the Company has
21 demonstrated need for a revenue requirement increase for
22
23
24
25
both its electric and natural gas customers.The
Stipulation provides for recovery of these costs.In the
final analysis,however,any settlement reflects a
compromise in the give-and-take of negotiations.The
26 Commission, therefore, has before it a Stipulation that is
Norwood, Di 19
Avista Corporation
1 supported by sound analysis and supporting evidence, the
2 approval of which is in the public interest.
3 Q.Does this conclude your pre-filed direct
4 testimony?
5 A.Yes, it does.
Norwood, Di 20
Avista Corporation