20110706Morris Di.pdf

,
DAVID J. MEYER
VICE PRESIDENT AND CHIEF COUNSEL FOR
REGULATORY & GOVERNMENTAL AFFAIRS
AVISTA CORPORATION
P.O. BOX 3727
1411 EAST MISSION AVENUE
SPOKANE, WASHINGTON 99220-3727
TELEPHONE: [phone]
FACSIMILE: [phone]
DAVID. MEYERØAVISTACORP. COM
20n JUL -5 AM II: 44
¡ t~"
1\";
BEFORE THE IDAHO PULIC 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
FOR AVISTA CORPORATION
CASE NO. AVU-E-11-01
CASE NO. AVU-G-l1..01
DIRECT TESTIMONY
OF
SCOTT L. MORRIS
(ELECTRIC AND NATURAL GAS)~
1
2
I. INTRODUCTION
Q.Please state your name, employer and business
3 address.
4 A.My name is Scott L. Morris and I am employed as
5 the Chairman of the Board, President and Chief Executive
6 Officer of Avista Corporation (Company or Avista), at 1411
7 East Mission Avenue, Spokane, Washington.
8 Q.Would you please brlefly describe your
9 educational background and professional experience?
10 A.Yes. I am a graduate of Gonzaga University with a
11 Bachelors degree and a Masters degree in organizational
12 leadership. I have also attended the Kidder Peabody School
13 of Financial Management.
14
15
I joined the Company in 1981 and have served in a
number of roles including customer service manager.In
16 1991, I was appointed general manageir for Avista Utilities'
17 Oregon and California natural gas utility business. I was
18 appointed President and General Manager of Avista
19 Utilities, an operating division of! Avista Corporation, in
20 August 2000.In February 2003, I was appointed Senior
21 Vice-President of Avista Corporation, and in May 2006, I
22 was appointed as President and Chief Operating Officer.
23 Effective January 1, 2008, I assumed the position of
24 Chairman of the Board, President~ and Chief Executive
25 Officer.
Morris, Di 1
Avista Corporation
1 I am a member of the Western Energy Institute board of
2 directors, a member of the Gonzaga Uni versi ty board of
3 trustees, a member of Edison Electric Institute board of
4 directors, a member of the American Gas Association board
5 of directors, a member of ReliOn board of directors, and
6 board director of the Washington Roundtable. On January 1,
7 2011, I was appointed to the Federal Reserve Bank of San
8 Francisco, Seattle Branch board of directors. I also serve
9 on the board of trustees of Greater Spokane Incorporated.
10 Q.What is the scope of your testimony in this
11 proceeding?
12
13
A.In my testimony, I will first explain why Avista
is requesting another rate increase in this case.I will
14 explain that much of our need for rate relief is driven
15 primarily by the increased costs associated with the need
16 to expand and replace our aging utility infrastructure, and
17 our obligation to reliably serve customers. As a regulated
18 company, we operate under state and federal mandates that
19 obligate us to serve every customer that requests service,
20 and to serve them reliably.Al though we continue to make
21 changes to our business to operate more efficiently, it is
22 simply not possible to cut costs enough to offset the
23 increased costs to expand and replace our aging
24 infrastructure to comply with our obligation to serve.
25
26
My testimony will provide an overview of Avista
Corporation.I will also summarize the Company's specific
Morris, Di 2
Avista Corporation
1 electric and natural gas rate requests in this filing, and
2 the primary factors driving the Company's need for general
3 rate relief.I will also discuss some of the measures we
4 have taken to cut costs, as well as ini tiati ves to increase
5 operating efficiencies in an effort to mitigate future cost
6 increases.I will briefly explain the Company's customer
7 support programs in place to assist our customers, as well
8 as our communications initiatives to help customers better
9 understand the changes in costs that are causing our rates
10 to increase.
11 Finally, I will introduce each of the other witnesses
12 providing testimony on the Company's behalf.
13 A table of contents for my testimony is as follows:14 Description Page15 I. Introduction 1
16 II. Why Is Avista Requesting Another Rate Increase 417 III. Overview of Avista 1218 iv. Summary of Rate Requests 15
19 V. Cost Management and Efficiencies 2020 VI. Communications with Customers 23
21 VII. Customer Satisfaction 2622 VI I I. Customer Support Programs 2723 ix. Other Company Witnesses 30
24 Q.Are you sponsoring any exhibits in this
25 proceeding?
26 A.Yes.I am sponsoring Exhibit 1, pages 1 and 2.
27 Page 1 is a diagram of Avista's corporate structure; and
28 page 2 includes a map showing Avista's electric and natural
Morris, Di 3
Avista Corporation
1 gas service areas.This exhibit was prepared under my
2 direction.
3 Q.What are the rate increases requested by Avista
4 in this filing?
5 A.Avista is requesting an overall electric billed
6 rate increase of 3.5%, and a natural gas billed rate
7 increase of 2.8%.
8 II. WHY is AVISTA REQUESTING ANOTHER RATE INCREASE
9 Q.Why is Avista requesting another rate increase
10 following the recent increases that were approved effective
11 October 1, 2010?
12 A.As a regulated monopoly there are two major
13 requirements that are having a significant effect on the
14 need to change retail rates:1) Avista has an obligation
15 to safely and reliably serve every customer that requests
16 service, and 2) the costs associated with replacing our
17 aging infrastructure are substantial.
18 Q.How does the ~obligation to serve" create a need
19 to increase rates?
20 A.Avista has a legal obligation to provide safe and
21 reliable service to every customer that requests electric
22 or natural gas service from the Company.When a new
23 customer wants service, we must hook them up, even if the
24 cost to serve that customer results in increased costs to
25 all other customers.Likewise, if the facilities serving
Morris, Di 4
Avista Corporation
1 an existing customer are deteriorating and need repair, we
2 must repair or replace them so that the customer continues
3 to receive safe, reliable service.
4 We occasionally receive comments from some of our
5 customers to the effect that Avista should cut its costs,
6 and ~tighten its belt" like other businesses are having to
7 do in these difficult economic circumstances, and keep
8 retail rates the same.We hear those comments and take
9 them to heart, and have taken steps to do so. But at the
10 same time we are not like other businesses. Wi thout the
11 obligation to serve, we could consider refusing to hook up
12 some new customers, because it could avoid an increase in
13 costs to our existing customers. Without an obligation to
14 serve, we could consider no longer serving some of the more
15 remote, more costly areas to provide service, which would
16 allow us to avoid further investment, and reduce labor and
17 other operating costs.Unregulated businesses have the
18 opportuni ty to shut down aging facilities or under-
19 producing retail outlets, eliminate product lines, and cut
20 back on investment and maintenance. We do not.
21 Please don't misunderstand my point we do have
22 opportuni ties to cut back on investment and operating
23
24
costs, and we have where prudent to do so.I will address
that later in my testimony .But those opportunities are
25 limited by our obligation to safely and reliably serve all
Morris, Di 5
Avista Corporation
1 customers, and our obligation to comply with numerous
2 mandatory state and federal requirements. We simply don't
3 have the choice to say no to new customers, no to
4 maintaining a safe, reliable system, and no to mandatory
5 requirements.Al though we have taken measures to ensure
6 that the costs that we incur represent the most cost-
7 effective and reliable way to continue to serve our
8 customers, we continue to experience significant increases
9 in costs.
10 Q.How does Avista's need to replace its aging
11 infrastructure create a need to change retail rates?
12 A.Avista's retail rates are cost-based, which means
13 the prices customers are paying now for transformers,
14 distribution poles, substations, and transmission lines,
15 among other facilities, are based on the cost to install
16 those facilities, in some cases, 40, 50, and even 60 years
17 ago.The cost of the same equipment and facilities today
18 are many times more expensive than those facilities
19 installed years ago.In order for us to continue to meet
20 our obligation to provide reliable service, we must replace
21 this aging infrastructure over time.When we replace the
22 old equipment with new, it results in increased costs,
23 which leads to the need to increase rates to cover those
24 costs.
Morris, Pi 6
Avista Corporation
1 Using the Handy-Whi tman Index 1Manual,the Company
2 analyzed several major categories of plant.The following
3 chart shows what distribution equipment costs have been
4 historically on a relative scale.For example,
5 distribution poles fifty years ago would cost 9% of the
6 current replacement cost. The chart shows that the cost of
7 the same equipment and facilities that are being added
8 today are many times more expensive than those facilities
9 installed in the past.
10 Illustration NO.1:
11
12
Handy Whitman Cost Index
Distribution Equipment-Accts 364, 365, & 368 ,l,#l i'.. ....
19 $20.00
$100.00
13
14 $80.00
15
16 $60.00
17
$40.00
18
20
21 $0.00
1959 1969 1979 1989 1999 2009
22 Ac 364.Pøles . Am 365.. OH Conductor li Am 3680H Line Transformers
1 "The Handy-Whitman Index of Public Utilty Construction Costs", published by Whitman, Requardt
and Associates, Baltimore, Maryland. The Handy-Whitman Indexes of Public Utilty Constrction Costs
show the level of costs for different tyes of utility construction. Separate indices are maintained for
general items of constrction, such as reinforced concrete, and specific items of material or equipment,
such as pipe or tubo-generators. Handy-Whitman Index numbers are used to trend earlier valuations and
original cost at prices prevailng at a certin date.
Morris, Di 7
Avista Corporation
1 Company witness Mr. DeFelice provides additional
2 details related to the significant increase in the cost of
3 utility materials and equipment in recent years.
4 Q.Can you give a sense for the scope of the
5 investment necessary to replace the utility infrastructure
6 over time?
7 A.Yes.For illustrative purposes, we have over
8 240,000 distribution poles and 34,500 transmission wood and
9 steel poles in our electric system. If, as an example, we
10 were to replace our distribution poles on a fifty-year
11 cycle, it would require us to replace approximately 4,800
12 poles every year.The distribution pole shown below
13 located in Lewiston, Idaho is pre-1940, and the pole has
14 deteriorated to the point where it needs to be replaced.
15 Illustration NO.2:
16
17
18
19
20
21
22
23
24
25
26
Morris, Di 8
Avista Corporation
1 We have many of these on our system and they must be
2 replaced. The replacement of distribution poles represents
3 a fraction of the infrastructure that needs to be replaced
4 each year.In the next five years, our relatively small
5 Company will need to spend approximately $1.2 billion of
6 capital on utility facilities and other requirements. This
7 $1.2 billion represents approximately 57% of the current
8 rate base of approximately $2.1 billion dedicated to
9 serving customers today. Utility equipment and facilities
10 are big and expensive, and the required investment in new
11 facili ties is one of the maj or reasons that we need an
12 increase in retail rates.
13 Q.Doesn't the level of depreciation each year cover
14 the cost to replace these facilities?
15 A.No.Some of our customers suggest that we set
16 aside dollars every year to replace these facilities over
17 time and we do.That is what depreciation is for.The
18 level of annual depreciation dollars built into retail
19 rates is available to the Company to replace aging
20 facilities over time.However, as I explained above,
21 because the annual depreciation is based on the actual
22 historical costs of our electric system and the cost of
23 those facilities decades ago were orders of magnitude less
24 than what it costs to build facilities today, the annual
25 depreciation falls dramatically short of providing the
26 funds necessary to replace facilities today.Therefore,
Morris, Di 9
Avista Corporation
1 retail rate increases are necessary to cover the higher
2 costs to replace facilities.As Ms. Andrews explains in
3 her testimony, approximately 90% of our rate increase
4 request is based on new capital investment and the return
5 on investment.Gross plant in service included in this
6 case increased by approximately $66.2 million (Idaho share)
7 compared to that currently included in rates.
8 Q.Is the Company experiencing increases in other
9 cost categories such as O&M and A&G costs?
10 A.Yes.A number of expense items have increased
11 since the Company's last general rate case. In particular,
12 the Company pro formed in the increased costs associated
13 wi th electric distribution vegetation management costs of
14 approximately $1.3 million, as discussed by Company witness
15 Mr. Kinney. These addi ti ve costs are necessary to keep the
16 trees out of our power lines.We are also experiencing
17 increased labor and medical expenses.
18 Q.Why has it been necessary for Avista to request a
19 ra te increase each year for a numer of years?
20
21
A.The current ratemaking process has not allowed
costs beyond the next year to be included in rates.In
22 addi tion, processing a rate request in Idaho can take seven
23 to nine months, which means the only way to recover
24 increasing costs to serve customers is to file a new rate
25 request every year.
Morris, Di 10
Avista Corporation
1 Since it is simply not possible to cuts costs enough
2 to fully offset other cost increases and the costs
3 associated with new plant investment, we have no choice but
4 to request rate increases on a regular basis.Avista is
5 not alone in that regard; other electric utilities, whether
6 publicly-owned or investor-owned like Avista, are also
7 increasing their rates on a more regular basis, and this
8 will likely continue into the near future.
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
9 The table below identifies recent rate increases for
utili ties in the Pacific Northwest that have either already
Table No.1.
occurred, or proposals that are currently pending.
Idaho
Idah Power
Rocky Mountain Power
Rocky Mountain Power
Q'!goii
Idah Power
Pacifoip
Pacifoip ..
Portlad General
Washigton
Benton Coun PUD
Clalh Coun PUD .
Clak Coun PUD
Cowli Coun PUD
Grnt Coun PUD
Okanogan Coun PUD
Pacif Power
Pacif Power
Put Soun Enrgy
Put Soun Enrgy
Put Soun Enrgy
.!!
Electr
Electr
Electr
Electr
. Electr
Electr
Elect
iElectr
: Elect
. Electr
Elect
Electr
. Electr
Electr
Electr
Elctr
Elect
NatwlOas
Recent Rate Increase Activity
Case Statu
Pendin
New Rates Approved
Pendin
New Rates Approved
: N ew Rates Approved ... i
. N ew Rates Approved
New Rates Approved
Pendin.
i N~ew. Rates Approved
'New Rates Approved.
New RatesApproved
:New Rates Approved
Pendin
New Rates Approved
Pendin
New Rates Approved
Pendin
Pendin
Source: E Source, June 2011
* Fild Jun 13,201 i after E Source report
Effective Date
n/a
06-28-2010
n/a
03-01-2010
02-01-2010
01-01-201 i
01-01-20ll
n/a
01-01-201 i
09-01-2010
01-01-20ll
04-01-2010
n/a
01-01-2010
04-03-201 i
04-07-2010
n/a
n/a
Rate Increase
9.9%
6.8%
15.0%
15.4%
4.4%
8.4%
5.9%
8.0%
8.0%
4.3%
9.0%
4.5%
6.5%
10.7%
2.8%
8.1%*
3%*
Morris, Di 11
Avista Corporation
1
2
III. OVERVIEW OF AVISTA
Q.Please describe Avista' s current business focus
3 for the utility and subsidiary operations.
4 A.Our strategy continues to focus on our energy and
5 utility-related businesses, with our primary emphasis on
6 the electric and natural gas utility business.There are
7 four distinct components to our business focus for the
8 utili ty, which we have referred to as the four legs of a
9 stool, with each leg representing customers, employees, the
10 communities we serve, and our financial investors. For the
11 stool to be level, each of these legs must be in balance by
12 having the proper emphasis. This means we must maintain a
13 strong utility business by delivering efficient, reliable
14 and high quality service at a reasonable price to our
15 customers and the communities we serve, and provide the
16 opportuni ty for sustained employment for our employees,
17 while providing a reasonable return to our investors.
18 Q.Please briefly describe Avista's subsidiary
19 businesses.
20
21
22
A.Avista Corp.' s primary subsidiary is the
information and technology business,Advantage IQ,
described below,which is headquartered in Spokane,
23 Washington. A diagram of Avista' s corporate structure is
24 provided on page 1 of Exhibit 1.
25 Q.Please provide an overview of Advantage IQ.
Morris, Pi 12
Avista Corporation
1 A.Advantage IQ provides utility expense management
2 and energy management solutions to mul ti-si te companies
3 across North America. Avista currently holds a 75.75% share
4 in Advantage IQ, which is held under Avista Capital.
5
6
Advantage IQ's invoice processing,audi ting and
payment services,coupled with energy procuremen t,
7 comprehensive reporting and advanced analysis, provide the
8 critical data clients need to balance the financial, social
9 and environmental aspects of doing business. Customers
10 include, CSK Auto, Jack in the Box, Staples, and Big Lots,
11 to name a few.
12 As part of the expense management services, Advantage
13 IQ analyzes and audits invoices, then presents consolidated
14 bills on-line, and processes payments. Information gathered
15 from invoices,service providers and other customer-
16 specific data allows Advantage IQ to provide its clients
17 with in-depth analytical support, real-time reporting and
18 consulting services.
19 Advantage IQ also provides comprehensive energy
20 efficiency program management services to utili ties across
21 North America. As part of these management services,
22 Advantage IQ helps utili ties develop and execute energy
23 efficiency programs with a complete turn-key solution.
24 Q.Please briefly describe Avista Utili ties.
Morris, Di 13
Avista Corporation
1 A.Avista Utilities provides electric and natural
2 gas service within a 26,000 square mile area of northern
3 Idaho and eastern Washington2. Of the Company's 358,982
4 electric and 319,141 natural gas customers (as of December
5 31, 2010), 122,506 and 74,209, respectively, were Idaho
6 customers. The Company, headquartered in Spokane, also
7 provides natural gas distribution service in southwestern
8 and northeastern Oregon.A map showing Avista's electric
9 and natural gas service areas is provided on page 2 of
10 Exhibi t 1.
11 As of December 31, 2010, Avista Utilities had total
12 assets (electric and natural gas) of approximately $3.9
13 billion (on a system basis), with electric retail revenues
14 of $ 683 million (system) and natural gas retail revenues of
15 $314 million (system).As of December 2010, the Utility
16 had 1,554 full-time employees.
17 Avista has a long history of innovation and
18 environmental stewardship. At the turn of the 20th century,
19 the Company built its first renewable hydroelectric
20 generation plant on the banks of the Spokane River. In the
21 1980' s, Avista developed an award-winning biomass plant
22 (Kettle Falls) that generates energy from wood-waste.
2 Avista also serves i 9 retail electric customers in western Montana.
Morris, Di 14
Avista Corporation
1
2
iv. SUMY OF RATE REQUESTS
Q.Please provide an overview of Avista's electric
3 rate request in this filing.
4 A.Avista is proposing an increase in electric
5 billed retail rates of $9.0 million or 3.5%. The Company's
6 request is based on a proposed rate of return of 8.49% with
7 a common equity ratio of 50.15% and a 10.9% return on
8 equity.
9 Mr. Ehrbar will provide details related to rate spread
10 and rate design. The proposed rate spread for the increase
11 to each electric customer class is shown in the
12 illustration below.
13 Illustration No.3:
Proposed Increase
in Billed Revenues
14
15
16
17
18
19
20
21
22
23
24
25
26
Service Schedule
Residential Service Schedule 1 3.6%
General Service Schedules 11 & 12 3.5%
Large General Service Schedules 21 & 22 3.5%
Extra Large General Service Schedule 25 3.4%
Extra Large General Service Schedule 25P 3.3%
Pumping Service Schedules 31 & 32
Street & Area Lighting Schedules 41-48
3.6%
3.6%
Overall Increase 3.5%
Morris, Di 15
Avista Corporation
1 Q.What is Avista's natural gas rate request in
2 this filing?
3 A.With regard to natural gas, the Company is
4 requesting an increase of $1.9 million or 2.8% of billed
5 rates.As with the electric increase, the Company's
6 request is based on a proposed rate of return of 8.49% with
7 a common equity ratio of 50.15% and a 10.9% return on
8 equity.The proposed rate spread for each natural gas
9 customer class is shown in the illustration below:
10 Illustration No.4:
11
12
13
14
15
16
17
18
19
20
21
Service Schedule Proposed Increase
in Billed Revenues
General Service Schedule 101 3.5%
Large General Service Schedule 111 0.1%
Interruptible Sales Service Schedule 131 1. 0%
Transportation Service Schedule 146
(excluding natural gas costs)4.7%
Overall Increase 2.8%
Q.What are the primary factors causing the
22 Company's request for an electric rate increase in this
23 filing?
24 A.The Company's electric general rate case is based
25 on a 12-months ending December 31, 2010 test period, and a
26 January 1, 2012 through December 31, 2012 pro forma rate
27 period.Approximately 90% of the Company's revenue
Morris, Di 16
Avista Corporation
1 requirement requested in this case is due to an increase in
2 Net Plant Investment (including return on investment,
3 depreciation and taxes, and offset by the tax benefit of
4 interest). This increase is due in part to an increase of
5 approximately $21.0 million in net plant rate base for the
6 Idaho jurisdiction.
7 The remaining 10% of our request is due to increases
8 in distribution, operation and maintenance (O&M) , and
9 administrative and general (A&G) expenses, offset by a
10 reduction in net power supply and transmission
11 expendi tures. The Company has included an Energy Efficiency
12 Load Adjustment (EELA) , which increases the Company's
13
14
15
16
electric revenue requirement by approxima tely $1. 86
million.The purpose of this adjustment is to reflect the
reduction in kWh sales the Company will experience
following the 2010 test year,as a direct result of
17 Avista's energy efficiency programs. The reduced load from
18 the EELA causes an increase in revenue requirement in each
19 of the maj or cost categories (mainly net plant investment
20 and power supply) because the foregone retail revenue from
21 the load reduction is designed to recover costs in each of
22 the categories.
23 Later witnesses provide details explaining these
24 changes in costs.
Morris, Di 17
Avista Corporation
1 Q.What are the primary factors driving the
2 Company's request for a natural gas rate increase?
3 A.The Company's natural gas request is driven by
4 changes in various operating cost components, approximately
5 two-thirds distribution O&M and A&G expenditures, such as
6 increased costs in employee benefits, i. e. wages and
7 medical insurance expenses, and one-third increased net
8 plant investment, due to additional Company investment in
9 underground storage facilities, distribution and general
10 plant.
11 Q.Is thé Company proposing any changes to the cost
12 of natural gas for its retail natural gas customers in this
13 case?
14 A.No. Avista is not proposing changes in this
15 filing related to the cost of natural gas included in
16 current rates for natural gas customers.Changes in
17 natural gas costs are addressed in the annual PGA filings.
18 Q.How do Avista's retail electric rates compare to
19 other utilities in the Northwest and across the country?
20 A.Edison Electric Institute periodically prepares a
21 comparison of residential electric bills for investor-owned
22 utili ties across the country.The chart below provides a
23 comparison of an Avista customer's monthly bill 3 in Idaho
24 and Washington, with utility bills in other States.The
3 Based on a residential customer's usage of 1,000 kWh per month. Source: Edison Electric Institute,
Typical Bils and Average Rates Report, Winter 201 1.
Morris, Di 18
Avista Corporation
1 chart shows that Avista's residential customers' rates are
2 the lowest, or are among the lowest, in the Country.
3 Illustration NO.5
4
5 Average Residential Monthly Electric Bill6 1,000 Kilowatt-Hours per Month7 January 2011
8
9
HawaII
Connecticut
California
Maine
New Jersey
Rhode Island
New York
Massachusetts
Vermont
Delaware
New Hampshire
District of Columbia
Maryland
Pennsylvania
Michigan
Nevada
USA Average
Wisconsin
Ohio
Colorado
Alabama
Florida
Indiana
South Carolina
Mississippi
Minnesota
Iowa
Arizona
Illinois
Georgia
Oregon
North Carolina
Kansas
Wyoming
South Dakota
Texas
Missouri
West Virginia
Virginia
Louisiana
Utah
Avista Idaho
Kentucky
Oklahoma
Montana
Idaho
North Dakota
Tennessee
Washington
New Mexico
Arkansas
Avista Washington
353.35
10
194.72
186.27
173.52
171.74
162.27
161.9
160.06
153.13
149.66
144.41
140.00
132.84
130.47
121.81
121.73
121.08
120.68
115.49
112.30
111.81
111.01
107.38
105.45
103.87
103.71
99.83
98.90
98.45
97.40
97.33
94.06
93.28
93.26
92.82
92.24
91.8891.4
90.76
90.10
87.69
87.69
87.07
86.08
85.17
83.21
82.05
81.5
81.03
80.02
79.11
7i:UI~
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
0.00 50.00 100.00 150.00 200.00 250.00 300.00 350.00 400.0027
Morris, Di 19
Avista Corporation
1 Our relatively low retail rates are due in large part
2 to a history of our Company aggressively pursuing the
3 acquisition and preservation of a diversified portfolio of
4 low cost resources for the benefit of our customers. This
5 portfolio includes hydroelectric, wood-waste fired, gas-
6 fired baseload,gas-fired peakers,and coal-fired
7 generation, together with long-term purchases of power and
8 an aggressive energy efficiency program.
9 Our low rates are also a result of Avista's aggressive
10 efforts to control its costs, in order to keep retail rates
11 as low as reasonably possible.
12 V. COST MAAGEMNT AN EFFICIENCIES
13 Q.Is Avista continuing to pay particular attention
14 to controlling its costs in order to mitigate the level of
15 price increases to its customers?
16 A.Yes. In the last couple of years we have renewed
17 our efforts to control our costs and improve efficiency,
18 while continuing to meet our reliability and environmental
19 compliance requirements, and preserving a high level of
20 customer satisfaction.We are focused on long-term
21 sustainable savings to continuously improve our service to
22 customers and manage costs into the future.
23 Some of the measures from the last couple of years
24 that we are continuing are briefly explained below, as well
25 as a number of more recent ini tiati ves.
Morris, Di 20
Avista Corporation
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
Hiring Restriction
The Company continues to operate under a
restriction which requires approval by
Chairman/President/CEO, President of the utility,
CFO, and the Sr. VP for Human Resources for
replacement or new hire positions.
hiringthetheall
Limi ta tions on Capital Spending
Avista approved a lower capital budget than was
requested by the Company's Engineering and Operationspersonnel. The original capital proj ects request for
approval in 2011 consisted of projects totaling over
$292 million. The Capital Prioritization Committee
reduced the list of recommended proj ects by $ 62
million to the $230 million capital budget approved bythe Board (excluding Stimulus Projects4). In addition,
the Company prioritized 0 & M facility maintenance and
improvement projects and removed projects that could
be delayed without safety or operational concerns.
Reduced Pension Benefit for New Hires
As part of the new contract negotiated with Avista's
bargaining unit employees, the Defined Benefit Pension
Plan's benefit formula was reduced by approximately28% for all bargaining unit new hires, effective
January 1, 2011. This change was earlier made fornon-bargaining unit employees effective January 1,
2006.
Refinance Long Term Debt
As explained by Company witness Mr. Thies, the Company
has reduced its overall cost of debt to 5.61% in
December 2010, from approximately 6.5% in 2008, due
primarily to issuing the following debt, some of which
represents an early redemption of higher-cost debt to
take advantage of historically low interest rates:
September 2009:
$250 million of secured debt at a coupon of
5.125% due in 2022
December 2010:
· Avista was awarded matching grants from the U. S. Department of Energy
for two "Smart Grid" projects. One project will upgrade portions of
the utility's electric distribution system to smart grid standards in
Spokane, Washington and the other project is a demonstration project
in Pullman, Washington that involves automation of many parts of the
electric distribution system using advanced metering, enhanced utility
communication and other elements of smart grid technologies. Avista's
share of these costs are not included in this rate filing.
Mo r r is, D i 2 1
Avista Corporation
1
2
3
4
5
6
7
8
9 Performnce Excellence Initiative
10 In May 2010, the Company enlisted the help of Booz &
11 Company to work with us on what we are calling
12 Performance Excellence. They brought with them
13 industry knowledge, expertise and a phased-approach.14 Phase 1 involved assessing and identifying Avista' s15 top opportunities to better align our resources so we16 can run our business more efficiently, and be better17 prepared to meet customers' future needs for energy18 and energy information. In Phase 2 we are designing19 processes to capture these opportunities, and are
20 still early in the implementation phase.
2122 Through the initial assessment phase we discovered23 that many of our processes were already efficient, but24 the outside, third-party, best practices perspectives
25 brought in by Booz & Company has provided us the26 opportuni ty to identify areas where we can fine-tune27 our practices and further mitigate increased costs to28 our customers. One example is in our Supply Chain.29 Each year we spend over $5 million on transformers.30 This year we changed our transformer bidding process,31 which included revisiting how we buy transformers,32 made changes to the suppliers we use, how contracts33 are structured, as well as the volume of transformers34 we buy at one time. We estimate that these changes35 alone will allow us to save approximately $2 million36 in capital costs per year on transformers for the next37 three years. These savings will enable our available38 capi tal dollars to replace other utili ty39 infrastructure on a more timely basis than would40 otherwise occur.
4142 We recognize that our proposed rate increases will
$52.0 million of secured debt at a coupon of
3.89%due in 2020
$35.0 million of secured debt at a coupon of
5.55%due in 2040
$50.0 million of secured debt at a coupon of
1. 68%due in 2013
43 result in energy bills that will be more difficult for some
44 of our customers to pay.I can assure you that we are not
45 just sitting on the sidelines as our costs go up, as
Morris, Di 22
Avista Corporation
1 evidenced by the measures described above and others
2 explained by Mr. Kopczynski.
3 VI. COMMICATIONS WITH CUSTOMRS
4 Q.How is Avista communicating with its customers
5 to explain what is driving increased costs for the
6 Company?
7 A.The Company proactively communicates with its
8 customers in a number of ways: electronic communications
9 on issues of importance to them, customer forums, one-on-
10 one customer interactions through field personnel and
11 account representatives, bill inserts, media contacts,
12 group presentations, and through our employees' involvement
13 in community, business and civic organizations, to name a
14 few.We believe our communications are helping our
15 customers and the communities we serve to better understand
16 the issues faced by the Company, such as increased
17 environmental mitigation, and infrastructure investment and
18 generation constraints, all of which have led to higher
19 costs for our customers.
20 We have listened to our customers and learned that
21 they want information and conversations with Avista
22 employees to better understand the choices they have to
23
24
25
26
manage how they use energy and the forces that are
impacting their energy prices.
That's why we are continuing to build on our
communications efforts begun in 2009,so that customers
Morris, Di 23
Avista Corporation
1 receive information directly from us on issues important to
2 them.We are also continuing to engage employees in the
3 Company in our efforts to more directly communicate with
4 customers.
5 Q.How has the Company stepped-up communications
6 with its customers?
7 A.One of the important principles in our
8 intensified outreach is to meet customers where they
9 gather.Our customer conversation uses traditional and
10 non-traditional communication channels including print,
11 radio, website, face-to-face listening posts, newsletters,
12 videos, social media, emails, and one-on-one and group
13 presentations.
14
15
One important customer segment that we target are
those customers who gather online.We are continuing to
16 focus on our social media program with the Avista blog as
17 our foundation.We also communicate on Twitter and in
18 online discussion forums when appropriate. The Company was
19 recently named as ~Top Utility in Social Media" by its
20 peers according to E Sources. To find out how utilities
21 were using social media, E Source conducted its second
22 national social media survey in early 2011. The electric,
23 natural gas,water,and combination utili ties that
24 participated in the survey were asked which utilities they
25 considered to be social media leaders.Avista was voted
5 E Source News Release dated June 21, 2011.
Morris, Di 24
Avista Corporation
1 number one.The Company's social media is built on the
2 model that says an authentic voice is the most effective
3 way to engage with customers.
4 For customers who want a more private online
5 conversation, we offer customers a conversation email
6 account to make sure they were comfortable having this new
7 conversation with us.
8 A cornerstone of our enhanced customer communication
9 is an enhanced rates section of the Company's web site at
10 www.avistautilities.com .At that website, customers can
11 view a video on how rates are set, including the regulatory
12 process,view other videos on the components of current
13 general rate requests, and access additional information on
14 general rate requests. Our employees provide excellent
15 customer service, and this focus on communicating with our
16 customers includes providing them messaging and new tools
17 to make is easier to have conversations about Avista with
18 friends, family and customers. We are finding that once a
19 customer talks with one of our employees and has the
20 opportunity to voice their concerns and receive answers to
21 their questions,their satisfaction level increases
22 significantly. We're listening to our customers' point-of-
23 view and sharing ours about energy issues that directly
24 affect us all.
25 We are continuing our focus on informing customers of
26 the many programs we offer to provide assistance in
Morris, Di 25
Avista Corporation
1 managing their energy bills,and ensuring that our
2 employees are equipped to engage in these conversations.
3 Also, we are continuing to build understanding on how
4 decisions today, specifically in areas such as energy
5 efficiency,sustainabili ty,reliabili ty and renewable
6 energy, will affect our energy future.
7 VII. CUSTOMER SATISFACTION
8 Q.Wha t kind of feedback are you receiving from
9 customers related to customer satisfaction?
10 A.I am pleased with the dedication of Avista
11 Utili ties' employees and their commitment to provide
12 quali ty service to our customers.While we continue to
13 maintain tight controls on capital and O&M budgets, our
customer service surveys indicate that customer14
15
16
satisfaction remains high.Our recent second quarter 2011
customer survey results show an overall customer
17 satisfaction rating of 88% in our Idaho, Washington, and
18 Oregon operating divisions.This rating reflects a
19 positive experience for the majority of customers who have
20 contacted Avista related to the customer service they
21 received. These results can be achieved only with very
22 commi t ted and competent employees.
23 In September 2010, J.D. Power and Associates6 ranked
24 Avista ~Highest in Customer Satisfaction with Residential
6 htt://www.jdpower.cOlnlnews/pressRelease.aspx?ID""'2010168
Morris, Di 26
Avista Corporation
1 Natural Gas Service in the Western U. S. among Mid-Sized
2 Utili ties in a Tie." Avista' s score of 654 placed the
3 Company highest in the segment, tied wi th Boise~based
4 Intermountain Gas Company. The segment average score on
5 this study was 629.The study surveys customer
6 satisfaction across a number of factors, including billing
7 and payment, price, corporate citizenship, communications,
8 customer service and field service.
9 I believe we achieved this award because the Company
10 has been listening closely and doing the right things to
11 serve our customers well, as affirmed by the J. D. Power and
12 Associates 2010 study. Achieving the highest ranking was a
13 wonderful recognition of our dedicated employees who are
14 making the difference.
15 VIII. CUSTOMER SUPPORT PROGRAS
16 Q.What is Avista doing to assist customers with
17 their energy bills?
18
19
A.More than 600,000 customers in three states rely
on Avista for their electricity and natural gas.One of
20 the challenging aspects of the utility business is to
21 address the needs of those least able to pay. In the past
22 two years, this challenge has broadened with the serious
23 economic impact the national recession has had on
24 individuals and businesses. Federal energy assistance for
25 those in need is supplemented with Project Share, an
Morris, Di 27
Avista Corporation
1 emergency energy assistance program funded through Avista,
2 its employees and customer donations.
3 But one-time, annual grants alone are not enough to
4 meet the long-term challenges faced by those living on
5 limited incomes.In 2010 Avista initiated and hosted two
6 Energy Fairs one in Coeur d' Alene, Idaho and one in
7 Spokane, Washington. The fairs provided information and
8 demonstrations on energy assistance, energy efficiency and
9 home weatherization to limited income families and senior
10 citizens. But the fairs went beyond the focus of helping
11 customers pay their utility bill.They provided an
12 opportunity for attendees to learn about employment
13 opportuni ties, earned income tax credits,child care
14 options, community college offerings and other community
15
16
resources. Nearly 700 people attended the two fairs.The
Energy Fairs provided a convenient environment for
17 customers to learn about billing options and energy
18 assistance, while offering them tips and tools to use to
19 help manage their limited financial resources.
20 In the 2009/2010 heating season 10,297 Idaho customers
21 received approximately $3.7 million in various forms of
22 energy assistance (Federal LIHEAP program, Project Share,
23 and local community funds).Some of the key programs that
24 we offer or support are as follows:
25 1. Project Share. Project Share is a voluntary26 program allowing customers to donate funds that are
Morris, Di 28
Avista Corporation
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
distributed through community action agencies to
customers in need. In addition to the customer
contributions in 2010 of $316,600 (system), the
Company also contributed $126,227 (Idaho's share)
to the program.
2. Comfort Level Billing. The Company offers the
option for all customers to pay the same bill
amount each month of the year by averaging their
annual usage. Under this program, customers can
avoid unpredictable winter heating bills.
3. CAS Program. Customer Assistance Referral and
Evaluation Services provides assistance to special-
needs customers through access to specially trained
(CARES) representatives who provide referrals to
area agencies and churches for help with housing,
utili ties, medical assistance, etc.
4. Increased Demnd-Side Management (DSM) Programs and
Funding. In January 2009 Avista proposed, and the
IPUC approved, modifications to the Company's
energy efficiency program offerings. The
modifications further broadened the DSM technical
and financial support Avista provides to its
customers, and provides customers with increased
opportunity to manage their energy bills. In 2008
Avista also launched the award-winning ~Every
Li ttle Bit" energy efficiency promotional campaign
which integrates all of the Company's energy
efficiency programs into one location.
These programs and the partnerships we have formed
34 with community action agencies have been invaluable to
35 customers who often have nowhere else to go for help.
36 Company witness Mr. Kopczynski provides additional detail
37 in his testimony concerning these and other programs
38 designed to assist customers.
Morris, Di 29
Avista Corporation
1
2
ix. OTHER COMPAN WITNSSES
Q.Would you please provide a brief sumry of the
3 testimony of the other witnesses representing Avista in
4 this proceeding?
5 A.Yes.The following additional witnesses are
6 presenting direct testimony on behalf of Avista:
7 Mr. Mark Thies, Senior Vice President and Chief
8 Financial Officer will provide, among other things, a
9 financial overview of the Company and will explain the
10 overall rate of return proposed by the Company in this
11 filing for its electric and natural gas operations.The
12 proposed rate of return is derived from Avista's total cost
13 of long-term debt and common equity, weighted in proportion
14 to the proposed capital structure. He will address the
15 proposed capital structure, as well as the proposed cost of
16 debt and equity in this filing.
17 In brief, he will provide information that shows:
18 . Avista' s plans call for significant capital19 expenditure requirements for the utility over the20 next two years to assure reliability in serving
21 our customers and meeting customer growth.
22 Capital expenditures of approximately $48223 million are planned for 2011-2012 for customer24 growth, investment in generation upgrades and25 transmission and distribution facilities, as well
26 as necessary maintenance and replacements of our27 natural gas utili ty systems. Capi tal28 expenditures of approximately $1.2 billion29 (excluding forecasted wind expenditures), are30 planned for the five-year period ending December
31 31, 2015. Avista needs adequate cash flow from32 operations to fund these requirements, together
Morris, Di 30
Avista Corporation
1 wi th access to capital from external sources
2 under reasonable terms.
3
4 . Avista' s corporate credit rating from Standard &
5 Poor's (S&P) is currently BBB and Baa2 from
6 Moody's Investors Service (Moody's). Avista must7 operate at a level that will support a solid
8 investment grade corporate credit rating, of BBB
9 on a short-term basis and BBB+ as a long-term10 goal, in order to access capital markets at11 reasonable rates, which will decrease long-term
12 borrowing costs to customers. In March 2011, S&P13 upgraded Avista' s Corporate Credit Rating to BBB
14 from BBB- and Moody's upgraded Avista's Issuer15 Rating to Baa2 from Baa3. A supportive regulatory16 environment is an important consideration by the17 rating agencies when reviewing Avista.18 Maintaining solid credit metrics and credit19 ratings will also help support a stock price20 necessary to issue equity under reasonable terms21 to fund capital requirements.
22
23 . The Company is proposing an overall rate of24 return of 8.49%, including a 50.15% equity ratio25 and a 10.90% return on equity. Our proforma cost26 of debt is 6.05%.
27
2829 Dr. William E. Avera, as President of Financial
30 Concepts and Applications (FINCAP), Inc., has been retained
31 to present testimony with respect to the Company's cost of
32 common equity. He concludes that:
33
34
35
36
37
38
39
40
41
42
43
44
. In order to reflect the risks and prospectsassociated with Avista's jurisdictional utility
operations, his analyses focused on a proxy group
of twenty-eight other utili ties with comparable
investment risks. Consistent with the fact thatutili ties must compete for capital with firms
outside their own industry, he also referenced a
proxy group of comparable risk companies in the
non-utili ty sector of the economy;
. Because investors' required return on equity is
unobservable and no single method should be viewed
in isolation, he applied both the DCF and CAPM
Morris, Di 31
Avista Corporation
1 methods, as well as the expected earnings approach,
2 to estimate a fair ROE for Avista;
3 . Based on the results of these analyses, and giving
4 less weight to extremes at the high and low ends of
5 the range, he concluded that the cost of equity for6 the proxy groups of utilities and non-utility
7 companies is in the 10.3 percent to 11. 3 percent
8 range, or 10.45 percent to 11.45 percent after
9 incorporating an adjustment to account for the10 impact of common equity flotation costs; and,
11 . As reflected in the testimony of Mr. Thies, Avista
12 is requesting a fair ROE of 10.9 percent, which is13 essentially equal to the midpoint of his
14 recommended range. Considering capital market15 expectations, the exposures faced by Avista, and
16 the economic requirements necessary to maintain17 financial integrity and support additional capital18 investment even under adverse circumstances, it is19 his opinion that 10.9 percent represents a fair and
20 reasonable ROE for Avista.
21
22 Mr. Robert Lafferty, Director of Power Supply, will
23 provide an overview of Avista's resource planning and power
24 supply operations.This includes summaries of the
25 Company's generation resources, the current and future load
26 and resource position, future resource plans, and an update
27 on the Company's plans regarding the acquisition of new
28 renewable resources.As part of an overview of the
29 Company's risk management policy, he will provide an update
30 on the Company's hedging practices.He will address
31 hydroelectric and thermal project upgrades, followed by an
32 update on recent developments regarding hydro licensing.
33 Mr. Clint Kalich, Manager of Resource Planning & Power
34 Supply Analyses, will describe the Company's use of the
35 AURORAXMP dispatch model, or ~Dispatch Model."He will
Morris, Di 32
Avista Corporation
1 explain the key assumptions driving the Dispatch Model's
2 market forecast of electricity prices.The discussion
3 includes the variables of natural gas, Western Interconnect
4 loads and resources, and hydroelectric conditions. He will
5 also describe how the model dispatches its resources and
6 contracts to maximize customer benefit and tracks their
7 values for use in pro forma calculations. Finally, he will
8 present the modeling results provided to Company witness
9 Mr. Johnson for his power supply pro forma adjustment
10 calculations.
11 Mr. William Johnson, Wholesale Marketing Manager, will
12 1) identify and explain the proposed normalizing and pro
13 forma adjustments to the January 2010 through December 2010
14 test period power supply revenues and expenses, and 2)
15 describe the proposed level of expense and retail revenue
16 credit for the Power Cost Adjustment (PCA) purposes, using
17 the pro forma costs proposed by the Company in this filing.
18 His testimony also shows the change in power supply expense
19 incorporating the Energy Efficiency Load Adjustment
20 proposed by the Company in this case.
21 Mr. Kevin Christie, Director of Gas Supply, will
22 describe Avista's natural gas procurement planning process,
23 provide an overview of the Jackson Prairie natural gas
24 storage facility, and discuss how the Company uses Jackson
25 Prairie for balancing on behalf of our Local Distribution
26 Company (LDC) customers.
Morris, Di 33
Avista Corporation
1 Mr.Don Kopczynski,Vice President of Customer
2 Solutions, will describe Avista's electric and natural gas
3 energy delivery facilities and operations, and recent
4 efforts to increase efficiency and improve customer
5 service. Mr. Kopczynski describes:
6 . Avista' s customer service programs such as energy
7 efficiency, Project Share, CARES program, Senior8 Outreach Program, and payment plans. Some of
9 these programs will serve to mitigate the impact10 on customers of the proposed rate increase.
11 . The Company's multi-faceted effort to increase12 customer service automation, including
13 replacement and upgrade of the new Enterprise
14 Voice Portal (EVP) system.
15
16 Mr. Scott Kinney, Director, Transmission Operations,
17 will discuss the electric transmission and distribution
18 capital investments included in this case, and presents the
19 Company's pro forma period transmission revenues and
20 expenses.In addition, he describes the Company's Asset
21 Management Program (including the additional vegetation
22 management expenses included in the Company's case).
23 Ms.Elizabeth Andrews,Manager of Revenue
24 Requirements, will generally cover accounting and financial
25 data in support of the Company's need for the proposed
26 increase in rates.She will explain pro formed operating
27 results, including expense and rate base adjustments made
28 to actual operating results and rate base.She
29 incorporates the Idaho share of the proposed adjustments of
30 other witnesses in this case.In addition, she will
Morris, Di 34
Avista Corporation
1 explain the Company's request for deferred accounting
2 treatment of changes in generating plant operation and
3 maintenance (O&M) costs related to its Coyote Springs 2
4 combined-cycle natural gas-fired plant and its 15%
5 ownership share of the Colstrip 3 & 4 coal-fired generating
6 plants.
7 Mr. Dave DeFelice, Senior Business Analyst, will cover
8 the Company's proposed restating and pro forma adj ustments
9 for capital investments in utility plant for the 2010 test
10 period. Mr. DeFelice explains:
11 . The rising cost of essential materials specific12 to the utility industry is causing significant13 increases in capi tal proj ect funding14 requirements.
15 . These costs must be pro formed into the test-year16 in order to allow necessary recovery of our costs17 to serve customers.
1819 Ms. Tara Knox, Senior Regulatory Analyst, sponsors the
20 Company's electric and natural gas cost of service studies
21
22
performed for this proceeding.Addi tionally, she is
sponsoring the electric and natural gas revenue
23 normalization adjustments to the test year results of
24 operations and the proposed Load Change Adjustment Rate
25 (LCAR) to be used in the Power Cost Adjustment (PCA). Ms.
26 Knox's studies indicate:
27
28
29
30
31
32
. The electric residential service, extra large
general service, pumping service, and the street
and area lighting service schedules are earning
less than the overall rate of return under
present rates, while general service, large
general service and extra large general service
Morris, Di 35
Avista Corporation
1
2
3
4
5
6
7
8
9
10
11
12
13
to Clearwater Paper schedules are earning more
than the overall rate of return under presentrates.
. The natural gas general service schedule is
earning slightly less than the overall rate of
return at present rates, and large general
service, interruptible, and transportation
service schedules are earning slightly more than
the overall rate of return at present rates.
Mr. Patrick Ehrbar, Manager of Rates and Tariffs,
14 discusses the spread of the proposed annual revenue changes
15 among the Company's general service schedules as well as
16 the proposed rate design wi thin each schedule.He
17 explains, among other things, that:
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
. The proposed increase in electric base rates is
3.7%, which consists of an increase in electricbase retail revenues of $ 9.0 million.
. The monthly bill for a residential customer
using an average of 956 kWhs per month would
increase from $83.81 to $86.87 per month, an
increase of $3.06 or 3.7%. This includes the
proposed increase in the monthly basic orcustomer charge from $5.00 to $5.50.
. The proposed natural gas annual revenue increase
in base rates is $1.9 million, or 2.7%.
. The monthly bill for a residential customer
using 62 therms per month would increase from
$60.76 to $62.91 per month, an increase of $2.15or 3.5%. This includes the proposed increase in
the monthly basic or customer charge from $4.00
to $4.50.
In addition, he will provide further information
40 related to the Company's proposed Energy Efficiency Load
41 Adj ustment.
Morris, Di 36
Avista Corporation
1,Q.
2 testimony?
3 A.
Does
Yes.
this conclude your pre-filed direct
Morris, Di 37
Avista Corporation
DAVID J. MEYER
VICE PRESIDENT AND CHIEF COUNSEL FOR
REGULATORY & GOVERNMENTAL AFFAIRS
AVISTA CORPORATION
P . O. BOX 3727
1411 EAST MISSION AVENUE
SPOKANE, WASHINGTON 99220-3727
TELEPHONE: [phone]
FACSIMILE: [phone]
DAVID. MEYERØAVISTACORP. COM
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-11-01
CASE NO. AVU-G-11-01
EXHIBIT NO. 1
SCOTT L. MORRIS
FOR AVISTA CORPORATION
(ELECTRIC AND NATURAL GAS)
A
v
i
s
t
a

C
o
r
p
o
r
a
t
i
o
n

O
v
e
r
v
i
e
w
Av
i
s
t
a

C
o
r
p
o
r
a
t
e

B
u
s
i
n
e
s
s

O
r
g
a
n
i
z
a
t
i
o
n
a
l

S
t
r
u
c
t
u
r
e
.J
~
~
'
V
'
S
T
A
*
I
C
o
r
p
.
I
_
_

I
..
n
n
S
T
A
'
Ut
l
i
t
e
s
AV
'
S
T
A
Ca
p
i
t
a
l
ad
v
a
n
t
a
g
e
'
"
/w

C
o
r

I
s

t
h

p
a
r
e

c
o

f
O
f

a
l
co

b
u
.
Av
l
s

l
I
i
t
,

a
n

o
p

d
i
i
s
i
o

o
f

A
v
l
s
Co
.
,

i
n
c
d
e
s

t
h

r
e

b
u
i
n
e
,
se
l
n

c
u
s

i
n

W
a
l
n

I
d
a
h
o

a
n
Or
n
.
Av
i

C
a
I
s

t
h

p
a

c
o

o
f

a
l
l1
u
l

s
u
b
s
l
d
l
a
.

A
v
l
s

C
a
p
l
l
s

a
wh

o
w

s
u
l

o
f

A
v
l
s

C
o
Ot
e
r
Ex
h
ì
b
ì
t

N
o
,
1
Ca
s
e

N
o
.

A

V
U
-
E
-
I
I
-
0
l

&

A
V
U
-
G
-
I
I
-
0
l
S.

M
o
m
s
,

A
v
ì
s
t
a
Pa
g
e

1

o
f
2
Av
i
s
t
a
'
s

E
l
e
c
t
r
i
c

a
n
d

N
a
t
u
r
a
l

G
a
s

S
e
r
v
i
c
e

A
r
e
a
s
Ex
h
i
b
i
t

N
O
.
1
Ca
s
e

N
o
.

A

V
U
-
E
-
1
1
-
0
1

&

A
V
U
-
G
-
l
l
-
O
l
s.

M
o
r
r
s
,

A
v
i
s
t
a
Pa
g
e

2

o
f
2