20160125reconsideration_order_no_33455.pdf

Office of the Secretary
Service Date
January 25,2016
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION )
OF AVISTA CORPORATION DBA AVISTA )CASE NOS.AVU-E-15-05
UTILITIES FOR AUTHORITY TO )AVU-G-15-O1
INCREASE ITS RATES AND CHARGES FOR )
ELECTRIC AND NATURAL GAS SERVICE )ORDER NO.33455
IN IDAHO )
On December 18,2015,the Commission issued final Order No.33437 approving the
settlement of Avista’s rate case.On December 28,2015,Avista customer Craig Kerwin filed a
timely Petition for Reconsideration requesting that the Commission reconsider Order No.33437.
Mr.Kerwin asserts that the approved $1.7 million increase in electric rates,and the $2.5 million
increase in natural gas rates are attributable to “inflated”executive compensation,to which he
objects.Petition at 1.He specifically inquired as to how much of the approved settlement “goes
to salaries for the management”of Avista.
Avista filed a timely answer urging the Commission to deny reconsideration.Avista
claims that contrary to Mr.Kerwin’s allegation,executive compensation was specifically
addressed in the settlement.Avista points out that the settlement removes all officer incentive
pay from the approved rates.Answer at 2,citing Stipulation and Settlement at §7(h)-9(h).The
utility notes that there has been no increase in the base pay for Avista executives since 2011,and
that the settlement does not approve an increase in executive base pay for 2016.The Company
concludes by quoting the Commission that “[t]he settlement represents a reasonable compromise
of the positions held by the parties and reflects a significant reduction in the requested revenue
increase.”Id.,quoting Order No.33437 at 10.
Based upon our review of the Petition for Reconsideration,Avista’s answer and our
record,we deny reconsideration as set out in greater detail below.
BACKGROUND
On June 1,2015,Avista Corporation dba Avista Utilities applied to increase its
general rates for electric and natural gas service.The Company originally proposed a two-phase
rate plan that would increase electric billed revenues by $26.9 million over two years effective
January 1,2016,and increase natural gas billed revenues by $4.9 million effective January 1,
2016.
ORDER NO.33455 1
In September and October 2015,the Company,Commission Staff,Community
Action Partnership Association of Idaho,Clearwater Paper,Idaho Conservation League,Idaho
Forest Group,and Snake River Alliance (the “Parties”)engaged in extensive settlement
negotiations.The Parties eventually agreed to a full settlement.On October 19,2015,the
Company and Commission Staff requested that the Commission approve a Stipulation and
Settlement that had been entered into by all Parties.See Motion for Approval of Stipulation and
Settlement.On October 20,2015,the Commission issued a Notice of Proposed Settlement
soliciting comments on the proposed settlement.The Commission received one customer
comment expressing support generally for the settlement.The Commission approved the
settlement on December 1$,2015.
ISSUES ON RECONSIDERATION
A.Legal Standards
Reconsideration provides an opportunity for a party to bring to the Commission’s
attention any question previously determined and thereby affords the Commission with an
opportunity to rectify any mistake or omission.Washington Water Power Co.V.Kootenai
Environmental Alliance,99 Idaho 875,879,591 P.2d 122,126 (1979).The Commission may
grant reconsideration by reviewing the existing record,by written briefs,or by evidentiary
hearing.Rule 332,IDAPA 31.01.01.332.If reconsideration is granted,the Commission must
complete its reconsideration within 13 weeks after the deadline for filing petitions for
reconsideration.Idaho Code §61-626(2).
Consistent with the purpose of reconsideration,the Commission’s Procedural Rules
require that petitions for reconsideration “set forth specifically the ground or grounds why the
petitioner contends that the order or any issue decided in the order is unreasonable,unlawful,
erroneous or not in conformity with the law.”Rule 331.01,IDAPA 31.01.01.331.01.Rule 331
further requires that the petitioner provide a “statement of the nature and quantity of evidence or
argument the petitioner will offer if reconsideration is granted.”Id.
B.Executive Compensation
At the outset of his Petition,Mr.Kerwin asserts that Avista management should
“forego salary increases for a while ...to pass [savings to its customers].”Id.Mr.Kerwin’s
Petition mirrors concerns addressed in his July 10,2015,written comments to the Commission.
Kerwin also objects to the Company’s handling of recent weather-related outages and points to
ORDER NO.33455 2
that as evidence of poor management for which the executives should not be rewarded through
“pay increases above operating costs.”Id.
Avista responds that executive compensation was specifically addressed in the
settlement,and that “by its express terms,[the Settlement]removed all officer incentive pay
from the approved rates.”Answer at 2.Avista states that the settlement contemplates officer
compensation based on existing salary levels as of March of 2015,with no increase for 2016.Id.
COMMISSION FINDINGS AND CONCLUSIONS
As set out in the Parties’settlement and explained in Avista’s reply,the amount of
executive compensation paid by ratepayers will not increase.Stipulation and Settlement at 4-6.
Rather,the settlement reflects the Parties’mutual agreement to restrict incentive compensation
for Avista executives to 2011 levels.In other words,the settlement precludes executives from
getting a salary increase at ratepayer expense as a result of the settlement—exactly what Mr.
Kerwin requested.In fact,in addition to no increase in executive compensation borne by
ratepayers,the settlement also achieved a reduction of $100,000 in non-officer incentives,when
compared to the Company’s original request.Settlement at 4.Accordingly,we are not persuaded
that the settlement is unreasonable,unlawful,erroneous or not in conformity with the law.
Therefore,we deny reconsideration.
We further find that the Parties negotiated in good faith,participated in extensive
discovery,including audits,and independent staff review.The Parties all ultimately agreed to
compromised positions including consideration of executive compensation.The Parties agreed
to a settlement because of a belief that the settlement achieved a better outcome than what might
be gained through hearing.We affirm that the settlement is fair,just,reasonable and in the
public interest.
ORDER
IT IS HEREBY ORDERED that the Petition for Reconsideration is denied.
THIS IS A FINAL ORDER ON RECONSIDERATION.Any party aggrieved by this
Order may appeal to the Supreme Court of Idaho pursuant to the Public Utilities Law and the
Idaho Appellate Rules.See Idaho Code §6 1-627.
ORDERNO.33455 3
DONE by Order of the Idaho Public Utilities Commission at Boise,Idaho this
day of January 2016.
PAUL KJE LANDE&J PRESIDENT
Rf’J\
KRIST RAPER,COMMIS lONER
Commissioner Anderson did not participate in this case
ERIC ANDERSON,COMMISSIONER
ATTEST:
J%ewe11
mmission Secretary
O:AVU-E-I 5-O5AVU-G-1 5-0 Ibk3
ORDER NO.33455 4