20170609Johnson Direct.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]
[e-mail]

BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION

IN THE MATTER OF THE APPLICATION ) CASE NO. AVU-E-17-01
OF AVISTA CORPORATION FOR THE )
AUTHORITY TO INCREASE ITS RATES )
AND CHARGES FOR ELECTRIC AND )
NATURAL GAS SERVICE TO ELECTRIC ) DIRECT TESTIMONY
AND NATURAL GAS CUSTOMERS IN THE ) OF
IN THE STATE OF IDAHO ) WILLIAM G. JOHNSON
)

FOR AVISTA CORPORATION

(ELECTRIC ONLY)

Johnson, Di 1
Avista Corporation
I. INTRODUCTION 1
Q. Please state your name, business address, and 2
present position with Avista Corporation. 3
A. My name is William G. Johnson. My business address
is 1411 East Mission Avenue, Spokane, Washington, and I am
employed by the Company as a Wholesale Marketing Manager in
the Energy Resources Department.
Q. What is your educational background? 8
A. I graduated from the University of Montana in 1981
with a Bachelor of Arts Degree in Political
Science/Economics. I obtained a Master of Arts Degree in
Economics from the University of Montana in 1985.
Q. How long have you been employed by the Company and 13
what are your duties as a Wholesale Marketing Manager? 14
A. I started working for Avista in April 1990 as a
Demand Side Resource Analyst. I joined the Energy Resources
Department as a Power Contracts Analyst in June 1996. My
primary responsibilities involve power contract origination
and management, and power supply regulatory issues.
Q. What is the scope of your testimony in this 20
proceeding? 21
A. My testimony will 1) identify and explain the
proposed normalizing and pro forma adjustments to the 2016
Johnson, Di 2
Avista Corporation
test period power supply revenues and expenses, and 2)
describe the proposed level of expense and Load Change
Adjustment Rate (LCAR) for Power Cost Adjustment (PCA)
purposes, using the pro forma costs proposed by the Company
in this filing.
Q. Are you sponsoring any exhibits to be introduced in 6
this proceeding? 7
A. Yes. I am sponsoring Exhibit No. 6, Schedules 1
through 4, which were prepared by me. Exhibit No. 6,
Schedule 1 identifies the power supply expense and revenue
items that fall within the scope of my testimony. A brief
description of each adjustment is provided in Exhibit No. 6,
Schedule 2. Exhibit No. 6, Schedule 3 shows the pro forma
fuel costs for each thermal plant and short-term purchases
and sales by month. The proposed authorized PCA power supply
expense and revenue, transmission expense and revenue, retail
sales and LCAR are shown in Exhibit No. 6, Schedule 4.
Q. Are there other Company witnesses providing 18
testimony regarding issues you are addressing? 19
A. Yes. Company witness Mr. Kalich provides detailed
testimony on the AURORA model used by the Company to develop
short-term power purchase expense, fuel expense and short-
term power sales revenue included in my exhibits.
Johnson, Di 3
Avista Corporation
II. OVERVIEW OF PRO FORMA POWER SUPPLY ADJUSTMENT 1
Q. Please provide an overview of the pro forma power 2
supply adjustment. 3
A. The pro forma power supply adjustment involves the
determination of revenues and expenses based on the
generation and dispatch of Company resources and expected
wholesale market power prices as determined by the AURORA
model simulation for the pro forma rate period (calendar year
2018) under normal weather and hydro generation conditions.
In addition, adjustments are made to reflect contract changes
between the historical test period and the 2018 pro forma
period. Table No. 1 below shows total net power supply
expense during the test period and the pro forma period. For
information purposes only, the power supply expense1 currently
in base retail rates, which is based on a calendar 2017 pro
forma period, is also shown.

1 For the remainder of my testimony, for purposes of the power supply
adjustment I will refer to the net of power supply revenues and expenses
as power supply expense for ease of reference.
Johnson, Di 4
Avista Corporation
Idaho
System Allocation
Power Supply Expense in Current Rates (2017 pro forma)$155,334,000 $53,388,296
Actual 2016 Test Period Power Supply Expense $134,524,000 $45,951,615
Proposed 2018 Pro forma Power Supply Expense $161,230,000 $55,253,521
Proposed 2018 Expense vs 2016 Test Period $26,706,000 $9,301,906
Proposed 2018 Expense vs Current Rates $5,896,000 $1,865,225
Power Supply Expense
Table No. 1: 1
2
3
4
5
6
7
The net effect of my adjustments to the test year power
supply expense is an increase in 2018 of $26,706,000
($161,230,000 - $134,524,000) on a system basis and
$9,301,906 Idaho allocation.
The increased expense in 2018 from the level in current
base rates is $1,865,225 (Idaho share). This increase in
power supply expense was higher primarily due to lower net
spot market sales resulting from less favorable economic
operating conditions for the Company’s gas-fired resources.

III. PRO FORMA POWER SUPPLY ADJUSTMENTS 18
Q. Please identify the specific power supply cost 19
items that are covered by your testimony and the total 20
adjustment being proposed. 21
Johnson, Di 5
Avista Corporation
A. Exhibit No. 6, Schedule 1 identifies the power
supply expense and revenue items that fall within the scope
of my testimony. These revenue and expense items are related
to power purchases and sales, fuel expenses, transmission
expense, and other miscellaneous power supply expenses and
revenues.
Q. What is the basis for the adjustments to the test 7
period power supply revenues and expenses? 8
A. The purpose of the adjustments to the test period
is to normalize power supply expenses for normal weather and
normal hydroelectric generation and to reflect current
forward natural gas prices using the AURORA model and include
other known and measurable changes for the 2018 pro forma
period.
A brief description of each adjustment is provided in
Exhibit No. 6, Schedule 2. Detailed workpapers have been
provided to the Commission with this filing to support each
of the pro forma revenues and expenses. The detailed
workpapers for each adjustment show the actual revenue or
expense in the test period, and the pro forma revenue or
expense.
Johnson, Di 6
Avista Corporation
Long-Term Contracts 1
Q. How are long-term power contracts included in the 2
pro forma? 3
A. Long-term power contracts are included in the pro
forma by including the energy receipt or obligation
associated with the contract in the AURORA Model and
including the cost or revenue in the pro forma net power
supply expense.
Q. Are there any new long-term power purchases or 9
sales in the pro forma that are not in current base rates?
A. Yes. The Company has entered into a new contract
with Douglas County PUD for a share of the output of the
Wells hydroelectric project. The contract begins September
2018, after the expiration of the existing Wells contract,
and continues through September 2028.
Q. Are there any long-term power purchases or sales 16
that are in current base rates but not in this pro forma? 17
A. Yes. Two contracts end before or during the pro
forma period. The Douglas Settlement contract ends August
31, 2018. The Nichols Pumping contract ends October 31,
2018.
Johnson, Di 7
Avista Corporation
Short-Term Power Purchases and Sales 1
Q. How are short-term transactions included in the pro 2
forma? 3
A. Short-term electric power purchases and sales are
an output of the AURORA model. The model calculates both the
volumes and price of short-term purchases and sales that
balance the system’s generation and long-term purchases with
retail load and other obligations. The price of the short-
term transactions represents the price of spot market power
as determined by the AURORA model.
Q. What actual forward short-term transactions are 11
included in the pro forma? 12
A. Consistent with past general rate cases, the pro
forma does not include actual short-term fixed-price
transactions entered into for the 2018 pro forma period.
Thermal Fuel Expense 16
Q. How are thermal fuel expenses determined in the pro 17
forma? 18
A. Thermal fuel expenses include Colstrip coal costs,
Kettle Falls wood-waste costs, and natural gas expense for
the Company’s gas-fired resources including Coyote Springs 2,
Lancaster, Rathdrum, Northeast, Boulder Park, and the Kettle
Falls combustion turbine. Unit coal costs at Colstrip are
Johnson, Di 8
Avista Corporation
based on the long-term coal supply and transportation
agreements. Unit wood fuel costs at Kettle Falls are based
on multiple shorter-term contracts with fuel suppliers and
inventory. Total fuel costs for each plant are based on the
unit fuel cost and the plant’s level of generation as 5
determined by the AURORA model.
Exhibit No. 6, Schedule 3 shows the pro forma fuel costs
by month for each plant. Mr. Kalich provides details and
supporting workpapers regarding the level of generation for
the Company’s thermal plants, and the fuel cost for natural
gas-fired plants.
Transmission Expense 12
Q. What changes in transmission expense are in the pro 13
forma compared to the test-year and the expense in current 14
base rates? 15
A. The only change is an increase of 9 MW of BPA
point-to-point transmission purchased.
Summary 18
Q. Please summarize your proposed pro forma power 19
supply expense that is provided to Company witness Ms. 20
Andrews for the Company’s electric Pro Forma study. 21
A. The net effect of my adjustments to the test year
power supply expense is an increase in 2018 of $26,706,000
Johnson, Di 9
Avista Corporation
($161,230,000 - $134,524,000) on a system basis and
$9,301,906 Idaho allocation. The increased expense in 2018
from the level in current base rates is $1,865,225 (Idaho
share).
5
IV. PCA AUTHORIZED VALUES 6
Q. What is Avista’s proposed authorized power supply 7
expense and revenue for the PCA? 8
A. The proposed authorized level of annual system
power supply expense is $145,045,600 for the 2018 pro forma.
This is the sum of Accounts 555 (Purchased Power), 501
(Thermal Fuel), 547 (Fuel), less Account 447 (Sale for
Resale). It also includes transmission expense and
transmission revenue. The proposed level of net Renewable
Energy Credits (REC) revenue is also included in the total
authorized net expense.
Q. What is the level of retail sales and the proposed 17
Load Change Adjustment Rate for the PCA? 18
A. The proposed authorized level of retail sales to be
used in the PCA is 2016 weather adjusted Idaho retail sales.2
The proposed Load Change Adjustment Rate is $24.89/MWh for

2 The historical loads also include a pro forma adjustment as explained by
Company witnesses Mr. Kalich and Ms. Knox.
Johnson, Di 10
Avista Corporation
the 2018 pro forma period3, which is the energy related
portion of the average production and transmission cost.
The proposed authorized PCA power supply expense and
revenue, transmission expense and revenue, REC revenues, Load
Change Adjustment Rate and retail sales are shown in Exhibit
No. 6, Schedule 4.
Q. Does that conclude your pre-filed direct testimony? 7
A. Yes.

3 Also shown on Exhibit No. 6, Schedule 4 is the proposed 2019 Load Change
Adjustment Rate of $25.34/MWh, which includes the impact of production and
transmission costs for the 2019 Rate Year as pro formed by Ms. Andrews.
The Company is not proposing to update power supply costs or the PCA base
effective with the 2019 electric base rate change January 1, 2019.