20170609Morris 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 ) CASE NO. AVU-G-17-01
AUTHORITY TO INCREASE ITS RATES )
AND CHARGES FOR ELECTRIC AND )
NATURAL GAS SERVICE TO ELECTRIC ) DIRECT TESTIMONY
AND NATURAL GAS CUSTOMERS IN THE ) OF
STATE OF IDAHO ) SCOTT L. MORRIS
)

FOR AVISTA CORPORATION

(ELECTRIC AND NATURAL GAS)

Morris, Di 1
Avista Corporation
I. INTRODUCTION 1
Q. Please state your name, employer and business 2
address. 3
A. My name is Scott L. Morris and I am employed as
the Chairman of the Board, President and Chief Executive
Officer of Avista Corporation (Company or Avista), at 1411
East Mission Avenue, Spokane, Washington.
Q. Would you please briefly describe your educational 8
background and professional experience? 9
A. Yes. I am a graduate of Gonzaga University with
a Bachelors degree and a Masters degree in organizational
leadership. I have also attended the Kidder Peabody School
of Financial Management. 13
I joined the Company in 1981 and have served in a number
of roles including customer service manager. In 1991, I was
appointed general manager for Avista Utilities’ Oregon and 16
California natural gas utility business. I was appointed
President and General Manager of Avista Utilities, an
operating division of Avista Corporation, in August 2000.
In February 2003, I was appointed Senior Vice-President of
Avista Corporation, and in May 2006, I was appointed as
President and Chief Operating Officer. Effective January 1,
2008, I assumed the position of Chairman of the Board,
President, and Chief Executive Officer.
Morris, Di 2
Avista Corporation
I am a member of the Edison Electric Institute board of
directors, a member of the American Gas Association board of
directors, a member of the Washington Roundtable, and I also
serve on the board of trustees of Greater Spokane
Incorporated. I am also on the board of directors of the
Federal Reserve Bank of San Francisco, Seattle Branch, and
Gonzaga University board of trustees and I currently serve
as Chair for both organizations.
Q. What is the scope of your testimony in this 9
proceeding? 10
A. I will summarize the Company’s proposal in this
filing for a Two-Year Rate Plan, and general rate case “stay-
out” period. I will explain why there is a continuing need
for retail rate increases, not just for Avista, but for the
electric and natural gas utility industry in general. I will
address our continuing capital investments, and how they are
designed to accomplish, and balance, three primary
objectives: 1) provide safe, reliable service; 2) achieve high
customer satisfaction; and 3) maintain a reasonable cost to
customers. I will also briefly explain the Company's customer
support programs in place to assist our customers. Finally,
I will introduce each of the other witnesses providing
testimony on the Company’s behalf.
Morris, Di 3
Avista Corporation
A table of contents for my testimony is as follows:
Description Page
I. Introduction 1
II. Summary of Rate Requests 3
III. Why the Continuing Need for Retail Rate Increases 9
IV. Need for Continuing Capital Investments 19
V. O&M and A&G Cost Management 38
VI. Utility into the Future 41
VII. Communications with Customers 43
10
Q. Are you sponsoring an Exhibit in this proceeding? 11
A. Yes. I am sponsoring Exhibit No. 1 which is
comprised of four schedules. Schedule 1 includes a summary
of witnesses representing Avista in this proceeding,
Schedule 2 is Avista Utilities’ “Infrastructure Investment 15
Plan,” Schedule 3 includes an overview of Avista and its
utility and subsidiary operations, as well as a diagram of
Avista’s corporate structure, and finally, Schedule 4
includes a map showing Avista’s electric and natural gas
service areas.

II. SUMMARY OF RATE REQUESTS 22
Q. Would you please summarize the Company’s proposal 23
for a Two-Year Rate Plan included in this electric and 24
natural gas general rate case filing?
Morris, Di 4
Avista Corporation
A. Yes. In this filing, the Company is proposing a
Two-Year Rate Plan, which would begin with new rates
effective January 1, 2018 and January 1, 2019. The Company
is proposing a Two-Year Rate Plan, to once again, avoid
annual rate cases in its Idaho jurisdiction, providing
benefits to all stakeholders.
A Two-Year Rate Plan, with increases in 2018 and 2019,
would provide benefits to its customers by providing some
level of rate certainty over this two-year period; relief to
all stakeholders – customers, the Commission and its Staff,
intervenors, and the Company - from the administrative
burdens and costs of litigation of annual general rate cases;
and to Avista by providing a two-year window to manage its
business in order to achieve a fair rate of return within
known price changes.1
Q. What are the primary factors driving the Company’s 16
need for its requested electric and natural gas increases in 17
2018 and 2019?

1 The Two-Year Rate Plan would not preclude tariff filings authorized by
or contemplated by the terms of the Power Cost Adjustment (PCA),
Purchased Gas Adjustment (PGA), Public Purpose Rider Adjustment (DSM)
or similar adjustments. The Company is proposing that the Two-Year Rate
Plan also not preclude the Company from filing for rate relief or
accounting treatment for major changes in costs not reflected in this
filing, such as the potential costs associated with participation in the
Energy Imbalance Market, or new safety or reliability requirements
imposed by regulatory agencies. Following a filing by the Company, all
interested parties would have an opportunity to respond to the Company’s
filing and make recommendations to the Commission, with the Commission
ultimately deciding the outcome of the filing.
Morris, Di 5
Avista Corporation
A. The primary factor driving the Company’s electric
and natural gas revenue increase requests in 2018 and 2019
is an increase in net plant investment from currently
authorized. For 2018, there is also a net increase in power
supply expenses. A reduction in usage for two electric rate
groups has also contributed to the need for a revenue
increase.
There is a slight decrease in distribution, operation
and maintenance (O&M), and administrative and general (A&G)
expenses for both electric and natural gas operations,
compared to current authorized levels.
Q. Please provide an overview of Avista’s 2018 and 12
2019 electric rate requests in this filing. 13
A. For 2018, Avista is proposing an overall increase
in electric base revenues of $18.6 million or 7.5%. On an
overall billed basis, the increase is 7.9%. For 2019,
Avista is proposing an overall increase in electric base
revenue of $9.9 million or 3.7%. On an overall billed
basis, the increase is 4.2%.
Through rate Schedule 97, customers are receiving a
rebate of approximately $2.7 million, which expires on
Morris, Di 6
Avista Corporation
December 31, 2017.2 Avista deferred approximately $1.5
million under the electric earnings sharing for calendar-
year 2015. The Company is proposing in this case to rebate
the $1.5 million deferral balance to customers beginning
January 1, 2018. The net effect for 2018 of the expiring
rebate, and the new rebate, is an increase in billed
revenues (i.e., less of a rebate) of approximately $1.2
million. The new rebate would expire on December 31, 2018.3
The Company’s electric and natural gas requests are 9
based on a proposed rate of return of 7.81%, with a common
equity ratio of 50% and a 9.9% return on equity (ROE).
Q. How is the Company proposing to spread the 2018 12
and 2019 electric increase to each of the customer rate 13
schedules? 14
A. The proposed electric billed increase to each
customer rate schedule effective January 1, 2018 and January
1, 2019 is shown in Illustration No. 1 below.4

2 This rebate rate was approved in the Company’s 2015 general rate case,
Case No. AVU-E-15-05. The rebate was related to Avista’s 2014 electric
earnings sharing of approximately $5.6 million, of which approximately
one-half was rebated to customers in 2016, and the remaining half rebated
in 2017.
3 Further information related to the expiration of the current rebate,
and the proposed new rebate, is provided in Company witness Mr. Ehrbar’s
direct testimony.
4 Company witness Ms. Andrews provides details of the proposed revenue
increases, and Company witness Mr. Ehrbar provides details of the
proposed spread of the increase to each customer class for each year of
the Two-Year Rate Plan.
Morris, Di 7
Avista Corporation
Rate Schedule Description
2018 Billing
Increase
2019 Billing
Increase
Residential Service Schedule 1 8.1%4.3%
General Service Schedules 11 & 12 7.5%4.0%
Large General Service Schedules 21 & 22 8.2%4.4%
Extra Large General Service Schedule 25 7.7%4.3%
Extra Large General Service 25P Schedule 25P 7.2%4.1%
Pumping Service Schedules 31 & 32 8.8%4.6%
Street & Area Lights Schedules 41 - 49 7.5%3.8%
Total 7.9%4.2%
Illustration No. 1 – Proposed Electric Increase by Schedule 1

8
Q. Please provide an overview of Avista’s 2018 and 9
2019 natural gas rate requests in this filing. 10
A. The Company is requesting an overall natural gas
increase in 2018 of $3.5 million, or 5.7% of total billed
revenue.5 For 2019, the Company is requesting an overall
increase of $2.1 million, or 3.3% of total billed revenue.6
As with the electric increase, the Company’s request is 15
based on a proposed rate of return of 7.81% with a common
equity ratio of 50% and a 9.9% return on equity. The

5 Total billed revenue includes base margin revenue (the revenue
associated with the Company’s ownership and operation of its natural gas
distribution operations), as well as the cost of natural gas, upstream
third-party owned transportation, and the effect of other rate tariffs.
The proposed increase in base margin is 8.8%.
6 The proposed increase in base margin is 5.0%.
Morris, Di 8
Avista Corporation
Rate Schedule Description
2018 Billing
Increase
2019 Billing
Increase
General Service Schedule 101 6.6%3.8%
Large General Service Schedules 111 & 112 2.2%1.3%
Interruptible Service Schedules 131 & 132 0.0%0.0%
Transportation Service Schedule 146*9.2%5.0%
Total 5.7%3.3%
* excludes commodity and interstate pipeline transportation costs
proposed rate spread for each natural gas customer class is
shown in Illustration No. 2:7
Illustration No. 2 – Proposed Natural Gas Increase by 3
Schedule 4
5
6
7
8
9
10
Q. Is the Company proposing any changes to the 11
commodity cost of natural gas for its retail natural gas 12
customers in this case? 13
A. No, Avista is not proposing changes in this filing
related to the commodity cost of natural gas or upstream
pipeline transportation costs. Changes in the commodity cost
of natural gas and transportation costs included in customers’ 17
rates are addressed in the Company’s annual Purchased Gas 18
Cost Adjustment (PGA) filing.

7 The proposed billed percentage increase for Transportation Schedule
146 is not comparable to the proposed increases for the other (sales)
service schedules, as Schedule 146 revenue does not include an amount
for the cost of natural gas or upstream pipeline transportation.
Including an estimate of 35.0 cents per therm for the cost of natural
gas and pipeline transportation, the proposed increase to Schedule 146
rates represents an average bill increase of 2.4% in 2018, and 1.4% in
2019.
Morris, Di 9
Avista Corporation
III. WHY THE CONTINUING NEED FOR RETAIL RATE INCREASES 1
Q. Why is there a continuing need for annual retail 2
rate increases? 3
A. A review of historical data goes to the “heart” of 4
why there is a continuing need for annual rate increases.
The illustrations below show the changes over time from 1889
to 2016 for the following sets of data related to Avista’s 7
electric utility operations:
a. Net plant investment (essentially rate base);
b. Number of residential customers;
c. Residential use-per-customer; and
d. Residential retail rate per kilowatt-hour (kWh).
13
The level of retail rates is influenced heavily by
changes in net plant investment over time, growth in the
number of customers, and changes in the use-per-customer.
The data presented in the line graphs below illustrate
visually why Avista, as well as many other utilities, are
seeking retail rate increases on a regular basis.
Q. How has Avista’s net plant investment for its 20
electric operations changed from 1889 to 2016? 21
A. The line graph in Illustration No. 3 below shows
the cumulative growth in Avista’s net plant investment for 23
its electric operations from 1889 to 2016. The data have
been presented in five-year increments for ease of viewing.
Morris, Di 10
Avista Corporation
$0
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
$7,000
$8,000
$9,000
(m
i
l
l
i
o
n
s
)
Avista Net Electric Plant Investment
1889 -2016
Illustration No. 3
2
3
4
5
6
7
8
9
10
11
12
The line on the graph illustrates, among other things,
the rapid expansion of net plant investment beginning in the
1950s following World War II, where net plant investment
nearly doubled in a relative short period of time. The line
also shows that net plant investment in recent years has
continued to grow. Later in my testimony I will address how
Avista identifies and prioritizes capital investment to
ensure that the capital investments are necessary in the
time frame in which they are completed.
Q. How have Avista’s number of customers and use-per-22
customer changed from 1889 to 2016? 23
Morris, Di 11
Avista Corporation
0
200
400
600
800
1,000
1,200
1,400
0
50
100
150
200
250
300
350
400
Avista Number of Residential Customers & Average
Monthly Use per Customer
1889 -2016
Th
o
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t
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kW
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p
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M
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t
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Customers
(thousands)
kWh per Month
A. The line graph in Illustration No. 4 below shows
the change over time in both the number of residential
customers (blue line) and the residential use-per-customer
(red line) for the period 1889 to 2016. The data, again,
are presented in five-year increments for ease of viewing.
Illustration No. 4 6
7
8
9
10
11
12
13
14
15
16
17
Among the observations from the line graph, two are
very significant and quite relevant to retail rate
adjustments during the 127 year period, as well as today.
First, from the 1950s through roughly 1980, there was steady
growth in the number of customers (blue line), which was
also combined with rapid growth in use-per-customer (red
line). Second, beginning around 1980, the use-per-customer
Morris, Di 12
Avista Corporation
began to decline dramatically. The decline in use-per-
customer was due in part to Avista’s energy efficiency 2
programs that began in 1978, as well as the regional and
national efforts generally to encourage consumers to use
energy more efficiently. The change from rapid growth in
use-per-customer to a significant reduction in use-per-
customer beginning around 1980 had a direct impact on
Avista’s retail rates.
Q. What were Avista’s retail rates from 1889 to 2016, 9
and how were they affected by the growth in net plant 10
investment, number of customers and use-per-customer? 11
A. The line graph in Illustration No. 5 below shows
Avista’s retail rate per kWh for its residential customers
(blue line) for the period 1889 to 2016. The red line on
the graph is the same use-per-customer line from the graph
in Illustration No. 4 above. The graph shows that Avista’s 16
retail rates were flat to declining for approximately 50-60
years, up until about 1980 when they began to rise.
Morris, Di 13
Avista Corporation
0
10
20
30
40
50
60
0
200
400
600
800
1,000
1,200
1,400
kW
h
pe
r

M
o
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t
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Ce
n
t
s

p
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k
W
h
Cents per kWh
kWh per Month
Avista Average Monthly Residential Use per Customer
& Average Electric Retail Rate
1889 -2016
Illustration No. 5 1
2
3
4
5
6
7
8
9
10
11
The three graphs above, taken together, illustrate the
significance of the relationship over time of the rate of
growth in net plant investment, number of customers, and
use-per-customer. During the 1950s, for example, there was
rapid growth in net plant investment, but it was accompanied
by rapid growth in use-per-customer, combined with steady
growth in the number of customers. The net result was retail
rates that were either flat or declining, due in large part
to the annual growth in revenues being sufficient to cover
the annual growth in costs. During the 1950s, Avista added
new major baseload generating resources (Cabinet Gorge in
1952, and Noxon Rapids in 1959), and yet retail prices
Morris, Di 14
Avista Corporation
continued to be flat or declining, due primarily to the
strong growth in kWh sales.
In contrast, retail prices began to increase in 1980
due, at least in part, to the significant decline in use per
customer, which resulted in lower annual sales growth. Post-
1980 – because annual costs were growing at a faster pace
than revenues, it was necessary to increase retail rates
each year so that total revenues were equal to total costs.
These are the circumstances currently facing not just
Avista, but many investor-owned and consumer-owned utilities
across the country, and it is the primary reason Avista has
requested electric and natural gas revenue increases through
this filing.
Q. As Avista removes old equipment and replaces it 14
with new, does the depreciation component currently included 15
in retail rates cover the cost to replace facilities? 16
A. No. The depreciation component currently included
in retail rates generally covers a very small amount of the
new facilities and equipment placed into service, especially
for the long-lived assets. Avista’s retail rates are cost-
based, which means the prices customers are paying today for
transformers, distribution poles, substations, and
transmission lines, among other facilities, are based on the
cost to install those facilities, in some cases, 40, 50, and
Morris, Di 15
Avista Corporation
even 60 years ago. The costs of the same equipment and
facilities today are many times more expensive. The
depreciation component built into retail rates today is
based on the much lower cost to install those facilities
many years ago. Therefore, the depreciation component in
retail rates covers only a small fraction of the annual costs
associated with the new investment in facilities.
Q. How does Avista’s growth in net plant investment 8
and operating expenses compare with the growth in retail 9
sales, for the more recent historical period as well as in 10
the near future? 11
A. The graph in Illustration No. 6 below shows actual
information for the period 2007 to 2016, and forecast
information for 2017 to 2020. The information in the graph
is for all of Avista Utilities’ combined electric and natural 15
gas operations in Idaho, Washington, and Oregon.
Morris, Di 16
Avista Corporation
-20%
0%
20%
40%
60%
80%
100%
120%
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Av
g
.

%

C
h
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g
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f
r
o
m

2
0
0
7

B
a
s
e
l
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n
e
Net Plant Investment Non-Fuel O&M/A&G Retail kWh Sales Retail Therm Sales
Actual
Forecast
Illustration No. 6 - Avista Utilities’ System Electric and 1
Natural Gas Operations 2
3
4
5
6
7
8
9
10
11
12
13
The red line on the graph shows the actual growth in
net utility plant investment (which is an indicator of rate
base growth) from 2007 through 2016, and the expected growth
for 2017 through 2020. The purple and blue lines on the
graph show the changes in retail kilowatt-hour (kWh) sales
and retail therm sales, respectively, for the same time
period.
The graph shows that net plant investment and non-fuel
operations and maintenance (O&M) expenses and administrative
and general (A&G) expenses are growing faster than sales.
The growth in kWh sales and therm sales reflect the annual
growth in revenue to the Company, absent any rate increases.
Morris, Di 17
Avista Corporation
With costs growing faster than sales revenue, there is a gap
each year between costs, and the revenues to cover those
costs, absent a rate increase. A rate increase is necessary
each year to cover that gap.
One of the reasons for this “gap” is Avista’s obligation 5
to serve. Unlike other businesses, Avista has a legal
obligation to provide safe and reliable service to electric
customers that request service from the Company. When a new
customer requests service, we must hook them up even if the
cost to serve that customer results in increased costs to
all other customers. Likewise, if the facilities serving an
existing customer are deteriorating and need repair, we must
repair or replace them so that the customer continues to
receive safe, reliable service. 14
Without the obligation to serve, we could consider
refusing to hook up new customers in order to avoid increased
costs to our existing customers, or no longer serve some of
the more remote, more costly areas to provide service, which
would allow us to avoid further investment, and reduce labor
and other operating costs.
Unregulated businesses have the opportunity to shut
down aging facilities or under-producing retail outlets,
eliminate product lines, and cut back on investment and
maintenance. As an example, on January 14, 2016, Walmart
Morris, Di 18
Avista Corporation
announced plans to close 269 underperforming retail stores
of which 154 stores are in the United States. In their news
release8 they explained that:
Closing stores is never an easy decision, but it
is necessary to keep the company strong and
positioned for the future, Doug McMillon,
Walmart’s president and chief executive, said in
a statement.

In contrast, Avista has an obligation to continue to
serve all existing customers with safe, reliable service, as
well as hook up new customers upon their request.
Q. Are there other factors that contribute 13
significantly to this “gap” between the growth in costs and 14
the growth in sales revenue? 15
A. Yes. Electric and natural gas utilities, like
Avista, are very unique businesses in that we offer dollar
incentives to customers to not use our product (through our
energy efficiency programs). Furthermore, our communication
with our customers related to energy usage is to use less of
our product – not more.
Avista continues to run its successful energy
efficiency programs, which help existing and new customers,
use less energy in their homes and businesses. Avista’s 24
energy efficiency programs include not only our direct

8https://www.nytimes.com/2016/01/16/business/walmart-to-close-269-
stores.html?_r=0
Morris, Di 19
Avista Corporation
incentive programs that help fund energy efficiency measures
for customers, and engineering assistance to help design and
implement energy efficient measures, but also extensive
education and information to encourage customers to take
steps to use energy more efficiently.
In the long-term, this investment in energy efficiency
is absolutely the right thing to do and will allow us to
avoid building or acquiring new, higher-cost generating
resources in the future. However, it also contributes to
lower sales revenue growth, and contributes to the “gap” in 10
revenues to cover the costs associated with maintaining a
safe, reliable utility system to serve our customers.
13
IV. NEED FOR CONTINUING CAPITAL INVESTMENT 14
Q. Please explain how Avista identifies and 15
prioritizes capital investments, and why the investments are 16
made in the time frame they are completed. 17
A. I will summarize why Avista is making capital
investments in the time frame they are being completed, and
the process we use for identifying and prioritizing those
investments. Company witnesses Mr. Kinney, Ms. Rosentrater,
and Mr. Kensok provide details of our capital projects in
progress, as well as planned projects, and address why they
need to be done in the planned time frame, and what the risks
Morris, Di 20
Avista Corporation
and consequences are of not completing the projects in that
time frame.
Our process to identify and prioritize capital
investment is designed to meet the overall need for
investment, in the appropriate time frame, in a manner that
best meets the future needs and expectations of our
customers, in both the short-term and long-term. The
Company’s practice has been to constrain the level of capital 8
investment each year, such that not all of the prioritized
projects and programs9 will be funded in a given year at the
level requested. Avista believes that holding capital
spending below the level requested accomplishes several
important objectives, including:
 Promotes Innovation - Encourages ways to satisfy the
identified investment needs in a manner that may
identify potential cost savings, defer implementation,
or other creative options or solutions.
 Balances Cost and Risk – Captures the customer benefits
of deferring needed investments by prudently managing
the cost consequences and risks associated with such
deferrals.
 Efficiently Allocates Capital – Ensures that the
highest-priority needs are adequately funded in the
most efficient and effective way.
 Reduces Variability - Moderates the magnitude of year-
to-year variability to avoid excessive rate impacts,
and more efficiently optimizes the number and cost of
personnel necessary to carry out the capital projects.

9 “Project” refers to an individual investment for a specific period of
time. “Programs” represent investments that address systemic needs that
are ongoing with no recognized endpoint, such as the wood pole
management program. For ease of reference, the term “capital project”
will be used to represent both capital projects and capital programs.
Morris, Di 21
Avista Corporation
Avista currently has chosen to stabilize the level of
annual capital spending at what can be described as a
constrained level of $405 million, in an effort to accomplish
the objectives described above.
Whether the investment touches the customer directly,
such as our customer service or metering systems, or
indirectly, such as improving the capability and efficiency
of our employees and internal work processes, each dollar we
invest ultimately supports three primary objectives:
1) to deliver safe and reliable service to customers;
2) achieve high customer satisfaction; and
3) at a reasonable cost to customers.

1. Safe and Reliable Service – “Reliability” 14
encompasses every aspect of our service and the many
infrastructure systems we rely on, along with a priority on
the safety of our employees, our customers, and the
communities we serve. Each year we track and report on how
well our system has performed as measured by the number of
service interruptions or electric outages (SAIFI), and the
duration or length of time in minutes of interruptions
(SAIDI) that are experienced by our customers. The Company’s 22
annual reliability performance for the years 2004 through
2016 is shown in Illustration No. 7 below.
Morris, Di 22
Avista Corporation
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
0
50
100
150
200
250
2004 2005 2005 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Av
e
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a
g
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N
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o
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O
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(
S
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Av
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i
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M
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(S
A
I
D
I
)
Average Number of Outages Average Length of Outages (minutes)
Illustration No. 7 – Avista Electric System Reliability 1
(2004 – 2016) 2
3
4
5
6
7
8
9
10
11
As shown in Illustration No. 7 above, the Company’s 12
annual level of reliability will vary from year-to-year.
This fluctuation in outages is common in utility electric
systems, and for Avista, is caused by events such as wind
and ice storms, fires, heavy snowfall, animals, vehicles
striking our poles and equipment, etc.10 Our capital
investment plan is designed to achieve a reasonable balance
of reliable service, which contributes to a high level of
customer satisfaction, while at the same time keeping costs
reasonable for customers. The reliability of our system is
relatively stable, and we believe is at a level which

10 The measuring protocol for SAIDI and SAIFI excludes outages caused by
very large outage events such as the windstorm of November 2015. These
major events are referred to a “major event days.”
Morris, Di 23
Avista Corporation
effectively achieves this balance of reliability, customer
satisfaction, and at a reasonable cost.
This assessment is evidenced in part, by our high level
of customer satisfaction from our customer satisfaction
surveys, and by the low number of complaints we receive (and
the state commissions receive) each year that are related to
reliability issues.
2. High Customer Satisfaction – Each year the Company
surveys customers who have had recent contact with our
customer service and field service employees to gauge the
level of their satisfaction with the quality of our service
and their experience doing business with the Company. This
survey, known as “Voice of the Customer,” tracks many key 13
service metrics such as wait time on the phone and the
knowledge, experience and helpfulness of employees. In
addition to equipping our employees to provide excellent
service, we have also made major re-investments in
technology systems, such as our new customer care and billing
system, which enables us to deliver service more tailored to
the preferences of our individual customers. The Company’s 20
performance in meeting our objective to provide high
customer satisfaction is measured, in part, by the results
of the Voice of the Customer survey.
Morris, Di 24
Avista Corporation
75%
80%
85%
90%
95%
100%
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Pe
r
c
e
n
t

o
f

S
u
r
v
e
y
e
d

C
u
s
t
o
m
e
r
s

S
a
t
i
s
f
i
e
d

o
r

V
e
r
y

S
a
t
i
s
f
i
e
d
As shown in Illustration No. 8 below, our most recent
2016 year-end results show an overall customer satisfaction
rating of 94% for both electric and natural gas service
across all our jurisdictions. This 94% rating reflects
customers that are either “satisfied” or “very satisfied” 5
with the service they receive from Avista.
We believe our stable-to-improving performance in
achieving high levels of customer satisfaction reflects a
reasonable level of investment in infrastructure and
technology to deliver quality customer care.

Illustration No. 8 – Avista Total Customer Satisfaction 12
Ratings 13
14
15
16
17
18
19
20
21
22
23
3. Reasonable Cost to Customers – The third primary
objective related to our capital investments is to be mindful
Morris, Di 25
Avista Corporation
of the overall cost impacts to our customers over time. In
recent years Avista has chosen to not fund all of the capital
investment projects requested by the various departments in
the Company, driven in large part by the Company’s desire to 4
mitigate the retail rate impacts to customers. The decision
to delay funding on certain projects is made only in cases
where the Company believes the amount of risk associated
with the delay is reasonable and prudent. As new,
unexpected, high-priority capital projects arise, the
capital projects for the year must be reprioritized to limit
the total spend for the year to fall within the constrained
overall capital spending level. In other instances, some
scheduled capital projects will encounter unexpected delays
due to such things as permitting issues, delays in receipt
of materials and equipment, etc. A delay in one project may
allow another project to be accelerated in time as part of
managing the availability of our workforce and to continue
to make progress on projects next in the “queue” that need 18
to be done. The continuing progress on projects in the queue
is very important to avoid the creation of a large “bow-
wave” of investment that needs to be done in a relatively
short period of time. This reprioritization occurs within
Morris, Di 26
Avista Corporation
Year Requested Approved Delayed
2012 $268,974,720 $250,000,000 $18,974,720
2013 $319,552,833 $250,000,000 $69,552,833
2014 $386,256,808 $331,000,000 $55,256,808
2015 $403,864,170 $355,000,000 $48,864,170
2016 $450,595,906 $375,000,000 $75,595,906
2017 $461,111,714 $405,000,000 $56,111,714
the Capital Planning Group (CPG),11 which is charged with
ensuring that the total capital spend for the year stays
within the constrained spending limit established by the
Company.
The dollar amount of capital projects requested by
departments in recent years, and the amounts approved by the
Company is provided in Table No. 1 below. The dollar amounts
for projects that were delayed (not approved) are also shown:
Table No. 1 – Capital Project Requests/Approvals 9

11
12
13
14
15
The infrastructure investment we face today arises, in
part, from the re-investment that is necessary to rebuild or
replace facilities that were installed many years ago. The
line graph in Illustration No. 9 on the next page shows
Avista’s capital spending on an annual basis from 1950 to 20

11 The CPG is a group of Avista employee directors that represent all
capital intensive areas of the Company. The CPG meets to review the
submitted Business Cases and prioritize funding to limit the capital
spend to the level set by senior management. The CPG meets monthly to
review the status of the capital projects, and approves or declines
new Business Cases as well as monitors the overall capital budget.
Morris, Di 27
Avista Corporation
2016, along with investment plans for 2017 – 2021. The
dollars have been adjusted for inflation to reflect
equivalent dollars in 2016 for comparison purposes, e.g.,
the dollars spent in 1983 have been adjusted (increased) to
reflect what it would have cost to complete the same projects
in 2016.
The graph shows our Cabinet Gorge and Noxon Rapids major
hydroelectric projects, originally built in the 1950s, being
refurbished 40 to 50 years later; as well as our 230kV
transmission system receiving major upgrades 40 to 50 years
later. Our Central Office building was completed in 1958,
and we recently remodeled and replaced the original HVAC
system 50 years later, in order to continue to use these
same facilities for the foreseeable future.
Morris, Di 28
Avista Corporation
Illustration No. 9 – Avista Annual Capital Spend 1950-2021 1
(2016 Dollars) 2
3
4
5
6
7
8
9
10
11
12

It is informative to view the line graph in Illustration
No. 9 above on a per-customer basis. The graph in
Illustration No. 10 below represents Avista’s annual capital 16
spending, in 2016 dollars (from Illustration No. 9 above)
divided by the number of customers for each respective year.
Avista’s annual capital spending has grown in recent years, 19
but so has the number of customers being served by the
Company. The graph below illustrates that our current level
of capital spending on a per-customer basis is in line with
the per-customer capital spending for approximately the last
30-years. That is, if a trend-line for the last 30-years
were to be calculated and over-laid on the graph, it would
Morris, Di 29
Avista Corporation
$-
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
Actual Forecast
An
n
u
a
l

C
a
p
i
t
a
l

S
p
e
n
d

p
e
r

C
u
s
t
o
m
e
r
show that capital spending on a per-customer basis has been
relatively flat for the last 30-years. In addition, for the
period 2017-2021, the graph shows the planned capital
spending on a per-customer basis declining to the future.
Illustration No. 10 – Avista Annual Capital Spend per 5
Customer – 1950-2021 (2016 Dollars) 6
7
8
9
10
11
12
13
14
15
16
Q. How have customers’ electric and natural gas bills 17
changed in recent years as Avista has continued to make 18
necessary investments in its utility systems? 19
A. The line graph in Illustration No. 11 below shows
the change in the monthly bill, from 2009 to 2017, for an
Idaho residential electric customer using an average of
1,000 kilowatt-hours per month. The graph shows that the
average increase over time has been 2.2% per year. Although
this average increase is a little higher than the level of
Morris, Di 30
Avista Corporation
$40.00
$50.00
$60.00
$70.00
$80.00
$90.00
$100.00
$110.00
2009 2010 2011 2012 2013 2014 2015 2016 2017
Idaho Residential Electric Bill
2009 -2017
(1,000 kWhs)
Average Annual Increase
= 2.2%
inflation during the same period, the increase to customers
during this period is less than it otherwise would have been
due to the Company choosing to fund less than the dollar
amounts of capital projects requested by the various
departments of the Company.
Illustration No. 11 – Idaho Residential Electric Bill (2009-6
2017) 7
8
9
10
11
12
13
14
15
16
17

Morris, Di 31
Avista Corporation
$40.00
$50.00
$60.00
$70.00
$80.00
$90.00
$100.00
$110.00
2009 2010 2011 2012 2013 2014 2015 2016 2017
Idaho Residential Natural Gas Bill
2009 -2017
(70 Therms)
Average Annual Decrease
= 3.8%
With regard to natural gas, the line graph in
Illustration No. 12 below shows the change in the monthly
bill, from 2009 to 2017, for an Idaho residential natural
gas customer using an average of 70 therms per month. The
graph shows that customer bills have dropped from
approximately $84 per month in 2009, to approximately $58
per month in 2017. The graph shows that bills have decreased
significantly for this time period, even as Avista has
continued to make the necessary investments to maintain its
delivery system and invest in new technology. The decrease
in customers’ natural gas bills is driven primarily by the 11
decline in natural gas commodity costs, as well as a decrease
in interest costs during the period.
Illustration No. 12 – Idaho Residential Natural Gas Bill 14
(2009-2017) 15
16
17

Morris, Di 32
Avista Corporation
With regard to Avista’s retail rates compared to other 1
investor-owned utilities, Edison Electric Institute
periodically prepares a comparison of residential electric
bills for investor-owned utilities across the country.
Illustration No. 13 below provides a comparison of an Avista
residential customer’s monthly bill in Idaho and Washington
with utility bills in other states. The chart shows that
Avista’s residential customers’ rates are among the lowest 8
in the Country for investor-owned utilities.12

12 The primary reason for the difference in electric bills for Avista’s
Idaho and Washington residential customers is the difference in rate
design for the two states. Residential Schedule 1 in Idaho is comprised
of an inclining, two-block rate structure, while the rate design for
Residential Schedule 1 in Washington is comprised on an inclining, three-
block rate structure.
Morris, Di 33
Avista Corporation
90.2091.58
92.5992.7692.8494.40
94.6194.9599.00102.00
102.28104.16104.87105.08
105.65106.40108.49108.50
108.78108.99110.02111.25
111.43
111.53114.20115.68
116.71
117.19117.60117.77
117.90
118.31120.57123.37129.68
130.21130.22132.41132.87
135.43136.00147.22152.35
157.93162.79168.09171.79
182.66213.25215.94 253.98
313.45320.50
0.00 50.00 100.00 150.00 200.00 250.00 300.00 350.00
MontanaTennesseeAvista WashingtonArkansas
Oklahoma
WashingtonIdahoAvista Idaho
Louisiana
North CarolinaNorth DakotaIowa
Georgia
MississippiKentuckyIllinois
South Dakota
TexasVirginiaNew MexicoMissouri
NevadaOregonUtahArizona
KansasWest VirginiaFloridaMinnesota
ColoradoWyomingDistrict of ColumbiaOhio
South CarolinaIndianaWisconsinAlabama
PennsylvaniaUSA AverageMarylandDelaware
MichiganNew YorkMaineVermont
New JerseyNew HampshireRhode IslandConnecticut
MassachusettsCaliforniaHawaiiAlaska
Source: Edison
Electric Institute
Investor-Owned
Utilities
Based on 1,000 kWh
of use per month
as of January 1,
2017
Illustration No. 13 – Average Residential Monthly Electric 1
Bill 2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
Our relatively low retail rates are due in large part
to a history of our Company aggressively pursuing the
acquisition and preservation of a diversified portfolio of
Morris, Di 34
Avista Corporation
low cost resources for the benefit of our customers. They
are also a result of Avista’s efforts to control its capital
investment costs and utility operating costs, in order to
keep retail rates as low as reasonably possible.
Q. How does Avista identify and prioritize its 5
capital investments? 6
A. Avista’s capital investments originate from the
following six major “investment drivers”:
1. Respond to customer requests for new service or
service enhancements;
2. Meet our customers’ expectations for quality and 11
reliability of service;
3. Meet regulatory and other mandatory obligations;
4. Address system performance and capacity issues;
5. Replace infrastructure at the end of its useful life
based on asset condition; and
6. Replace equipment that is damaged or fails, and
support field operations.

An explanation of each of these drivers, as well as
examples of specific capital projects under these drivers,
is provided in the Infrastructure Investment Plan, attached
as Schedule 2. In addition, Company witnesses Mr. Kinney,
Ms. Rosentrater, and Mr. Kensok provide details on the
specific capital projects planned and in progress, why the
projects need to be done in the time frame they will be
completed, as well as what the risks and consequences are of
not completing the projects.
Morris, Di 35
Avista Corporation
$0
$20,000,000
$40,000,000
$60,000,000
$80,000,000
$100,000,000
$120,000,000
$140,000,000
$160,000,000
$180,000,000
Customer Requested Customer Service
Quality & Reliability
Mandatory &
Compliance
Performance &
Capacity
Asset Condition Failed Plant &
Operations
Five Year Infrastructure Plan by Investment Driver
2017 2018 2019 2020 2021
A breakdown of planned investments for each driver for
2017-2021 is shown in Illustration No. 14 below.
Illustration No. 14 – Planned Investments by Capital 3
Investment Driver (2017-2021) 4
5
6
7
8
9
10
11
12
13
14
15
16
The process under which Avista’s planned capital 17
expenditures are identified and prioritized is illustrated
in Illustration No. 15 below.
Morris, Di 36
Avista Corporation
Business Unit
Needs FundedNot Funded
(Deferred)
Capital Planning Group
Overall Infrastructure Priority and Capital
Allocation
Capital Requests/
Business Cases
Prioritization
Senior Management
Board Finance Committee
Illustration No. 15 – Identification and Prioritization 1
Process 2
3
4
5
6
7
8
9
10
11
12
13
14
The capital projects are identified in the lower-left
portion of the diagram labeled “Business Unit Needs,” and 16
are then prioritized within each department. This
prioritization occurs with the knowledge of the continuing
constraint on the capital spend level for the Company, while
at the same time the leadership of each department informs
Senior Management of both the near-term and longer-term
Morris, Di 37
Avista Corporation
needs that are being delayed.13 For the prioritized
projects, Business Cases14 are developed for each of the
Capital Requests that go to the Capital Planning Group (CPG)
(as illustrated in the diagram). The CPG prioritizes the
Capital Requests across departments, such that the overall
planned capital spend stays within the constrained spend
level established by Senior Management. The highest
priority Capital Requests are Funded, and a portion of the
Capital Requests are Not Funded (Deferred), as shown on the
diagram. The Board Finance Committee reviews and approves
the first year of the five-year capital investment plan.
Under this Identification and Prioritization Process, the
capital projects are screened and prioritized twice; once
within the departments, and then a second time across

13 Examples of deferred and underfunded projects include, 1) the Company’s
Hatwai-Lolo #2 230kV transmission line re-conductor and rebuild, and
2) rebuilding electric distribution feeders at the end of their useful
life. The Hatwai-Lolo project, which is required to comply with
federal transmission planning standards, has been deferred in order to
balance the overall demand for investment across the Company. Avista’s
engineers are evaluating other possible short-term solutions for
complying with the planning standards until this project can be
completed. The Company’s grid modernization program for rebuilding
distribution feeders is optimized on a 60-year cycle, however, it has
not been funded at a level to achieve that cycle time, in order to
accommodate other priority investment needs in Avista’s electric
distribution system. The planned funding for 2017 – 2021 supports an
84 year cycle.
14 A Business Case is a summary document that defines the business
problem addressed by a project or program, along with a proposal and
recommended solution. The Business Case explains why the work is
necessary, and the risks associated with not making the investment, as
well as the alternatives considered, the selected alternative and the
timeline associated with the project.
Morris, Di 38
Avista Corporation
departments within the CPG. This Identification and
Prioritization Process is explained in more detail in the
Infrastructure Investment Plan in Exhibit No.1, Schedule 2.
4
V. O&M AND A&G COST MANAGEMENT 5
Q. Please briefly explain some of the ways the 6
Company is managing its operating expenses for the benefit 7
of customers. 8
A. A few examples of how the Company manages its
operating expenses for the benefit of customers involve
labor, benefits, and IS/IT expenses. As explained in more
detail by Company witness Ms. Andrews “Exhibit No. 12,” the
Company carefully evaluates each component of overall
compensation in order to provide total compensation which
will be cost-effective for the Company, as well as attract
and retain employees. In an effort to appropriately manage
our staffing requirements, we have a hiring restriction
which requires approval by myself, the President of the
Utility, the CFO, and the Sr. VP for Human Resources for all
replacement or new hire positions
In order to manage medical costs, several measures have
been implemented to manage costs. The Company made changes
to the medical plan for employees hired on or after January
1, 2014 such that upon retirement the Company no longer
Morris, Di 39
Avista Corporation
provides a contribution towards his/her medical premiums.
The Company will provide access to the retiree medical plan,
but the retiree will pay the full cost of premiums upon
retirement. In addition, beginning in January 1, 2020 the
method for calculating health insurance premiums will shift
more expenses to our retirees, lowering Company medical
expense.
In an effort to keep medical office visits down, we
offer access to phone or web-based 24/7 telemedicine and we
have an on-site clinic. Beginning in 2017, Avista offered
a self-insured High Deductible Health Plan (“HDHP”) in 11
addition to the current self-insured plan. The HDHP requires
plan participants to pay all costs of medical care up to
defined deductible limits. Over time we expect this plan to
result in lower overall medical costs to the Company.
The Company has also made changes to its retirement
plan. Effective January 1, 2014, the defined benefit pension
plan was closed to all non-union employees hired or rehired
on or after January 1, 2014, and was replaced with a defined
contribution 401(k) plan. Under the defined contribution
plan the Company will provide a non-elective contribution as
a percentage of each employee's pay based on his or her age.
In addition to the above changes, the Company also revised
our lump sum calculation for non-union retirees under the
Morris, Di 40
Avista Corporation
defined benefit pension plan to provide non-union
participants who retire on or after January 1, 2014 with a
lump sum amount equivalent to the present value of the
annuity based upon applicable discount rates. This reduces
the future costs and risks to the Company of funding and
managing the annual pension benefit (annuity) for retirees.
As discussed by Company witness Mr. Kensok, to mitigate
operating expense increases in IS/IT, Avista works to
automate our systems through technology where reasonable and
prudent to do so, and we work to negotiate discounted multi-
year contracts with vendors that result in discounted
maintenance and support rates. As an example, in 2016 we
introduced a cloud-based business performance monitoring
tool that automates a portion of the labor performed by our
IS teams. This subscription-based license model resulted in
a significant reduction of internal labor costs over a three
year period, allowing us to redeploy our IS operations team
labor resources and providing immediate cost savings.
A second example where the Company has successfully
managed IS/IT O&M expenses, is related to a 2017
telecommunications contract, which had two years remaining
on its term. We renegotiated early in the term to commit to
a longer, five year term which resulted in approximately
$215,000 in annual savings over the life of the agreement.
Morris, Di 41
Avista Corporation
These two examples of cost reductions required no changes to
service or quality, no equipment deployments, and were
implemented by changing the delivery model in one instance,
and committing to a longer term in the other. Both are
continuous improvement practices to manage expenses over
time.
7
VI. UTILITY INTO THE FUTURE 8
Q. What steps is Avista taking to meet the needs and 9
expectations of its customers, both now and into the future? 10
A. Avista continues to partner with its customers and
other stakeholders to change and adapt its operations, and
its utility infrastructure, to meet the needs and
expectations of not only our customers, but all of our
stakeholders.
We are continuing to build on the recent advancements
in products, services and changes in our operations. Many
of the recent changes were developed and implemented in
partnership with the Commission Staff, low income agencies,
and representatives of other customer groups.
Some examples of the recent advancements and
improvements for our customers are summarized below and
others are discussed in more detail in Company witness Mr.
Christie’s direct testimony. These are just the beginning 24
Morris, Di 42
Avista Corporation
of what is to come as we partner with our customers and our
other stakeholders in developing an energy future where we
use energy efficiently and minimize the impact on our
environment.
HVAC Filter Replacement Program: This program is
designed to educate customers on the value of replacing
filters, and offer choices to customers to make it more
convenient for them to remember to replace their
filters. In addition to extending the life of a
furnace, replacing the furnace filter helps to maintain
the expected operating performance of the furnace.
This program was launched in August of 2015, and it is
available to all Avista customers in Idaho, Oregon, and
Washington. Through the filter program, customers have
three convenience options: 1) Receiving an e-mail
reminder from Avista on a periodic basis to replace
their filter, 2) receiving an e-mail reminder with
promotional codes from manufacturers and vendors for
discounts on filter purchases, and 3) the opportunity
to order filters directly from a vendor, for delivery
to their home or business on a schedule chosen by the
customer. To date, 2,954 customers have signed up for
one of the three options in this program.15

Battery Electricity Storage at Schweitzer Engineering 26
Laboratories: Avista’s Energy Storage project builds 27
upon the technology upgrades in Pullman, Washington,
and is part of the Company’s investment into research 29
that will improve power system reliability by
addressing one of the biggest challenges facing the
energy industry – how to integrate power generated from
intermittent renewable sources such as wind and solar
into the electrical grid. The 1 MW, 3.2 MWh large-scale
battery storage system uses batteries manufactured in
Washington in a real-world setting at Schweitzer
Engineering Laboratories in Pullman. The system went
online in 2015, and is the result of a partnership
between Avista and the State of Washington, with both
parties contributing funding for the project.

15 To date, 1,413 customers have requested an email reminder without
coupons, 1,390 customers requested email reminders with coupons and 151
customer have signed up to receive filters direct from the vendor.
Morris, Di 43
Avista Corporation
Batteries such as this one provide the capability to
store power generated by renewable sources when it’s 2
abundant, for example when the wind is blowing, and
distribute energy when it’s needed, regardless of 4
weather patterns.

Rooftop Solar Estimator: In mid-2015 Avista launched
a rooftop solar estimator on www.myavista.com. The
solar estimator tool provides a 20 year financial
analysis for customers that allows them to compare
their options for rooftop solar and make a more fully
informed decision if rooftop solar makes sense for them
or not. In order to use the tool a customer enters
their address and finds their location on a map, then
enters their building type (residential or commercial),
and average energy usage. The tool then calculates a
personalized solar estimate for the customer, which
includes a recommended solar system sized for their
roof, their estimated annual savings or cost, and a
financial analysis of the costs and benefits of
installing rooftop solar. Since being launched
approximately 3,400 customers have used the rooftop
solar estimator.

VII. COMMUNICATIONS WITH CUSTOMERS 25
Q. How is Avista communicating with its customers to 26
explain what is driving increased costs for the Company? 27
A. The Company proactively communicates with its
customers in a number of ways: customer forums, one-on-one
customer interactions through field personnel and account
representatives, bill inserts, social media, media contacts,
group presentations, and through our employees’ involvement 32
in community, business and civic organizations, to name a
few. We believe our communications are helping our customers
and the communities we serve to better understand the issues
Morris, Di 44
Avista Corporation
faced by the Company, such as increased infrastructure
investment, environmental mitigation and security, all of
which have led to higher costs for our customers.
Our employees provide excellent customer service, and
this focus on communicating with our customers includes
providing our employees messaging and new tools and training
to make it easier to communicate with friends, family and
customers. We are finding that once a customer talks with
our employees, and voices their concerns and receives
answers to their questions, their satisfaction level
increases.
We are also continuing our focus on informing customers
of the many programs we offer to provide assistance in
managing their energy bills, and ensuring that our employees
are equipped to engage in these conversations.
Q. Does this conclude your pre-filed direct testimony? 16
A. Yes.