20170612KensokDirect.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 ) JAMES M. KENSOK
)

FOR AVISTA CORPORATION

(ELECTRIC AND NATURAL GAS)

Kensok, Di 1
Avista Corporation
I. INTRODUCTION 1
Q. Please state your name, employer and business 2
address. 3
A. My name is James M. Kensok. I am employed by Avista
Corporation as the Vice-President and Chief Information and
Security Officer. My business address is 1411 E. Mission Avenue,
Spokane, Washington.
Q. Mr. Kensok, please provide information pertaining to 8
your educational background and professional experience? 9
A. I am a graduate of Eastern Washington University with
a Bachelor of Arts Degree in Business Administration, majoring
in Management Information Systems and from Washington State
University with an Executive MBA. I have experience through
direct application and management of Information Services over
the course of my 34-year information technology career. I joined
Avista in June of 1996. Over the past 20 plus years, I have
spent approximately one year in Avista’s Internal Audit 17
Department as an Information Systems Auditor with involvement
in performing internal information systems compliance and
technology audits. I have been in the Information Services
Department for approximately 19 years in a variety of management
roles directing and leading information systems, infrastructure
technology and security strategy, system delivery and
operations, complex communication networks, cyber security,

Kensok, Di 2
Avista Corporation
applications development, outsourcing agreements, contract
negotiations, technical support, cost management, and data
management. I was appointed Vice-President and CIO in January
of 2007 and Chief Security Officer in January of 2013. 4
A table of contents for my testimony is as follows:
Description Page 6
I. INTRODUCTION ........................................1 7
II. IS/IT OVERVIEW ......................................2 8
A. Networks .......................................... 4 9
B. Data Management and Analytics ..................... 5 10
C. Mobility .......................................... 6 11
D. Security and Business Continuity .................. 7 12
E. Technology Refresh and Expansion ................. 10 13
F. Customer Engagement .............................. 11 14
III. IS/IT CAPITAL PROJECTS ............................12 15
IV. IS/IT OPERATING AND MAINTENANCE EXPENSES ...........28 16

Q. Are you sponsoring any exhibits in this proceeding? 18
A. Yes. I am sponsoring Exhibit No. 10, Schedule 1, which
includes the Information Technology Capital Project Business
Cases.
II. IS/IT OVERVIEW 22
Q. What is Avista’s approach to information technology? 23
A. Our investments in technology are twofold – we invest
in capital projects (new technologies or upgrades of existing
technologies) and we invest in Operating and Maintenance (O&M)
for existing technologies. Overall, information technology for

Kensok, Di 3
Avista Corporation
Avista is generally driven by the need for cyber security
systems to protect customer data and critical utility
operations, legal and regulatory requirements, cost-effective
replacement of information technology assets, management of
information technology obsolescence, efficient and cost-
effective work processes, and training.
Avista’s approach to making investments in information 7
technology is a multistep process, which consists of
identifying, analyzing, assessing and decision-making. Avista
identifies foundational technologies that support an evolving
digital business model aligned with industry best practices and
customer needs (e.g., safe and reliable infrastructure, real-
time customer engagement, and cyber security).
Q. Please provide a brief overview of the foundational 14
areas of Avista’s technology investment. 15
A. The core information technology investments are
focused in the following six technology areas:
A. Networks 18
B. Data Management and Analytics 19
C. Mobility 20
D. Security and Business Continuity 21
E. Technology Refresh and Expansion 22
F. Customer Engagement 23
24
Making investments in these six areas in the utility
industry is not new — and has been the focus of information
technology for decades — but these areas are experiencing

Kensok, Di 4
Avista Corporation
significant change as a result of new technologies, increases
in volume and velocity of data, the sophistication of cyber-
attacks, and consumer behavior.
Based on these changes, Avista is focused on 1) responsive
field staff and crews who are able to communicate and transmit
information across a reliable network; 2) near real-time
integrated data and analytics to improve customer satisfaction
and employee productivity; 3) near real-time information
exchanges between customers and Avista through varying mobile
devices in the field and on the web; 4) strong and skilled
defenses against increasingly sophisticated cyber threats to
the utility industry; and 5) the tools to help customers manage
their energy consumption and pay for the services they use. A
brief summary, with examples, is provided below:
A. Networks 15
Networks are the foundation of Avista’s communication 16
infrastructure, continuously transmitting critical data,
information, and voice communication across our entire system
to support daily operations and responsiveness to our customers.
An example of a critical network technology investment is
replacing Avista’s aging microwave equipment and systems with
current technology to provide for high speed voice and data
communications that receive and transmit data for electric and
natural gas operations across all jurisdictions. Avista’s 24

Kensok, Di 5
Avista Corporation
current network technology is past its useful life and is no
longer supported by the manufacturer. Many of the communication
sites to be replaced not only serve as primary communication
paths for critical data, but also as redundant paths during
network outages. Maintaining redundant paths allows for business
continuity in the event of an outage. Avista’s customer service
representatives, field staff workers, and crews all rely on the
same networks to communicate with customers regarding service
connects, disconnects, outages, etc. Continuous investment in
network systems technology has a direct impact on customer
satisfaction, as we build our ability to communicate directly
with our customers in the field, on the phone, and through the
web.
B. Data Management and Analytics 14
Data Management is also foundational to the Company and
drives daily decisions to improve operational efficiencies and
respond to customer requests. We use data to determine optimal
dispatch of generation resources to meet our customer loads, to
determine our future demand for electricity and natural gas,
and to ensure that customer needs and preferences are addressed.
We use call volume data to adjust customer service
representative staffing times to align with customer call
volume. We use data to schedule our crews. Through research with
other utilities (e.g., CenterPoint Energy) Avista is learning

Kensok, Di 6
Avista Corporation
about foundational data and analytics technology platforms and
business use cases that support customer-focused programs.
Avista is also focused on additional uses of data and analytics
to help advance workforce efficiency, as well as to assess
existing and new customer programs.
C. Mobility 6
Improved mobile technology is changing what it means to
“digitally enable” our utility workforce and our customers. 8
Mobile technology has been one of the fastest-growing technology
areas in the past 10 years, mainly as a result of the rapid
growth in consumer mobile device technologies, such as tablets,
smart phones, and applications (“apps”). These new devices and 12
apps are key components of future mobile workforce enablement
at Avista. For example, the mobile system design tool provides
field personnel with powerful functionality to meet customer
responsiveness expectations, such as providing capability for:
electronic receipt and completion of construction work orders;
access to Geographic Information System (GIS) data in the field;
real time capture of as-built configuration and materials; and
electronic documentation of asset and compliance data by taking
advantage of a variety of data sources, including digital image
data, keyed data, bar code scanned data, and Global Positioning
System (GPS) location data.
Mobile customer interaction technology enables Avista to

Kensok, Di 7
Avista Corporation
deliver information and services to customers using smartphones
and tablet computers, and to deliver communications and services
via short message service (SMS) or text messaging. New
responsive design allows desktop webpages to be viewed in
response to the size of the screen or web browser so that Avista
can interact with a broader customer base via smaller screen
mobile devices.
A mobile-friendly website that is connected to relevant
systems of record allows customers to access: Avista’s 9
information system for bill presentment and payment; the outage
management system for outage reporting and status; and the meter
data management system for customer consumption analytics.
Mobile customer interaction channels help improve
customer-facing functions and outbound notifications. Mobile
access can reduce call center volumes resulting in reduced hold
times and enhanced customer satisfaction, and it can also
increase adoption of electronic billing and payment transactions
resulting in lower processing costs.
D. Security and Business Continuity 19
Security technologies in the electric and natural gas
utility industry are critical to the protection of the energy
infrastructure and of Avista’s sensitive customer data, employee 22
data, operating data and financial data. Investments are
necessary to protect Avista’s utility assets and to prepare for 24

Kensok, Di 8
Avista Corporation
the appropriate response and recovery if and when there is a
security incident, a data breach, or when a natural or human-
induced disaster event takes place. Avista’s security program 3
focuses on protecting its physical and cyber assets, including
protecting against a data breach.
The number of U.S. data breaches tracked in 2016 hit an
all-time record high of 1,093 according to a report released by
the Identity Theft Resource Center (ITRC) and CyberScout
(formerly IDT911). This represents a substantial increase of 40
percent over the near record high of 780 reported in 2015.
Avista’s security program is critical to defend against a data
breach. Illustration No. 1 is a graph from ITRC showing the
steep increase in data breach incidents through 2016 by a
variety of sources.
Illustration No. 1: 15

Kensok, Di 9
Avista Corporation
Avista is a member of the American Gas Association/Edison
Electric Institute (AGA/EEI) cyber security task force that
analyzes and follows best security practices for protecting the
utility industry using the National Institute of Standards and
Technology (NIST) framework. Avista is an active participant in
additional industry security groups, such as Downstream Natural
Gas Information Sharing and Analysis Center (DNG-ISAC) that
serves natural gas utility (distribution) companies,
Electricity Information Sharing and Analysis Center (E-ISAC)
that serves electric utilities, EEI Cyber Mutual Assistance that
serves electric and natural gas utilities, and the use of
Transportation Security Administration’s (TSA) Pipeline 12
Security Guidelines, and others.
In addition to being an active participant in protecting
U.S. critical infrastructure and following best practices in
security, Avista appropriately invests in its business
continuity program, following the industry standard NIST
framework which focuses on the following: Identify, Protect,
Detect, Respond, and Recover. Avista also follows the Federal
Emergency Management Administration (FEMA) Incident Command
System (ICS) for planning, response and recovery efforts.
Continuous investment in cyber and physical security and
business continuity programs and technologies is a technology
investment priority to maintain a safe and reliable energy

Kensok, Di 10
Avista Corporation
infrastructure and to protect sensitive customer data, employee
data, operating data and financial data.
E. Technology Refresh and Expansion 3
Through our technology refresh and expansion program,
Avista evaluates and plans the direction of its information
technology (“IT”) portfolio. A team of IT professionals,
managers, and directors guide the technology refresh and
expansion program, analyzing the benefits and costs of investing
in new technology and maintaining existing technology. The team
considers whether the current technology environment is stable
and secure so that it is in Avista’s and its customers’ best 11
interests to maintain it, and if so, for how long. If not, other
options that may better suit the technology needs of Avista and
its customers are discussed. The technology refresh and
expansion program also evaluates the risks of not making an
immediate technology change or deferring a change to a later
date. Periodic technology planning sessions are held, which
include Vice Presidents, Directors, and Managers from various
business units, to review and discuss initiatives and guide
project prioritization. Decisions based on the discussions in
these technology refresh and expansion planning sessions are
documented in more formal business cases that guide future
technology investments.

Kensok, Di 11
Avista Corporation
F. Customer Engagement 1
Customer engagement is how we identify and respond to
customer expectations. Throughout our industry, customers
continue to expect more value for their energy costs and are
interested in a variety of offerings that can simplify their
interactions with Avista and give them more information about,
and control over, their energy use.1
Research shows that by 2018 more than 50 percent of our
customers will use a tablet or smartphone technology first for
all online activities2. To meet our customers’ expectations we 10
must stay abreast of the technological changes and be prepared
to offer services and choices that align with customers’ 12
everyday use. For example, environmentally conscious consumers
may be interested in managing their carbon footprint by electing
to pursue alternative energy resources, setting up auto or
paperless payments, or receive alerts when reaching preset
therm or kilowatt hour thresholds. Only through continuous
customer engagement can we truly understand and endeavor to
meet our customers’ changing needs and expectations, which are
growing beyond traditional electric and natural gas services. 20

1 KPMG, The race for the customer, Winning in a dynamic marketplace (2016)
2 Gartner, Newsroom. (2014, December 8). Gartner Says By 2018, More Than 50
Percent of Users Will Use a Tablet or Smartphone First for All Online
Activities [Press release]. Retrieved May 8, 2017, from
http://www.gartner.com/newsroom/id/2939217

Kensok, Di 12
Avista Corporation
III. IS/IT CAPITAL PROJECTS 1
Q. Company witness Mr. Morris identifies the six 2
“Investment Drivers” or classifications of Avista’s 3
infrastructure projects and programs. What are the Company’s 4
planned investments in IS/IT, and how do they fit within the 5
six investment drivers? 6
A. The six Investment Drivers are summarized as follows:
8
1. Customer Requested - Respond to customer requests for
new service or service enhancements;
2. Customer Service Quality and Reliability - Meet our
customers’ expectations for quality and reliability 12
of service;
3. Mandatory and Compliance - Meet regulatory and other
mandatory obligations;
4. Performance and Capacity - Address system performance
and capacity issues;
5. Asset Condition - Replace infrastructure at the end
of its useful life based on asset condition, and
6. Failed Plant and Operations - Replace equipment that
is damaged or fails, and support field operations.
22
The IS/IT capital projects planned to be transferred to
plant in service during the period 2017 through 2019 are shown
in Table No. 1 below. The projects are grouped together under
the relevant investment driver. An explanation of each of the
projects follows the table. 27

Kensok, Di 13
Avista Corporation
Table No. 1:
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
Asset Condition: 25

Microwave Refresh – 2017: $5,322,000; 2018: $2,100,000; 2019: 27
$2,100,000 28
Avista manages an ongoing program to systematically-replace
aging and obsolete technology under “refresh cycles” that are 30
timed to optimize hardware/software system changes. This
project will replace aging microwave communications technology
with current technology to provide for high speed and more
reliable data communications. These communication systems
support relay and protection schemes of the electrical
transmission system. The decision to make this technology
investment at this time will reduce Avista's risk that failure
of these critical communication systems will have a significant
impact on Avista's transmission capacity and ability to serve
our customers electrical needs. If we delay or cancel this
microwave refresh technology investment, Avista risks out of
date communications technology that could result in a shut-down
of critical communications and transmissions systems. 43
2017 2018 2019
Asset Condition
Microwave Refresh 5,322 2,100 2,100
Project Atlas 6,563 9,734 807
Technology Refresh to Sustain Business Process $ 21,191 16,957 14,140
Customer Service Quality and Reliability
AvistaUtilities.com Redesign 9,093
Customer Facing Technology 1,830 2,237 1,900
Mandatory and Compliance
High Voltage Protection for Substations 937 30
Next Generation Radio Refresh 102
Performance and Capacity
Enterprise Business Continuity Plan 665 486 450
Enterprise Security 3,816 3,639 1,710
Technology Expansion to Enable Business Process 13,941 14,350 12,315
Total Planned Enterprise Technology Capital Projects $ 63,461 $ 49,534 $ 33,422
TABLE NO. 4
Enterprise Technology Capital Projects (System) In $(000's)

Kensok, Di 14
Avista Corporation
Project Atlas – 2017: $6,563,000; 2018: $9,734,000; 2019: 1
$807,000 2
Avista Facility Management (AFM) is the legacy custom-coded
system that the utility uses to manage the location and current
operating state of its critical electric and gas assets (e.g.
pipes, poles and wires). Environmental Systems Research
Institute (ESRI) GIS serves as the foundational data structure
on which AFM applications are built or rely on. AFM is the
system of record for spatial electric and gas facility data and
provides the connectivity model to support the AFM
applications. This program replaces legacy custom-coded systems
with COTS technology common in the utility industry. Project
examples include the replacement of the Electric and Gas Design
tools, which are applications for the design of electric and
natural gas facilities, as well as Electric and Gas Edit tools
inherent in the system used for data edits prior to committing
final data changes and additions. These tools also include a
mobile version for in-the-field updates by field staff,
enabling real time changes in the system, as well as meeting
customer responsiveness expectations. For the reliability of
system records and the efficiency reasons stated above, this
technology investment is made at this time. If we delay or
cancel this AFM technology investment, Avista risks not having
up to date information on our natural gas and electric assets
that could result in harm to our customers, crews and business
operations.
27
Technology Refresh to Sustain Business Process – 2017: 28
$21,191,000; 2018: $16,957,000; 2019: $14,140,000 29
Avista manages an ongoing program to systematically-replace
aging and obsolete technology under “refresh cycles” that are 31
timed to optimize hardware/software system changes and industry
trends. The business case program generally has over one
hundred active projects each year. The scope spans technology
solutions for back office, customer facing, energy operating
and control systems. An example of the 2017 project scope is
as follows: Oracle E-Business Suite, Enterprise Budget Tool
Replacement, BizTalk Upgrade, Cognos Upgrade, Metropolitan Area
Network Transport Backhaul Refresh, MS Exchange 2013 Upgrade,
SCCM Software Package Implementation, Virtual Server Upgrade,
and Linux Operation System Upgrade. This technology investment
is made at this time based on technology lifecycle planning and
risk management. The decision to make this technology
investment will lessen the use and maintenance of obsolete or
custom technology and optimize integrations with other
commercial off-the-shelf (COTS) investments. If we delay or
cancel this technology investment, Avista risks various

Kensok, Di 15
Avista Corporation
technologies that currently support automated business
processes and operational efficiencies, to degrade and fall
risk to technology obsolescence and security vulnerabilities
due to loss of maintenance, support and patching.

Customer Service Quality and Reliability: 6

AvistaUtilities.com Redesign – 2017: $9,093,000
Like many businesses today, Avista is experiencing continued
growth in the use of its customer website, Avistautilities.com.
The website was originally built in 2006-2007, but because the
technology landscape has advanced so quickly, the site does not
meet current web best practices for customer usability and
security. This project updated and improved the technology,
overall web usability, security and customer satisfaction. Not
replacing the aging website would limit its potential for
customer engagement opportunities and open it to security
risks. The website is part of Avista’s plan to provide customers
a more effective channel to meet their expectations for self-
service options, including mobile access, energy efficiency
education, and to drive self-service as a means to lower
transaction costs. After the revenue requirement was finalized
in this case, it was determined that the transfer to plant
amount has increased to approximately $12 million on a system
basis. The Company will update this business case throughout
the process of this case. If we were to delay or cancel this
technology investment, it would pose risks to customer data
security on the existing website platform.

Customer Facing Technology – 2017: $1,830,000; 2018: 30
$2,237,000; 2019: $1,900,000
In an effort to keep pace with customer demands and quickly
changing technologies, Avista intends to expand on the
foundational technologies established during previous business
cases, and offer more channels of choice including self-service
options that meet customer needs and help reduce overall
business cost. A primary example of a project funded under the
Customer Facing Technology Program business case is the
expansion of our outage mobile app to include payments, SMS
messaging around payments and billing, and “pay by text” 40
functionality. Expanding our mobile options can reduce call
center volumes, resulting in reduced hold times and enhanced
customer satisfaction. It can also increase adoption of
electronic billing and payment transactions, which can lead to
lower processing costs. Efforts like this are focused on
providing tools for our customers that support general consumer
preferences for mobile devices. The decision to make this

Kensok, Di 16
Avista Corporation
technology investment now is based on industry practice and
trends.3 If we delay or cancel this technology investment,
Avista risks longer call center wait times, lower customer
satisfaction and generally, less efficient and higher cost
operations.
6
Mandatory and Compliance: 7
8
High Voltage Protection for Substations – 2017: $937,000; 2018: 9
$30,000 10
Telecommunication facilities, including Phone, Communication
Switches, SCADA, and Metering & Monitoring systems, are
commonly co-located inside Avista’s high voltage substations. 13
This requires communications technicians to work in close
association with our high-voltage electrical equipment. Avista
has implemented new high-voltage protection & isolation
standards that are designed to lower potential risks to our
personnel and equipment. The decision to make this technology
investment at this time will ensure implementation of the
clearance changes required to meet the new standards and will
result in a safer working environment for our crews who work in
close proximity to high voltage electrical equipment. If we
delay or cancel this high voltage protection upgrade
investment, Avista crews will be at a higher risk of injury or
death.

Next Generation Radio Refresh – 2017: $102,000 27
This project is refreshing Avista’s 20-year-old Land Mobile
Radio system. Avista maintains this private system because no
public provider is capable of supporting communications
throughout our rural service territory. And, since our systems
comprise a portion of our nation’s critical infrastructure, 32
Avista is required to have a communication system that will
operate in the event of a disaster. This technology investment
is made at this time to fulfill a mandate from the Federal
Communications Commission that all licensees in the
Industrial/Business Radio Pool migrate to spectrum efficient
narrowband technology. If we delay or cancel this technology
investment, Avista risks a less efficient and reliable critical
infrastructure communication system and potentially significant
fines and penalties, and potential loss of our two-way radio
license. 42

3 KPMG, The race for the customer, Winning in a dynamic marketplace
(2016).

Kensok, Di 17
Avista Corporation
Performance and Capacity: 1

Enterprise Business Continuity Plan - 2017: $665,000; 2018: 3
$486,000; 2019: $450,000 4
Avista has developed and maintains an Enterprise Business
Continuity Program to support Avista’s emergency response, and 6
to ensure the continuity of its critical business systems under
crisis conditions. The framework includes the key areas of
technology recovery, alternate facilities, and overall business
processes. The effort of developing and continuously improving
the program ensures the readiness of systems, procedures,
processes, and people required to support our customers and our
communities any time we are required to operate under critical
emergency conditions. A Business Impact Assessment (BIA)
typically drives the need for improvement projects, however
some projects are funded based on quality issues with existing
infrastructure following an annual exercise or actual event.
Projects within this business case may also support regulatory
requirements. The decision to make this technology investment
now is based on the continued need for reliable emergency and
business continuity systems to protect Avista’s critical 21
technology and ensure continued operations. If we delay or
cancel this technology investment, Avista risks a potential
complete shut-down of operations and communications in the
event of an emergency.
26
Enterprise Security – 2017: $3,816,000; 2018: $3,639,000; 2019: 27
$1,710,000 28
There are three primary drivers of the increasing costs for
Enterprise Security: cyber security, physical security and
regulatory standards. Each plays a critical role in supporting
our delivery of safe and reliable energy to our customers. 32

Cyber Security
The security of our electric and natural gas
infrastructure is a significant priority at a national and
state level, and is of critical importance to Avista.
Threats from cyber space, including viruses, phishing, and
spyware, continue to test our industry’s capabilities. 39
And while these malicious intentions are often unknown, it
is clear the methods are becoming more advanced and the
attacks more persistent. In addition to these threats,
the vulnerabilities of hardware and software systems
continue to increase, especially with industrial control
systems such as those supporting the delivery of energy.
The decision to make this technology investment now is
based on Avista’s need to advance its cyber security 47

Kensok, Di 18
Avista Corporation
program and invest in security controls to prevent,
detect, and respond to increasingly frequent and
sophisticated cyberattacks.

Physical Security
While considerable attention is focused on cyber security,
physical security also remains a concern for our industry.
Physical security encompasses the aspects of employee
safety and the protective security of our facilities and
critical infrastructure. Acts of theft, vandalism, and
sabotage of critical infrastructure not only result in
property losses, but can also directly impact our ability
to serve customers. Securing remote unmanned or
unmonitored critical infrastructure is difficult,
especially when traditional tools such as perimeter
fencing by itself are not adequate. In response to these
challenges, Avista is investing in additional physical
security equipment, expertise and technology. The decision
to make this technology investment now is based on the
need to protect our utility assets from theft and vandalism
and employees from acts of terror or violence through
additional physical security protection measures (i.e.,
lighting and crash barriers), remote detection and
response technology.

Regulatory Obligations
Advancing cyber threats continue to drive change in the
regulatory landscape faced by Avista and the utility
industry. Early in 2013, President Obama issued the
Executive Order “Improving Critical Infrastructure Cyber 30
Security.” The Order directed the National Institute of 31
Standards and Technology (NIST) to work with stakeholders
in developing a voluntary framework for reducing cyber
risks to critical infrastructure. The framework consists
of standards, guidelines, and best practices to promote
the protection of critical infrastructure. On May 11,
2017, a new Executive Order “Strengthening the 37
Cybersecurity of Federal Networks and Critical
Infrastructure” was issued that builds upon the 2013 39
Executive Order and addresses cybersecurity requirements
in federal networks, in critical infrastructure and for
the nation in general. The Federal Energy Regulatory
Commission also issued Order 791 on November 22, 2013,
approving the North American Electric Reliability
Corporation (NERC) Critical Infrastructure Protection
(CIP) Standards, Version 5. Both of these activities will
increase our security-related operating costs because they

Kensok, Di 19
Avista Corporation
require Avista’s security controls and processes to 1
conform to new standards, guidelines, and best practices,
and is the basis for the decision to make this technology
investment now. For example, Avista is required by NERC to
adhere to the new CIP v.5 Standards by 2018. In addition
Avista also has requirements under the Payment Card
Industry (PCI) standards. These standards continue to
change as updates are made to the standards on a 1-2 year
cycle. If we delay or cancel Enterprise Security
technology investments, Avista risks non-compliance with
federal mandates and recommendations, a weaker and less
reliable infrastructure (both cyber and physical), and we
risk placing electric and gas operations, sensitive
customer and employee information and the safety and
security of people and critical operations and systems in
jeopardy.

Technology Expansion to Enable Business Process – 2017: 18
$13,941,000; 2018: $14,350,000; 2019: $12,315,000 19
This program facilitates technology growth throughout Avista,
including technology expansion for the entire workforce,
business process automation and increased technology to support
efficient business processes. For example; when trucks are
added to the fleet, communication equipment needs to be added
to the truck; as Avista hosts more customer data, disk storage
needs to be expanded, as customers expand their use of the
website, additional computing capacity is needed. This
investment is made at this time to promote efficiencies through
automated business technologies that allow Avista to gather,
transmit, and analyze more information and guide sound business
decisions. If we delay or cancel this technology investment,
Avista risks a longer lag in business automation, which can
result in longer wait times, manual business processes, and
system-wide inefficiencies.
35
Q. A major portion of Avista’s planned technology 36
investment falls within the Technology Refresh and Technology 37
Expansion Programs. Please further explain Avista’s Technology 38
Refresh Program. 39
A. Avista’s Technology Refresh Business Case supports 40
technology replacement across six technology domains: 1)

Kensok, Di 20
Avista Corporation
Distributed Systems, 2) Central Systems, 3) Communication
Systems, 4) Network Systems, 5) Environmental Systems, and 6)
Business Applications. Each technology domain is governed by a
Program Steering Committee that guides annual project priority
in response to Avista’s overall approach to technology and 5
technology roadmaps, while balancing the risk of reliability
and functionality. The Technology Refresh Business Case
refreshes existing technology in alignment with roadmaps for
application and technology lifecycles.
At a fundamental level, Avista’s Technology Refresh
Business Case is necessary to allow Avista to effectively manage
its technology portfolio, given that IT assets are foundational
in the provision of utility service, and that IT components
naturally become outdated or reach technological obsolescence
over a period that is much shorter than the life of other
utility assets such as a natural gas pipe in the ground. As
technology assets reach manufacturer-planned or real
obsolescence, vendor support for these assets is reduced, or
ceases altogether. As vendor support ends, the risk associated
with Avista’s business systems that rely upon these technology
products increases and the value provided by these business
systems is jeopardized. These factors present a risk to Avista
in the form of increased failure rates, inefficient work
practice, employee/public safety incidents due to system

Kensok, Di 21
Avista Corporation
failures, and reduced customer satisfaction, among other areas
of risk.
Q. Please explain how the Technology Refresh Program 3
refreshes existing technology in alignment with roadmaps for 4
applications and technology lifecycles? 5
A. Information technology components have varying useful
lives. For example, servers tend to have a shorter lifespans,
while the lifespan of network switches tends to be longer.
Additionally, software vendors regularly update their products
to provide improved functionality, maintain and improve
security, and implement bug fixes. It is generally Avista’s 11
practice to replace technology within an acceptable failure
tolerance outside of the vendor recommended lifecycles. For
example, Avista completed its upgrade to Microsoft Office 2013
in 2015 and 2016. Prior to this upgrade, Avista had been using
Microsoft Office 2007. By prudently managing its upgrade cycles
and using Microsoft Office 2007 for an extended period, Avista
was able to avoid the intermediate upgrade to Microsoft Office
2010.
With that said, approximately 25 percent of Avista’s asset 20
base of more than 10,000 assets recorded in the technology asset
management system have exceeded the manufacturer suggested
lifecycle. As a result, the demand for technology refresh
investment has continued to grow over time (a natural outcome

Kensok, Di 22
Avista Corporation
of the growth in the installed base of information technology
assets as the modern utility continues to rely more and more on
enabling technologies).
Illustration No. 2 shows the level of demand for capital
investment within the Technology Refresh Business Case, along
with the level of capital investment approved by the Capital
Planning Group (“CPG”) (approximately $18 million from 2016
through 2020, and $23 million in 2021, as indicated by the red
line). This illustrates the work Avista is doing to limit the
amount of capital investment, while remaining attentive to the
risk associated with not making timely investments to refresh
its technology assets. 12
Illustration No. 2: 13

CPG Funded
Technology Refresh Demand vs Spend by Year

Kensok, Di 23
Avista Corporation
Q. Please explain the growth in investment associated 1
with the Technology Expansion Program. 2
A. The growth in investment in the Technology Expansion
Program in recent years has primarily been driven by
applications and networks. This program addresses many types of
application investment projects, including projects that
increase end user counts of existing COTS applications,
functionality enhancements of existing COTS applications,
functionality enhancements of custom applications, and
investments in new COTS applications. Examples of application
investment include: Customer Care and Billing (CC&B) and Work
and Asset Management (Maximo) systems, Energy Settlements &
Risk Management (Nucleus) system, Geographical Information
System (GIS), Oracle Financials & Power Plant System, and other
enhancements and license expansion.
Additionally, this program addresses many types of network
investment projects, including projects that expand Avista’s 17
network infrastructure (e.g., in offices, substations, plants,
meters, and data centers, etc.) Examples of network investment
under this program include hardware, software, fiber optic
products, and services for inside and outside construction. The
network sub-program is experiencing growth within the data
center, among other areas. Primary drivers within the data
center have been increasing numbers of applications, increasing

Kensok, Di 24
Avista Corporation
security controls, and an increasing need for enhanced network
management systems. Data center operations support Avista’s 2
business applications and are beneficial to all jurisdictions,
and to all customers.
Illustration No. 3 below shows the level of demand for
capital investment within the Technology Expansion Business
Case, along with the level of capital investment approved by
the CPG ($14.6 million in 2016, $14 million from 2017 through
2020, and $19 million in 2021, as indicated by the red line).
This illustrates the work Avista is doing to limit the amount
of capital investment, while remaining attentive to making
timely investments to enable, maintain or enhance our critical
technology systems. The CPG approved an increase in 2021 to
address the deferred capital investments from 2016 through
2020.
Illustration No. 3: 16
17
18
19
20
21
22
23
24 $-
$5,000,000
$10,000,000
$15,000,000
$20,000,000
$25,000,000
$30,000,000
2014 2015 2016 2017 2018 2019 2020 2021
Technology Expansion Demand vs Spend by Year
Networks Communications Distributed Central Facilities Applications Data CPG Funded

Kensok, Di 25
Avista Corporation
Q. Please provide some examples of the types of 1
Technology Refresh and Technology Expansion projects that were 2
not approved as shown in the illustration Nos. 2 and 3 above 3
(projects above the red line), and the risk associated with not 4
completing or deferring these projects. 5
A. Examples of projects that were not approved during
the 2016-17 budget cycle include:
 Oracle Database Upgrade Project Delay. This
technology investment was delayed due to competition
for funding. This delay will result in more manual
driven processes, higher inefficiencies, and less
digital integration with other programs. Due to the
decision to delay this project, we may experience
inefficiencies in delivering customer bills,
answering customer questions, processing customer
payments, and in dispatching crews that may
ultimately result in higher costs to customers and
lower customer satisfaction with our services.

 Fiber Network Expansion Projects. This technology
investment was deferred due to competition for
funding. The delay in these projects will result in
not being in lock-step with the Transmission Rebuild
Schedule, thereby needing to access private property
multiple times, taking additional outages on the
transmission line where Optical Ground Wire (OPGW) is
planned to be installed, and delaying other business
initiatives, such as SCADA at every substation,
mobility, and security monitoring.

 Asset Management System Mobile Enhancement Project.
This technology was deferred due to competition for
funding. The delay in this project will result in the
continuation of inefficient manual work processes for
collecting asset information, conducting audits and
inspections, and updating asset data to support other
interdependent business processes, such as work order
assignments, etc.

Kensok, Di 26
Avista Corporation
Q. How does Avista cut costs during a Technology Refresh 1
and/or Expansion initiative? 2
A. The cost of a refresh is dependent on several factors.
During the time spent evaluating, vetting, and negotiating with
vendors, we work to identify the best products and service
pricing. Avista considers the IT components or systems being
refreshed, the new technology replacement, and the costs to
integrate with other components and systems. Multiple vendors
and subject matter expert teams are often needed when multiple
components are involved. However, integrated solutions that
offer a single-vendor solution that may help cut costs by
integrating a portion, or in some cases, components of a
traditional IT application portfolio into a platform (e.g.,
CC&B and Meter Data Management share a common Oracle platform)
are pursued.
Q. Please explain how Avista prioritizes technology 16
investments. 17
A. During each annual planning cycle, the respective
technology business case owner surfaces the project demand or
roadmap for the upcoming five years to the Technology Planning
Group (“TPG”) and Executive Technology Steering Committee 21
(“ETSC”) with a recommended business case priority, including 22
the factors driving the current and expected need and timing
for the investment. Avista’s technology initiatives are 24

Kensok, Di 27
Avista Corporation
established by senior executives who are members of the ETSC.
The TPG sets priority across the technology investment
portfolio, balancing business value and customer benefits, and
based on the ETSC’s guidance. Through a mid-year special
session, the TPG and ETSC provide a comprehensive review of all
technology investment demands and prioritize requests based on
mandatory investment drivers and customer benefits. Projects
with the highest business value and customer benefit are
prioritized, while projects that cannot demonstrate similar
merits are returned for reconsideration. An additional filter
is applied following this vetting by the TPG and respective
business case owners considering resource capacity, risk
assessment criteria, and alternatives. Following this exercise,
the overall technology investment plan of approved projects is
submitted to the CPG for funding consideration across all other
Avista business cases, as part of the overall demand for
capital. Projects that are not approved for consideration are
not included in the list of project demand provided to the CPG.
The CPG establishes limits on annual capital investment
through a published five-year plan. The five-year plan requires
the TPG and technology business case owners to review and revise
their initial investment plan annually to fit within the new
established investment level. Steering committees prioritize
technology asset risks, such as lifecycle obsolescence,

Kensok, Di 28
Avista Corporation
business impact if failure occurs, vendor specifications to
maintain support, and roadmaps of integrated technology
strategy, while considering the resource capacity and funding
constraints for each year. Technology asset refresh funding is
generally assigned priority in this sequence: Safety, Energy
Control, Customer Facing, and Back Office.
7
IV. IS/IT OPERATING AND MAINTENANCE EXPENSES 8
Q. Please summarize the increases in O&M expenses, to 9
arrive at IS/IT O&M expenses included in this case effective 10
January 1, 2018. 11
A. In Company witness Ms. Andrews’ electric and natural
gas Pro Forma Studies, she has pro formed the level of expected
information services and technology expenses, which includes
both incremental labor costs and non-labor costs, associated
with software development, application licenses, maintenance
fees, and technical support for a range of information services
programs that will be in place beginning January 1, 2018. These
incremental expenditures are necessary to support Company cyber
and general security, emergency operations readiness, electric
and natural gas facilities and operations support, and customer
services.

Kensok, Di 29
Avista Corporation
System
Incremental Labor Increases
Project Atlas (Avista Facility Management) $ 32,357
Project Phoenix (AvistaUtilities.com redesign) 64,713
Total Incremental Labor Change $ 97,070
Non-Labor Increases
Product Maintenance and Support $ 1,129,918
Contracted Professional Services 209,058
Total Non-Labor Change $ 1,338,976
Total Change $ 1,436,046
IS/IT
Incremental Labor and Non-Labor Expenses Included
Table No. 2 below summarizes the net increase in IS/IT O&M
expenses included on a system basis. A discussion of these
increases is provided following Table No. 2.
Table No. 2:
5
6
7
8
9
10
11
12
13
Q. Please discuss the specific projects driving the 14
incremental labor expense increases? 15
A. The incremental increase to labor operating expenses
are largely driven by capital investments in core business
systems necessary to provide safe and reliable electric and
natural gas service to our customers, as discussed earlier in
the IS/IT Overview and IS/IT Capital Additions sections. As
shown in Table No. 3 below, there are two specific projects
driving the labor increases which have been pro formed in this
case.

Kensok, Di 30
Avista Corporation
Annual
Labor
Expense
Amount
Included
in Filing
Project Drivers
Project Atlas (Avista Facility Management) $ 65,402 $ 32,357
Project Phoenix (AvistaUtilities.com redesign) 130,803 64,713
Total Incremental Labor Expenses $ 196,205 $ 97,070
Operations Incremental Labor Expenses
System
Beginning in mid-2017, when Project Atlas goes into
service, we will need to hire an Integration Analyst to provide
operational support. Project Atlas is used to manage the
location and current operating state of its critical electric
and natural gas assets (e.g. pipes, poles and wires). Likewise,
the Company will hire two System Analysts to manage the
operation of Project Phoenix. Project Phoenix upgrades
Avista’s existing website to provide a more effective channel 8
to meet customer expectations for self-service options,
including mobile access, energy efficiency education, and to
drive self-service as a means to lower transaction costs. Table
No. 3 below summarizes the incremental labor changes for
projects Atlas and Phoenix.
Table No. 3:4 14
15

19
20

4 After completion of the Company’s revenue requirement it was determined
that the labor increases in mid-2017 as shown in Table No. 3 should have
been annualized and included in full in electric and natural gas Pro Forma
adjustments 3.06. Correction for this would increase system expense
approximately $99,135 ($196,205 total - $97,070 included), increasing the
requested revenue requirement approximately $24,000 for electric and $6,000
for natural gas.

Kensok, Di 31
Avista Corporation
Q. What are the increases in IS/IT non-labor O&M 1
expenses? 2
A. There are two increases in non-labor O&M expenses,
which include product maintenance and support provided by our
technology vendors ($1,129,918 from Table No. 2 below), as well
as contracted professional services ($209,058). Product
maintenance and support typically includes vendor provided
security patches, bug fixes, incremental upgrades, and expert
technical support with pre-determined service level agreements.
Contracted professional services provide Avista’s IS/IT team 10
with external subject matter expertise for various systems
outside of our internal expertise.
Q. What is driving the increase in these non-labor O&M 13
expense categories?
A. There are several factors driving the increase in
IS/IT non-labor operational expenses. Drivers of non-labor
costs include: growth in capital investments in technology that
results in an increase to product maintenance and support
expenses for each of the systems; vendor changes to their
licensing models and related implementation costs – for
instance, from an on-premises solution to a cloud-based
solution or increased cost of maintenance and support for older,
non-current versions of systems; and demand for highly
specialized contracted professional services to implement,

Kensok, Di 32
Avista Corporation
(System)
Pro Forma Amount(1)
Project Drivers
App Dynamics $ 200,000
Login Radius 40,000
Microsoft 180,000
Oracle 396,000
Data management & analytics 50,000
SiteCore 50,000
Security Systems 137,000
Minor new items and incremental changes 76,918
Total Incremental Change $ 1,129,918
(1) Increase in expense included in filing above 2016 levels.
Incremental Product Maintenance and Support
integrate, and maintain technology systems where such skills
are outside of Avista’s core expertise.
The non-labor expense increase of $1.34 million represents
a 6.7 percent increase between 2016 and 2017. The majority (84.3
percent, or $1.13 million) of this increase is directly related
to product maintenance and support. Table No. 4 below lists
major systems with incremental increases to required product
maintenance and support.
Table No. 4:
10
11
12
13
14
15
16
17
Q. Please discuss a few examples of product maintenance 18
and support and how it affects core systems used by the Company.
A. Core systems are becoming more and more highly
integrated as business transactions transmit across various
systems to deliver information. In some cases, issues can arise
while business transactions are traveling through these paths
and result in system errors, which can cause data transmission

Kensok, Di 33
Avista Corporation
delay or overall system unresponsiveness directly affecting
those using the tools (e.g. outage management, financial and
accounting systems, billing systems, etc.). Quick
identification and root cause analyses of these issues is
paramount to system recovery and mitigation of future similar
causes.
In 2016, Avista invested in an application performance
management and IT operations tool that optimizes resource time
in identifying issues when they arise to assist in the quick
identification of the root cause in application or system
performance degradation. Although the introduction of this tool
increases non-labor expenses, it provides visibility into each
and every business transaction and its path across multiple
complex core system integrations, allowing the technology
operations team to quickly respond to and recover from unknown
issues. Based on the number of business transactions that occur
across various core systems, it would be humanly impossible to
meet system or transaction recovery time objectives without
automation.
Q. What is the second driver increasing non-labor 20
operational expense costs for Avista’s technology department?
A. The second driver of the non-labor increases are the
contracted professional services. Approximately 15.7 percent
or $209,000 of the incremental increase above 2016 levels is

Kensok, Di 34
Avista Corporation
for contracted professional services, which is largely to
support nearly a dozen business systems, including COTS
integration, financial systems, geographic information systems,
energy settlement systems, billing systems, asset management
systems, and the web. 5
In subsequent years (2018-2019), the incremental changes
are less substantial, 3 percent and 1 percent, respectively.
However, as in the current year, much of the increase in the
non-labor costs is in product maintenance and support, as seen
in Illustration No. 4. These slight increases beyond 2017 are
mainly due to Avista’s efforts in negotiating multi-year,
enterprise agreements with technology vendors that result in
less significant increases for technology maintenance and
support.
Illustration No. 4: 15

23
24

Kensok, Di 35
Avista Corporation
Q. How has Avista focused on managing its overall IS/IT 1
expenses for the benefit of its customers? 2
A. Avista focuses on increasing reliability and
optimizing systems for our customers’ needs through the
deployment, maintenance and support of technology.
To mitigate operating expense increases, Avista works to
automate our systems through technology where reasonable to do
so, and we work to negotiate discounted multi-year contracts
with vendors that result in discounted maintenance and support
rates. For example, in 2016 we introduced a cloud-based business
performance monitoring tool that automates a portion of the
labor performed by our IS/IT teams. As a subscription-based
license model, the cost of the tool is amortized over three
years, resulting in approximately $192,000 per year in
additional expense costs. However, this particular increase in
product maintenance and support expense resulted in a
significant reduction of internal labor costs modeled over the
same three year period, allowing us to redeploy our IS/IT
operations team labor resources and providing an immediate
benefit by reducing the time to determine root cause and rectify
system issues when they arise.
A second example where the Company has successfully
managed its O&M expenses was a 2017 telecommunications
contract, which had two years remaining on its term. The

Kensok, Di 36
Avista Corporation
contract was renegotiated early in the term in order to commit
to a longer, five year term which resulted in approximately
$215,000 in annual savings over the life of the contract.
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 costs over time.
Q. Does this conclude your pre-filed direct testimony? 9
A. Yes.