20170612Schuh 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 ) KAREN K. SCHUH
)

FOR AVISTA CORPORATION

(ELECTRIC AND NATURAL GAS)

Schlect, Di 1
Avista Corporation
I. INTRODUCTION 1
Q. Please state your name, employer and business 2
address. 3
A. My name is Karen K. Schuh. I am employed by Avista
Corporation as a Senior Regulatory Analyst in the State and
Federal Regulation Department. My business address is 1411 East
Mission, Spokane, Washington.
Q. Please briefly describe your educational background 8
and professional experience. 9
A. I graduated from Eastern Washington University in
1999 with a Bachelor of Arts Degree in Business Administration,
majoring in Accounting. After spending six years in the public
accounting sector, I joined Avista in January of 2006. Since
2006, I have worked in various positions within the Company in
the Finance Department (Plant Accounting and Resource
Accounting) and joined the State and Federal Regulation
Department as a Regulatory Analyst in 2008. Currently, as a
Senior Regulatory Analyst, I am responsible for, among other
things, preparing the capital adjustments in general rate cases
for the Idaho and Washington jurisdictions.
Q. What is the scope of your testimony? 21
A. My testimony and exhibits in this proceeding will
explain how the Company’s capital investments in utility plant
from December 31, 2016 through December 31, 2019 are
Schuh, Di 2
Avista Corporation
incorporated into the proposed revenue requirements in this
case. Company witness Ms. Andrews has included adjustments
prepared by me to reflect these investments in her electric and
natural gas revenue requirement for the Company’s Two-Year Rate
Plan beginning January 1, 2018 through December 31, 2019.
A table of contents for my testimony is as follows:
Table of Contents Page 7
I. INTRODUCTION 1 8
II. WITNESSES TESTIFYING TO CAPITAL ADDITIONS 3 9
III. CAPITAL ADJUSTMENTS 5 10
IV. DEPRECIATION STUDY 9 11
V. REPORTING FOR CAPITAL ADDITIONS 11 12

Q. Are you sponsoring any exhibits? 14
A. Yes. I am sponsoring Exhibit No. 11, Schedule 1 which
was prepared by me. This exhibit provides a summary of the
capital investments included in each of the capital witnesses
testimony by year.1

1 Company witnesses Mr. Kinney, Ms. Rosentrater and Mr. Kensok sponsor
testimony explaining the Company’s capital investments.
Schuh, Di 3
Avista Corporation
II. WITNESSES TESTIFYING TO CAPITAL ADDITIONS 1
Q. Would you please provide a brief summary of the 2
witnesses who provide testimony related to capital additions in 3
this proceeding? 4
A. Yes. The following witnesses are presenting direct
testimony supporting capital additions in this case:
Mr. Scott Kinney, Director of Power Supply, will provide
detailed explanations of the Company’s electric generation-
related capital additions as well as the capital requirements
for the implementation of Protection, Mitigation and
Enhancement programs (“PM&E”), related to hydroelectric
licenses.
Ms. Heather Rosentrater, Vice President of Energy
Delivery, will explain capital additions related to electric
transmission and distribution, natural gas delivery,
facilities, fleet, as well as general plant.
Mr. James Kensok, Vice President and Chief Information and
Security Officer, will provide an overview of Avista’s 18
Information Service/Information Technology (IS/IT) programs and
projects. This includes summaries of the Company’s capital 20
investments for a range of IS/IT systems used by the Company.
Q. How have capital witnesses presented the transfers-22
to-plant in their testimony? 23
Schuh, Di 4
Avista Corporation
A. Mr. Kinney, Ms. Rosentrater and Mr. Kensok present
capital transfers-to-plant on a calendar year basis from
January 1, 2017 through December 31, 2019 on a total system
basis (i.e, the totals include all planned transfers to plant
for electric and natural gas operations for the Idaho,
Washington and Oregon jurisdictions). A detailed listing of
project names and calendar year totals can be found in Exhibit
No. 11, Schedule 1.
Table No. 1 below reflects the calendar year transfers to
plant totals that are represented in each witness’ testimony:

14
15
16
Q. Company Witness Mr. Thies makes reference to planned 17
capital expenditures of $405 million per year. Why do the annual 18
totals in Table No. 1 differ from the $405 million planned 19
expenditures? 20
A. There are two primary reasons. First, totals in Table
No. 1 above represent transfers-to-plant, whereas, Mr. Thies’ 22
$405 million represents capital expenditures. There is a timing
difference between when the dollars are spent, and when the
Functional Group Name Witness 2017 2018 2019
Generation/ Production Mr. Kinney 66,135 59,718 87,196
Transmission Ms. Rosentrater 79,303 60,416 79,814
Electric Distribution Ms. Rosentrater 77,575 70,528 70,871
Natural Gas Distribution Ms. Rosentrater 76,811 68,024 74,793
General Plant Ms. Rosentrater 57,330 44,880 6,060
Other Plant Ms. Rosentrater 9,616 9,412 9,333
Enterprise Technology Mr. Kensok 63,461 49,534 33,422
Total $ 430,230 $ 362,513 $ 361,489
TABLE NO. 1
Capital Projects (System) in $(000's)
Schuh, Di 5
Avista Corporation
various capital projects are completed and transferred to
plant-in-service.
Second, Mr. Thies’ $405 million includes the investment
associated with Advanced Metering Infrastructure (“AMI”), and 4
Table No. 1 excludes the investment associated with AMI, except
for the inclusion of the Company’s meter data management project
expected to be in-service in 2017. The remainder of the AMI
investment is related to the Company’s Washington jurisdiction
and has been excluded from Table No. 1 and excluded this case.

III. CAPITAL ADJUSTMENTS 11
Q. How were the capital additions for the Two-Year Rate 12
Plan developed in this case? 13
A. Summarized below in Table No. 2 are the electric
capital adjustments I have prepared for the Two-Year Rate Plan:

17

Adj #
Plant in
Service
Accumulated
Depreciation
Deferred
Taxes Rate Base
Rate Year 1 (2018)
2016 AMA Balance (Test Year)1,382,037 (491,764) (181,780) 708,493
2016 AMA-EOP Adjustment 1.03 44,531 (7,016) (9,388) 28,127
2017 EOP Adjustment 3.08 80,408 (34,216) (15,592) 30,600
Rate Year 1 1,506,976 (532,996) (206,760) 767,220
Rate Year 2 (2019)
2017 EOP Balance 1,506,976 (532,996) (206,760) 767,220
2018 AMA Adjustment 19.01 26,854 (19,992) (7,411) (549)
2018 EOP Adjustment 19.02 49,825 (19,992) (7,411) 22,422
2019 AMA Adjustment 19.03 21,327 (22,208) (6,006) (6,887)
Rate year 2 1,604,982 (595,188) (227,588) 782,206
Table No. 2
Idaho Electric Adjustments in $(000's)
Schuh, Di 6
Avista Corporation
Summarized in Table No. 3 below are the natural gas capital
adjustments I have prepared for the Two-Year Rate plan:

The transfers-to-plant adjustments presented in my
testimony, and reflected in the Two-Year Rate Plan, have been
included using Idaho’s share (electric and natural gas). Mr.
Kinney, Ms. Rosentrater and Mr. Kensok discuss their respective
area transfers-to-plant on a system basis for each calendar
year, and I have incorporated the Idaho share of these
investments for the Two-Year Rate Plan beginning January 1,
2018.
As in prior rate cases, Avista started with rate base for
the historical test year, which, for this case, is the average-
of-monthly-averages (“AMA”) for the twelve months-ended
Adj #
Plant in
Service
Accumulated
Depreciation
Deferred
Taxes Rate Base
Rate Year 1 (2018)
2016 AMA Balance (Test Year)244,550 (80,795) (34,956) 128,799
2016 AMA-EOP Adjustment 1.03 5,028 (2,816) 8 2,220
2017 EOP Adjustment 3.06 13,303 (6,418) (2,852) 4,033
Rate Year 1 262,881 (90,029) (37,800) 135,052
Rate Year 2 (2019)
2017 EOP Balance 262,881 (90,029) (37,800) 135,052
2018 AMA Adjustment 19.01 4,975 (3,850) (1,317) (192)
2018 EOP Adjustment 19.02 9,271 (3,850) (1,443) 3,978
2019 AMA Adjustment 19.03 2,553 (4,347) (352) (2,146)
Rate year 2 279,680 (102,076) (40,912) 136,692
Table No. 3
Idaho Natural Gas Adjustments in $(000's)
Schuh, Di 7
Avista Corporation
December 31, 2016, making the following adjustments as
described below:
(1) 2016 Plant In Service – The 2016 AMA plant in service
balance is adjusted to a 2017 EOP balance for Rate-
Year 1, and then to a 2019 AMA balance for Rate Year
2. This is done by first walking forward the
accumulated depreciation (“AD”) and accumulated 7
deferred federal income taxes(“ADFIT”) to a 2016 EOP 8
balance, then to a 2017 EOP balance, which is
incorporated into the Rate Year 1 rate based
calculation for retail rates effective January 1,
2018. For Rate Year 2, beginning January 1, 2019, the
2017 EOP rate base is adjusted to a 2018 AMA balance,
next to a 2018 EOP balance and finally, to a 2019 AMA
balance.
(2) 2017 Capital Additions EOP Basis – This adjustment
adds capital additions to plant in service during
2017,2 including the AD, depreciation expense and
ADFIT associated with these additions, on a 2017 EOP
basis.

2 For each of the rate base adjustments for the periods 2016 AMA through
2019 AMA, distribution-related capital expenditures associated with
connecting new customers to the Company’s system were excluded. The Pro
Forma adjustments do not include the increase in revenues from growth in
the number of customers from the historical test year to the 2018 and 2019
rate years, and therefore, the growth in plant investment associated with
customer growth should also be excluded.
Schuh, Di 8
Avista Corporation
Also included is an adjustment for the impact of asset
retirements in 2017.3 This adjustment also includes
annualizing depreciation expense on the plant-in-
service at December 31, 2017. These additions are also
carried forward to each adjustment discussed below to
a 2018 AMA, 2018 EOP and 2019 AMA basis by extending
AD, and ADFIT balances.
(3) 2018 Capital Additions AMA Basis – This adjustment
adds the capital additions to plant-in-service during
2018 on an AMA basis. This adjustment includes the
depreciation expense, AD and ADFIT associated with
these additions on an AMA basis. This also includes
an adjustment for the impact of asset retirements in
2018.4 These additions are also carried forward to
the 2019 AMA rate base calculation, by extending AD
and ADFIT balances.
(4) 2018 Capital Additions EOP Basis – This adjustment
modifies the capital additions to plant in service
during 2018 to reflect a 2018 EOP basis. This
adjustment includes the depreciation expense, AD and

3 The 2016 test year and the adjustment from AMA 2016 to EOP 2016 captures
the impacts of retirements for 2016. The adjustment to capital rate base
for 2017 through 2019 includes reducing rate base and depreciation expense
for the impact of retirements.
4 Ibid.
Schuh, Di 9
Avista Corporation
ADFIT associated with these additions on an EOP
basis. This also includes an adjustment for the
impact of asset retirements in 2018.5 These additions
are also carried forward to the 2019 AMA rate base
calculation, by extending AD and ADFIT balances.
(5) 2019 Capital Additions AMA Basis – This adjustment
adds the capital additions to plant-in-service during
2019 on an AMA basis. This adjustment includes the
depreciation expense, AD and ADFIT associated with
these additions. This also includes an adjustment for
the impact of asset retirements in 2019.6
In addition to the explanation of adjustments provided
herein, the Company has also provided workpapers, both in hard
copy and electronic formats, outlining the additional details
related to each of the adjustments.

IV. DEPRECIATION STUDY 17
Q. What is Avista’s plans for its next depreciation 18
study? 19
A. Avista’s next depreciation study is currently 20
underway and is expected to be completed towards the end of
2017. After completion of this study the Company will file a

5 Ibid.
6 Ibid.
Schuh, Di 10
Avista Corporation
petition in all of its jurisdictions to request to change
depreciation rates as determined by this study.
Q. Why is this depreciation study being performed? 3
A. The objective of a depreciation study is to recommend
depreciation rates to be utilized by Avista for accounting and
ratemaking purposes. Also, it is sound accounting practice to
periodically update depreciation rates to recognize additions
to investment in plant assets and to reflect changes in asset
characteristics, technology, salvage, removal costs, life span
estimates and other factors that impact depreciation rate
calculations. The Company last changed its depreciation rates
in Idaho effective January 1, 2013 for Common Plant and April
2, 2013 for Idaho Direct Plant, per Order No. 32769 in Docket
Nos. AVU-E-12-08 and AVU-G-12-07. The depreciation rates
approved by the Commission were developed from a study based on
depreciable plant balances at December 31, 2011 for
Transportation assets and December 31, 2010 for all other
assets. The Company typically conducts depreciation studies at
approximately five-year intervals. For the current study,
Avista hired Gannett Fleming, Inc. to undertake a depreciation
study of its depreciable electric, natural gas and general plant
in service as of December 31, 2016.
Q. Is it important to maintain uniform depreciation 23
rates on common plant by the Company’s three jurisdictions?
Schuh, Di 11
Avista Corporation
A. Yes. Avista will be making similar depreciation
filings with the Washington Utilities and Transportation
Commission and the Public Utility Commission of Oregon. It is
important that the Company maintain uniform plant accounts and
depreciation rates on common plant that are allocated to the
various services and jurisdictions in which the Company
operates. In the event different depreciation rates or methods
were to be ordered, it would result in multiple sets of
depreciation accounts and records that would need to be adjusted
annually for changes in allocation factors. This would impose
a costly administrative burden on the Company and unnecessary
expense for the Company’s customers.
13
V. REPORTING FOR CAPITAL ADDITIONS 14
Q. Is the Company proposing to report to the Commission 15
on completed capital additions as part of its proposed Two-Year 16
Rate Plan? 17
A. Yes. For the Rate Year effective January 1, 2019, the
Company is proposing to file with this Commission an “Idaho
Electric and Natural Gas Capital Report” by October 15,
2018(approximately 75 days) prior to new rates going into
effect. The annual report would provide actual balances through
August 31, 2018 with estimated balances through December 31,
2018, and updated estimates for 2019 on an AMA basis. (EOP net
Schuh, Di 12
Avista Corporation
plant balances including impact of A/D and ADFIT). This would
provide updated information to the Commission regarding the net
plant which will be in-service and serving customers prior to
new rates going into effect beginning January 1, 2019. This
report will include project detailed information regarding
transfers-to-plant.
Q. Does this conclude your pre-filed direct testimony? 7
A. Yes, it does.