20171128Andrews Rebuttal.pdf

DAVID J. MEYER
vrcE ,RESTDENT AND cHrEF couNSEL EE[llH0y 2g Ail B: Sg
REGULATORY & GOVERNMENTAL AFFAIRS r_1i,!nAVrsrA coRpoRATroN rt\ttlt^[^1]p.LiQ
p.o. Box 3t2t rr-\Jr\ ilTllij"lr.;i C0F,{},,{iSSlOil
1411 EAST MISSION AVENUE
SPoKANE, WASHINGTON 99220-312'7
TELEPHoNE: [phone]
FACSIMILE: [phone]
DAV] D . MEYERGAVI STACORP . COM
BEFORE THE IDAHO PT'BIJIC UTILITIES COMMISSION
IN THE MATTER OF THE APPL]CATION
OE AV]STA CORPORATION FOR THE
AUTHORITY TO INCREASE ]TS RATES
AND CHARGES FOR ELECTR]C AND
NATURAL GAS SERVICE TO ELECTRIC
AND NATURAL GAS CUSTOMERS IN THE
STATE OF IDAHO
EOR AV]STA CORPORATION
(ELECTRIC AND NATURAL GAS)
CASE NO. AVU-E-17-01
CASE NO. AVU-G-L7_O!
REBUTTAL TESTIMONY
OE
ELIZABETH M. ANDREVIS
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I. INTRODUCTION
A. PJ.ease state your na.me, business address,
present position with Avista Corporation.
and
A. My
address is
employed by
Requirements
name is El-izabeth M. Andrews and my business
7477 East Mission,Spokane,
as SeniorAvista Corporation
j-n the State and Federal Regulation Department
A. Have you previously provided direct testimony in
this Case?
A. Yes. My testimony covered accountj-ng and financial
data in support of the Company's Two-Year Rate PIan for the
period January L, 20LB through December 37, 2079. I
explained the pro formed operating resul-ts, i-ncluding
expense and rate base adjustments made to actual- operating
results. In addition, I incorporated the Idaho share of the
proposed adjustments of other witnesses in this case.
f also provided direct testimony in support of the
electric and natural gas revenue requirement efements of the
Settfement Stipulation filed wj-th the Commission on October
20, 2011 .
A. What is the scope of your testimony in this
proceeding?
A. My testimony is in response to the testimonies of
Sierra CIub witness Dr. Hausman and reiterated by fdaho
Andrews, Di
Avista Corporation
Washington. I am
Manager of Revenue
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I.
II.
]II.
rv.
Conservatj-on League witness Mr. Otto, concerning two capital
project additions (one project in 20L6, and one in 2011)
related to SmartBurn controls on Colstrip Units 3 and 4. I
wil} also discuss the Company's plans for its in-progress
depreciatj-on study, as it relates to CoIstrip.
A. Are you sponsoring any exhibits to be introduced
in this proceeding?
A. No.
A table of contents for my testimony is as fol-Iows:
Description Page
fntroduction
Party Positj-ons on Settlement Agreement
Colstrip Capital Additions
Depreciation Study
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II. Party Positions on SettLement Agreement
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A. Before discussing the issues raised by Dr. Hausman
and Mr. Otto, what is each of their positions with regard to
the Settlement Stipulation fiJ.ed by the Settling Partiesl on
October 20, 2Ol7?
A. Representing the Sierra Club, Dr. Hausman does not
recommend a change to the proposed revenue requirements or
1 The "Settling Parties" co1fectively include the Company, the Staff ofthe Idaho Public Utilitles Commission ( "Staff' ) , Clearwater PaperCorporatlon ("C1earwater"), Idaho Forest Group, LLC ("Idaho Forest"),and the Community Action Partnership Association of ldaho ("CAPAI"). TheIdaho Conservation League (*ICL"), and the Sierra Club, did not join lnthe Settfement Stipulation.
Andrews, Di
Avista Corporation
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rates in this proceeding, stating:
The majority of issues included in the Settlement
Agreement have nothing to do with CoIstrip, and
therefore I hesitate to disturb a revenue requirement
agreement that reflects a balance among the interests
of a diverse group of stakeholders.2
He does however,propose the Commission
costs associated with
require Avista to
remove
3 and
future
its Colstrip Units
2 Hausman, Di, p.
3 Hausman, Di, p.4 Otto, D;-, p. 2,
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11. 2-3.
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the capital
4 SmartBurn capital investment for purposes of aII
proceedings.311
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For its part, Mr. Otto on behalf of the Idaho
Conservation League, also supports the overa.Il revenue
requirement.a/s However, consistent wj-th Dr. Hausman, Mr.
Otto requests the Commission find the SmartBurn projects
imprudent and order the Company to remove the cost from
Avista's rate base going forward.6
A. PJ.ease describe the capital projects of concern by
Dr. Hausman and Mr. Otto.
A. Both witnesses, Dr. Hausman and Mr. Otto, have
concerns regarding two capital projects completed at
Colstrip Units 3 and 4 for which Avista has 15% ownership.
Specifically, one project was completed in June 2076, and
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5 He does, however, not support the provisj-on that limlts the ability of
the Company to reduce base rates during the Two-Year Rate Plan lf there
are reductions as a resul-t of the Company's depreciation study or the
pending Hydro One acquisitlon of Avlsta. Otto, Di, pp 3:,22-4:20.6otto, Di, p. 11, 11. 79-20.
Andrews, Di
Avista Corporation
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one prolect was completed in
These two projects,
June 2071.
AS discussed further in the
witness Mr. Thackston, both
of SmartBurn controls for
Colstrip
satisfy
emj-ssions of nitrogen oxides ( "NOx" ) at the
facility as part of a strategic decision to
environmental objectives.
rebuttal- testimony of Company
relate to the install-ation
As discussed further
capital projects in 2076
$359, 000, respectively, for
prevention emission
installation of a very
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be1ow, Idaho's share of these
and 201'7, total $685,000 and
a total- of $1,044,000.7
I do not. As discussed by Mr. Thackston,
were done in an effort to proactively install-
the lastT1
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11 a. Do you agree with Dr. Hausman or Ml. Otto's
12 proposal that the Cornrnission should order Avista to
13 effectively \\write off" these two specific SmartBurn
L4 projects?
A. No,
these projects
SmartBurn as
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available, l-ow cost, NOx polluti-on
control prior to the expected
expensive emission post-combustion
? When recommending the project disallowance amount for the IPUC toconsider, Dr. Hausman incfudes capital project amounts of $1,993,516 forthe 201,6 capital pro j ect and $ 1 ,04'l , 47'7 f or the 2071 capital pro j ect .
These amounts were provided ln response to Sierra Club data requests, inwhich the Company did not explain that these balances were Avistaproject total-s rather than only Idaho's share of the projects.
Andrews, Di
Avista Corporati-on
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control technoJ-ogy caIIed Sel-ective Catalytic Reduct j-on
(SCR) in future years.
decisionIn the 2072
in many surrounding States and the Sierra CIub was al-so
litigating against Colstrip to require SCR for alleged "New
Source Review" violations. The owners, therefore, chose to
install SmartBurn in an effort to manage a future regulatory
obligation in a strategic and cost-effective manner.s
Furthermore, these projects were prudent and moved into
timeframe, SCRs were being ordered
10 service in 2016 and 20L1 , thereby benefiting customers. The
11 SmartBurn technology was install-ed on one unit (Unit 4) in
L2 2016; the same rationale supported the instal-Iation on the
13 other (Unit 3) tn 201-'7. This Commission previously included
74 in rates the capital expenditures on SmartBurn for Unit 4 in
15 Case No. AVU-E-16-03, with no party taking issue with this
76 investment.
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18 III. Colstrip Capital Additions
19 9. Please provide the overall cost of the SmartBurn
20 Colstrip capital projects and ldaho's share of these
2l projects.
22 A. Table No. 1 below, shows the two specific Colstrip
23 Units 3 and 4 SmartBurn projects.
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Andrews, Di
Avj-sta Corporati-on
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1 Tab].e No. 1
Table No. 1 separates these two projects between: 1) the
project completed in June 2076, which was already included
in Avista's 2076 general rate case (Case No. AVU-E-16-03)
and reflected in current rates; and 2) the project completed
in June 2011, incfuded j-n this proceeding and a part of the
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13 overall revenue requirement agreed to by the Parties in the
14 Settl-ement fil-ed wj-th the Commj-ssion on October 21, 2077.
15 Accordingly, only the project completed in 2011 is at issue
16 j-n this proceeding, since the project completed in 2016 is
I7 already built into rates as used and usefuJ- plant in the
1B prior rate case (Case No. AVU-E-16-03). Indeed, no party
19 objected to this plant item in the prior case. Essential-Iy,
20 the Sierra CIub is seeking to col-IateralIy attack a prior
27 Commission determination approving rates as just and
22 reasonable, at least as to the SmartBurn installed on Unit
23 4. (See Order No. 33682 at Case No. AVU-E16-03.)
24 As can be seen in Table No. 1 above, the total cost to
25 Avista, based on its 15% ownership share, for the 2016 and
Andrews, Di
Avista Corporation
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Colstrip Projects lncluded in Case No. AVU-E-17-01
Sierra Club
Data Response Project Description Project lD
Project ln Service
Cost WA Share lD Share Date
Revenue Gross Rate
Requirement Base
SC_3-7 Smartburn-Nox 10023705 t,047,4I7 88,467 35&950 6l30l2ot7 S 98,682 $ fSA,gSO
Colstrip Projects !ncluded and Approved in Case No. AVU-E-16-03
ln Service
Date
Revenue Gross Rate
Requirement Base
Project
DataResponse ProjectDescription ProjectlD Cost WAShare lDShare
SC_3-6 Smartburn-NOx 10022t11 1,993,516 1,308,345 ffi'L7t 6/30120L6 S 73,635 S ees,rZr
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2011 projects, is approximately $1,994,000 and $1,047,000
respecti-vely.e This share i-s further al-Iocated to Avista's
Idaho and Washington jurisdictions based on the Company's
Production,/Transmission (P /T) all-ocation ratio of
approximately 34% Idaho/ 66e" Washington. Idaho's share,
therefore, for the 20L6 and 2077 capital projects, is
approximately $685,000 and $359,000, respectively, for a
total- of $1,044,000.
A. What is the revenue reguirenent impact on customer
rates for these two projects?
A. As shown in Table No. 1 above, the annual revenue
requirement currently included in customers' rates (approved
i-n Case No. AVU-E-16-03 and effective January 7, 207'7),
related to the June 20L6 completed SmartBurn project, is
approximately $74, 000.
The incremental revenue requirement amount incl-uded in
this case, and included in the Settl-ement Stipulation, is
approximately $39, 000.
e The overall cost for the SmartBurn project instafl on Unit 4 in 2076
was less expensive than the SmartBurn project lnstal-f on Unit 3 in 2071,primarily because the design work compatible for both units was
completed in 2076.
Andrews, Di
Avista Corporation
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III. DEPRECIATION STT'DY
A. Dr. Hausman refers to the depreciation rates for
the Colstrip projects as "stal.e" and r\outdated", and that
the Coryany should have filed its depreciation
direct filed case.lo Do
study prior
to filing the Company's
A. No, I do not.
rates are not stale
requirement to incl-ude
The Company's
or outdated,
you agree?
depreciationcurrent
and there was no
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the depreciation study within the
Company's current general rate case in Idaho. The Company's
prior depreciation study, completed in 201,2, reviewing plant
as of December 31 , 201-0 , was approved by the Commi s s ion j-n
201,3. Due to the length of time to complete a depreciation
study, and the fact a utility typically would not expect its
assets to change so significantly to requi-re a depreciation
study sooner, the Company typically completes its
depreciation studies approximately every five years. The
timing of this depreciation study is consistent with that
plan: utilizrng 20L6 plant bal-ances, completion of study in
late 20!1, with Commission filings and expected changes in
rates in each of its juri-sdictj-ons in 2018.
A. IVtren does Avista orpect to file its depreciation
study with this Comission?
A. The Company expects to file its depreciation study
Andrews, Di
Avista Corporation
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roHausman, Di, p.36, I1.3-6.
1 in the first quarter of 2018. The parties
the study, and the appropriate
of these changes can be determined by the
at that time.
will- have the ti-me
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they need
accounting
Commission
to review
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A. Does Avista agree with Mr. Hausman that because of
the in-process depreciation study, it may be premature for
the Parties to agtree on a revenue requirement in this
case?11
A. No, I do not. Dr. Hausman assumes the new
depreciation study may have an impact on the depreciable
1i-ves of the Colstrip Units 3 and 4 assets, due to a
shortened depreciable Iife of these assets agreed-to in a
recent Puget Sound Energy case in the State of
Vflashington.)'2/L3 However, the Company's current depreciation
study for Colstrip goes out to 2034-2036. Based on
preliminary discussions with the consul-tant performing the
Company's study, these dates wilI not materially change.
The appropriate place to raise concerns about
accelerating the depreciation schedule for Colstrip should
occur in the regulatory filing for the updated depreciation
llHausman, DI, p. 37, 11. 4-5.l2Hausman, DI, pp. 35-36.13The shortened period discussed by Dr. Hausman appears to be based on anegotiated settl-ement wlth Puget Sound Energy regardi-ng the depreciationperi-od for that company's 25 percent ownershlp interest in ColstripUnits 3 and 4. That settlement has not been approved by the WashingtonUtilities and Transportation Commission yet and the shortened perlod isnot otherwise supported by a depreciation study.
Andrews, Di
Avista Corporation
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schedule, including that of CoIstrip.
A. Does that conclude your pre-fiIed rebuttal
testimony?
A. Yes, it does.
Andrews, Di
Avista Corporation
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