20171228final_order_no_33953.pdf

Office of the Secretary
Service Date
December 28,2017
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION )CASE NOS.AVU-E-17-01
OF AVISTA CORPORATION DBA AVISTA )AVU-G-17-01
UTILITIES FOR AUTHORITY TO )
INCREASE ITS RATES AND CHARGES FOR )
ELECTRIC AND NATURAL GAS SERVICE )ORDER NO.33953
On June 9,2017,Avista Corporation filed an Application seeking authorityto increase its
rates for electric and natural gas service in Idaho.Avista proposed a two-year rate plan that
would increase annual electric revenues by $18.6 million (7.9%on a billed basis)on January 1,
2018,and $9.9 million (4.2%)on January 1,2019,and would increase annual natural gas
revenues by $3.5 million (5.7%)on January 1,2018,and $2.1 million (3.3%)on January 1,2019.
The Commission issued a Notice of Application and granted intervention to Clearwater
Paper,Idaho Conservation League (ICL),Idaho Forest Group,the Community Action
Partnership Association of Idaho (CAPAI),and Sierra Club.Order Nos.33808,33804,33815,
and 33829.The Commission also set deadlines for the parties to file testimony and exhibits,and
scheduled public workshops and a technical hearing.See Order Nos.33825 and 33837.
The parties held settlement discussions,and on October 20,2017,Staff filed a proposed
stipulation and settlement ("Settlement")and a motion to approve it.The Settlement was signed
and supported by all parties except Sierra Club and ICL.The Commission issued an Order
providing Notice of the Settlement and amending the case schedule.Order No.33920.The
amended schedule included deadlines for prefiled testimony in support of the Settlement,reply
testimony,and rebuttal testimony,and retained the date for the technical hearing.Id.
Commission Staff held public informational workshops in Lewiston and Coeur d'Alene
on August 30 and 31,2017.The Commission convened a public hearing for customers in Coeur
d'Alene on November 30,2017,and a technical hearing in Boise on December 8,2017.At the
technical hearing,the Commission closed the public comment period and set a deadline for the
parties to file any briefs.See Order No.33947.ICL,Sierra Club and Avista timely filed briefs.
Having reviewed the record,the Commission now issues this Order approving the Settlement.
ORDER NO.33953 1
OVERVIEW OF THE SETTLEMENT
The signing parties proposed a two-year rate plan for electric and natural gas service.
The signing parties agreed that Avista could implement tariff schedules designed to increase
annual base electric revenue by $12.9 million (about 5.1%billed),effective January 1,2018,and
$4.5 million (about 1.7%billed),effective January 1,2019.Natural gas base revenue would
increase by $1.2 million (about 1.9%billed),effective January 1,2018,and $1.1 million (about
1.8%billed),effective January 1,2019.See Settlement and Stipulation (Settlement)at 3 (filed
on October 20,2017).
The parties also agreed to a 9.5%return on equity and a 50.0%common equity ratio.Id.
at 4.Under the terms of the Settlement,Avista's capital structure and resulting rate of return
would be:
Component Capital Structure Cost Rate of Return
Debt 50%5.72%2.86%
Common Equity 50%9.50%4.75%
Total 100%7.61%
Id
The signing parties also agreed the Company would not file an electric or natural gas
general rate case to increase base rates before May 31,2019,and any such rates would not go
into effect before January 1,2020.Id.at 3.This stay-out provision excludes annual filings for
power cost adjustments,fixed cost adjustments,purchased gas adjustments,and other
miscellaneous annual filings.Id Avista also agreed to abstain from requesting deferred
accounting or to create regulatory assets during the two-year stay-out period,except in
extraordinary circumstances.See id at 3.
The Settlement includes several other provisions,including provisions about further
studying cost of service issues and convening a working group to consider fundingincreases for
the Low-Income Weatherization and Energy Conservation Education Programs.See id at 12-
18.Specifically,if interested parties agree on funding increases,the Company will make any
necessary filing(s)with the Commission by December 31,2017.Id at 15.The Company also
agreed to work with interested parties on rules for natural gas service and natural gas meter
placement,and on implementing service quality measures for Idaho customers.See id.at 15-16.
ORDER NO.33953 2
The Settlement would cause the followingchanges to Avista's base rates for electric and
natural gas service (shown by type of service and effective date):
ResultingPercentage Increase by Electric Service Schedule
Effective JanuaryI,2018:
Increase in Inavase in
Rate Nche<ltale liase Rates Billing Rates
Remicntal Schedule I 5 l'<5 US
General Scruce Scledules l I/12 5 D'r i 20
1.arge General Scruce Sdicdule,21/22 5 J'<5 7',
Exha I,uye GencialSeinte Scheduk 25 i 4',I /'r
Ukarwater Paper Scledule 25P 4 O',I NE
Pumping Scruce Scheduks 31/32 5 9',b l'
Streel &Area Ixht,Scheduk,41-4N 5 2',5 l'
Oven:Il 5.1';FAL<
Effective Janurary 1,2019:
Incrvase in Inctrase in
Rate Schedtilt liase ILstes Billing Rates
Residential Schedule I I 9',2 s'
General Service Schedules I 1/12 1 "<2 l'
Large General Service Schedules 21/22 I 85 2 l'
Extra Large General Service Schedule 25 i l'.2 2'
Clearwater Paper Schedule 25P l l',2 2'
PumpingService Schedules 31/32 2 D',2 45
Street &Area Lights Schedules 41-48 )S 1 E'.
Overall 1.89 2.39
ResultingPercentage Increase by Natural Gas Service Schedule
Effective January1,2018:
Inurase in Inuvase in
Rate Schedule Base Rates ljillingRate
General SelvLe Schedule 101 3 24 2 2'
large General Seruce Schedules i l 1/112 |46 0 7'
InlerruptihkSeniceScheduk,131/l32 000 00'
l ransportatx>n Sersk e Scleduk 146 i 05 A D'
Specul Connacts Sdeduk 148 0 0'<0 O'
Overall 2.9%099
ORDER NO.33953 3
Effective January 1,AI R
Inemase in Increase in
Id.at 13-14.
COMMENTS AND TESTIMONY OF PARTIES
Commission Staff,CAPAI,and the Company filed testimony supporting the Settlement.
ICL and Sierra Club filed replytestimony in opposition,Avista filed rebuttal testimony,and ICL,
Sierra Club and Avista filed post-hearingbriefs.
I.Testimony in Support of the Settlement
A.The Company
The Company testified the Settlement is in the public interest and is a fair,just and
reasonable compromise of the parties'positions.Andrews Direct at 9.The Company noted that
the Settlement is "the end result of extensive audit work conducted through the discovery
process,includingvarious on-site audit visits by Commission Staff,and hard bargaining"by the
settling parties.Id.(footnote omitted).
Company witness Andrews explained the Settlement is in the public interest.Id at 10.It
is the product of the give-and-take of negotiation that produced a just and reasonable result.Id.
It is supported by evidence demonstrating the need for rate adjustments to recover necessary
expenditures and investment not offset by a growth in sales margins.Id.The Settlement enjoys
broad-based support from a variety of constituencies represented in this case.Id.Finally,it
provides base rate certainty over the next two years.Id.
In sum,the Settlement strikes a reasonable balance between the interests of the Company
and its customers,including low-income customers,and therefore represents a reasonable
compromise among differing interests and points of view.Id at 27.
B.CAPAI
CAPAI unconditionallysupported and joined in the Settlement,believing it to be in the
interests of Avista's customers.See Zamora Direct at 4-5.In particular,CAPAI supported the
ORDER NO.33953 4
formation of a working group to consider funding increases for the Low-Income Weatherization
and Energy Conservation Education Programs administered by local Community Action
Partnership agencies.Id.at 7-8.CAPAI supported an increase in funding and stated that the
program "not only provides benefits to low-income Avista customers,but to the general body of
ratepayers."Id at 8.CAPAI hoped the working group would be able to answer any outstanding
questions necessary for parties to agree to an increase.Id
C.Staff
Staff supported the Settlement.Lobb Direct at 2.In preparing for the case,Staff audited
the Application and identified adjustments it would recommend in four general categories:1)
rate of return;2)capital investment and operations and maintenance expenses;3)salaries;and 4)
miscellaneous test year expenses.Id at 8-10.
The Settlement specifies a return of 9.5%,while in the Application,the Company
proposed a return on common equity of 9.9%.Id at 4,13-14.Staff reasoned that the agreed-
upon lower return is consistent with the return on equity of similar Northwest utilities and allows
Avista to "maintain its financial viabilityso it might attract new capital from the market to fund
new capital investments and refinance maturing debt issuances."Id at 14.
Regarding the Settlement's revenue requirement increase in 2018,Staff believed the
Settlement represents a "reasonable compromise of adjustments that may or may not have been
accepted [if the matter went to]hearing."Id.at 15.Staff supported the Settlement's revenue
requirement increase in 2019 because the components of the increase are relatively known and
measurable.Id.at 16.Further,the increases are included in rate base not for the whole year,but
only part of the year based on when the projects came online.Id.at 17.Staff also testified in
support of other components of the Settlement.Id.at 18-24.
Further,Staff believed that the rate case stay-out provision "has real value to customers
by prohibiting Company requests for regulatory assets or expense deferrals"during the stay-out
period,which ensures base rates will not increase after the stay-out period ends due to costs
incurred (and deferred)during the two-year rate plan.Id.at 16.
In sum,based on its investigation and analysis,Staff believed the proposed Settlement is
fair,just,and reasonable and in the public interest,and that the Commission should approve it.
Id.at 2.
ORDER NO.33953 5
IL Testimony in Opposition to the Settlement,Company Rebuttal,and Post-Hearing Briefs
ICL and Sierra Club ("opposing parties")oppose the Settlement.They do not oppose the
agreed-upon revenue requirement,nor the proposed return on equity portions of the Settlement.
The primary issue they oppose is inclusion in rate base of expenditures for the SmartBurn
investments (nitrous oxide (NOx)emissions controls)at Colstrip Units 3 and 4,and other
Colstrip-related issues.The Company testified in rebuttal.ICL,Sierra Club,and the Company
each filed post-hearing briefs.
A.ICL's Testimony and Post-Hearing Brief
ICL opposed the Settlement because it "inappropriately allows Avista to collect from
Idahoans the cost of SmartBurn projects at Colstrip,"which ICL concluded are not legally
required,not economically beneficial to Idahoans,and not effective at improving air quality.
Otto Direct at 4-5.ICL believed the SmartBurn projects were not required by the Regional Haze
Rule under the Clean Air Act or Montana's Implementation Plan.Id.at 5-9.ICL also referred
to the Sierra Club's testimony in asserting that the SmartBurn projects are unlikely to optimize
any future selective catalytic reduction (SCR)controls that might be required,and in asserting
that the SmartBurn projects are not currentlymeaningfullyreducing NOx emissions.Id.at 8-10.
ICL also opposed the two-year stay-out provision,believing it appropriate to adjust base rates to
reflect the results of the upcoming depreciation study and to reflect any costs or benefits from
HydroOne's acquisition of Avista.Id at 3-4.
ICL supported certain Settlement provisions,including the increased fixed charges and
the collaboration to consider funding increases for low-income weatherization.Id at 2-3.ICL
also strongly supported exploration of service quality and performance metrics.Id at 3.ICL
took no position on other provisions.Id at 2.
ICL acknowledged that the Settlement's revenue requirement "is the product of
compromise"and that "any adjustment necessitates recalculating rates."Id at 10.Instead of
adjusting the revenue requirement,ICL recommended the Commission "find the SmartBurn
projects imprudent and remove the cost from Avista's rate base going forward."Id ICL also
recommended Avista be required to "provide transparent and complete analysis for any future
capital spending at Colstrip"and "adopt a more rigorous approach to reviewing and challenging
Colstrip projects proposed by the plant operator Talen."Id at 10-11.ICL suggested the
ORDER NO.33953 6
Commission apply the above recommendations as conditions on approval of the Settlement
under Rule 276.Id at I 1.
According to ICL,the "decision to install SmartBurn was based on speculation regarding
future legal obligations,"and not on any legal requirement,when the decision was made around
2012 through to the actual installation in 2016 and 2017.ICL Br.at 4-5.ICL argued that Avista
has not established that the projects were necessary to meet a legal obligation or provide reliable
service,nor has it established that the projects were the least-cost,least-risk alternative to reduce
environmental effects and allow reliable service to continue.Id at 7.
B.Sierra Club's Testimony and Post-HearingBrief
Sierra Club asserted the Settlement is not in the public interest because it fails to remove
from rate base,capital spending (on SmartBurn)that was unnecessary and imprudent.Hausman
Direct at 3,6.Sierra Club recommended the Commission either reject the Settlement or
condition its approval on acceptance,per Rule 276,of the following:
(1)removal of $3,040,933 from rate base going forward,associated with the
installation of SmartBurn equipment on Units 3 and 41;
(2)direction that Avista adopt and exercise more rigorous review and approval
procedures for future capital expenditures at Colstrip Units 3 and 4;
(3)if the Settlement is rejected,that the Commission hold this case open and
consolidate it with Avista's next depreciation filing (which should include
updated end-of-life assumptions for Units 3 and 4 in this proceeding);and
(4)if the Commission accepts the Settlement,that the Commission clarify that
nothing in this proceeding precludes further adjustments to rates pursuant to
Avista's upcoming depreciation filing.
Id.at 4-5,47.Sierra Club acknowledged its recommended changes to rate base would normally
flow through to the revenue requirement,but stated it is not recommending a change to the
revenue requirement or rates in this proceeding.Id at 5.Sierra Club recognized the revenue
requirement in the Settlement represents a compromise among the parties,and the majority of
the issues in the Settlement "have nothing to do with Colstrip."Id
Sierra Club asserted the Clean Air Act's Regional Haze Program did not require
installation of SmartBurn for control of NOx,nor did any other state or federal requirement.Id.
at 12-19.Sierra Club argued that installing SmartBurn does not negate the possible need to
'In rebuttal,Avista provideda corrected cost of Idaho's share of the projects on both units of $1,044,000.See
Andrews Rebuttal at 7.
ORDER NO.33953 7
install SCR,and even if SmartBurn is a useful component of future SCR equipment,installing it
up to a decade early was not prudent.Id at 20-26.According to Sierra Club,SmartBurn has
resulted in only a very small reduction in the emissions rate.Id at 22-23.Sierra Club argued
Avista's review of the SmartBurn projects,prior to approval,was inadequate.Id at 28-31.
Avista should have identified its concerns regarding the project and raised them with the other
Colstrip owners,even if Avista is unable by itself to veto a project.Id at 30-31.
Sierra Club noted it cost more to install SmartBurn on Unit 4 in 2016 than to install
SmartBurn on Unit 3 in 2017,and questioned whether the test year for Avista's 2016 rate case,
Case No.AVU-E-16-03,improperly included some of the Unit 3 project costs with the Unit 4
project costs.Id at 32-33.Sierra Club argued the Commission can and should remove the costs
of SmartBurn on both units going forward (but not change existing rates).Id at 33-34.
Specifically,Sierra Club argued that Case No.AVU-E-16-03 settled "without a direct or implicit
finding of fact or law regarding the prudence of capital expendituresat Colstrip Unit 4,"and the
Commission "would therefore not be overturningany agreed-upon prudence finding related to
SmartBurn on Unit 4"if it removed those costs from rate base.Id at 34;Technical Hearing Tr.
at 38-41.
Finally,Sierra Club objected to the Company's assumptions that the depreciable lives of
Colstrip Units 3 and 4 end in 2034 and 2036 respectively.Hausman Direct at 35,38.Sierra
Club submitted that both Colstrip units will likely go out of service by 2025,and the Company
should accelerate its end-of-life assumptions to at least 2027 for both units.2 Id.at 42.Sierra
Club asserted that if the Company is allowed to assume such "an unrealisticallylong lifetime for
depreciation purposes,future ratepayers or utility shareholders will have to make up the shortfall
for a resource from which they are receiving no benefit."Id.at 45.
In its post-hearing brief,Sierra Club reiterated that Avista did not have to install
SmartBurn to meet a regulatory compliance deadline,and if installing it was discretionary,
Avista did not provide an adequate record on which to determine prudency.3 Sierra Club Br.at
1.According to Sierra Club,SmartBurn is unlikely to materially affect the requirement or
timing to install SCR.Id.at 2.Even if SmartBurn would reduce the costs of SCR-and Sierra
2 Sierra Club asserted this wouldmatch assumptions made by Colstrip co-owners.Hausman Direct at 43.
3 Avista did not provide any cost/benefit or other analysis showing how much money would be saved;did not
discuss the risks and rewards of installation vis-a-visthe Regional Haze Rule,and did not provide analysis of its
decision to proceed with SmartBurn in 2016/2017 rather than waiting to see what the compliance obligations would
actually be.Sierra Club Br.at 2.
ORDER NO.33953 8
Club purports that there is no evidence in the record to support that assertion-those savings will
not materialize if Colstrip is shut down before SCR is installed.Id at 3.Sierra Club argued the
Commission should not require Idaho customers to pay for the Company's SmartBurn
investments without evidence supporting its decision to make them,and when evidence from the
Sierra Club and ICL shows the decision was imprudent.Id
Sierra Club also clarified the Regional Haze Rule and what factors Montana will consider
when looking at a long-term emissions strategy for Colstrip Units 3 and 4.Id at 3-4.
Specifically,Sierra Club argued that having overall emissions within the "glide path"discussed
in testimony (see Technical Hearing Tr.at 58-59)is not enough-statesmust still consider,for
specific plants,four factors required by the Regional Haze Rule.4 Id at 4.According to Sierra
Club,Montana must apply the four factors to determine whether it is reasonable to install
emissions controls like SCR on Colstrip Units 3 and 4.Id Previous installation of SmartBurn
on those units will not affect the analysis.Id
Sierra Club also indicated Colstrip emissions data are reported to the Environmental
Protection Agency and are publicly available.Id at 5.Sierra Club's witness,Dr.Hausman,
accessed the data and summarized it in his testimony.Id Sierra Club recommended the
Commission rely on the data of record that was subjected to rebuttal testimony and cross-
examination,rather than on Avista witness Thackston's summary of the data at the hearing.Id
C.Avista Rebuttal Testimony and Post-HearingBrief
Avista explained Idaho's share of the SmartBurn project on Unit 4 in 2016 is actually
$685,000 and Idaho's share of the project on Unit 3 in 2017 is actually $359,000,for a total of
$1,044,000.Andrews Rebuttal at 7.Avista explained it cost more to install SmartBurn on Unit
4 in 2016 than Unit 3 in 2017 because the Unit 4 cost included design work that was compatible
with both units (thus,the Unit 3 cost in 2017 did not include that work).Id.at n.9;Technical
Hearing Tr.at 29-30.
Avista disagreed with Sierra Club and ICL's recommendation to remove the SmartBurn
projects'cost from rate base.Andrews Rebuttal at 4.According to Avista,the projects were
installed as the "last available,low cost,NOx pollutionprevention emission control prior to the
expected installation of a very expensive emission post-combustion control technology [SCR]in
4 The four factors are (1)the costs of compliance;(2)the time necessary for compliance;(3)the energy and non-air
quality environmental impacts of compliance;and (4)the remaining useful life of any potentially affected sources.
Id.at 4.
ORDER NO.33953 9
future years."Id.at 4-5.Avista described that in the "2012 decision timeframe,SCRs were
being ordered in many surrounding States"and Sierra Club was litigating against Colstrip to
require SCR.Id.at 5.At the time,Avista believed SCR could be required in the units in the
2020s.Thackston Rebuttal at 14.The Colstrip owners thus installed SmartBurn "in an effort to
manage a future regulatory obligation in a strategic and cost-effective manner."Andrews
Rebuttal at 5,Thackston Rebuttal at 8.Avista explained SmartBurn was expected to "reduce the
first increment of NOx"in the most cost-effective way,would be an integral part of any future
control technology,and would provide several years of boiler data to be used in the eventual
design and installation of SCR or other control technology.Thackston Rebuttal at 10-11.Avista
also explained it reduced implementation costs by installing SmartBurn on the units during
scheduled outages.Id.at 11.
Avista asserted the SmartBurn installation has met the guaranteed contractual emission
rate reduction and has improved NOx removal by 6%.Id at 12.Avista questioned why Sierra
Club objected to the SmartBurn investment in this case,when it did not raise concerns about the
SmartBurn investment in Puget Sound Energy's recent general rate case before the Washington
Utilities and Transportation Commission.Id at 12-13.Puget Sound Energy has a larger
ownership share of Colstrip Units 3 and 4 and thus a larger associated cost for SmartBurn.Id
According to Avista,the SmartBurn projects were prudent and moved into service in
2016 and 2017,thereby benefiting customers,and no party objected to includingthe investment
on Unit 4 in rate base in Case No.AVU-E-16-03.Andrews Rebuttal at 5.Avista asserted Sierra
Club's and ICL's recommendations to remove the cost of Unit 4 from rate base going forward,
after it was already included in Case No.AVU-E-16-03,amount to a collateral attack on a prior
Commission determination approving rates as just and reasonable.Id.at 6.Avista argued it
provided the same investment-related information to parties in this case and in the previous case.
Technical Hearing Tr.at 39-40.
In addition,Avista responded to Sierra Club's assertions regarding its oversight of
Colstrip capital decisions.Avista "actively exercises its ownership rights"and reviews projects
individuallyand as a group with the other Colstrip owners.Thackston Rebuttal at 15.The
owners review plant operations and projects at least every other month.Id Avista also
explained that the owners,their customers,and the plant operator,Talen,all have the same
financial interests to keep costs low while meeting all regulations.Id.at 16.Avista and the
ORDER NO.33953 10
other owners "strategically manage the risk to both our customers and shareholders for the
known and possible regulatory obligations at both the federal and state levels,while managing
reliability and cost of all of our generatingresources."Id
Finally,the Company explained it expects to file its depreciation study with the
Commission in the first quarter of 2018,when the parties can review the study and the
Commission can determine the appropriate accounting treatment for the changes.Andrews
Rebuttal at 8-9.Avista explained that based on "preliminary discussions with the consultant
performing the Company's study,"the depreciable lives for the units in Avista's study will not
change from what is currentlyused (2034-2036).Id.at 9.Avista asserted the regulatory filing
for the depreciation study case is the appropriate place to raise concerns about the depreciation
schedule for Colstrip.Id.at 9-10.In the technical hearing,Avista witness Andrews clarified that
Avista would expect changes in depreciation rates-not retail rates-in 2018 due to the new
depreciation study.Technical Hearing Tr.at 49.
In its post-hearing brief,Avista asserted the only contested issue in this case is the
suggestion that SmartBurn investment should be disallowed going forward.Avista Br.at 3.
Avista asserted the depreciation rates for Colstrip are not at issue here,as no depreciation studies
are before the Commission.Id Avista reiterated that,as to the investment in Unit 4,Sierra Club
is seeking to revisit a prior Commission determination that rates were just and reasonable (in
Order No.33682,Case No.AVU-E-16-03).Id at 4.In both the 2016 case and this case,the
Company produced information about SmartBurn through discovery.Id No party objected to
the investment in the 2016 case and the same rationale for including the investment also
supported the investment in Unit 3.Id
Avista asserted that,if Sierra Club and ICL are suggesting it write off the two SmartBurn
projects,then Sierra Club and ICL are collaterallyattacking Order No.33682,which approved
Avista's 2016 rate case settlement,and are directly attacking the Settlement and revenue
requirement here,which Sierra Club and ICL say they do not want to disturb.Id Avista
indicated it would not have joined the Settlement if it had to expense a $1 million write-off for
SmartBurn,which "most certainly"would re-open discussions around the revenue requirement
in the Settlement.Id at 5.
Avista thus requested the Commission approve the Settlement in its entirety and reject
any suggested disallowances by Sierra Club and ICL.
ORDER NO.33953 11
PUBLIC COMMENTS AND TESTIMONY
Sixteen customers testified at the customer hearing on November 30,2017.All opposed
Avista's use of coal or rate increases due to spending on coal.Several also advocated for more
transparency regarding Avista's decision-making on Colstrip.
In addition,the Commission received over 60 customer comments regarding the
Application or Settlement.S The vast majority of these were from residential customers who
strongly oppose any rate increase.Many of the commenters indicated they are retired or on fixed
incomes and are unable to afford a rate increase.Several customers objected to executive pay
and Company spending on advertising and sponsorships.Several customers opposed Avista's
use of coal or investments in Colstrip.Finally,a few customers expressed concern relating to the
pending merger of Avista and HydroOne.
COMMISSION FINDINGS AND DECISION
The Commission has jurisdiction over this matter under Idaho Code §§61-502 and 61-
503.The Commission has the express statutory authorityto investigate rates,charges,rules,
regulations,practices,and contracts of public utilities and to determine whether they are just,
reasonable,preferential or discriminatory,or in violation of any provision of law,and may fix
the same by Order.Idaho Code §§61-502 and 61-503.
Under Rule 276 of the Commission's Rules of Procedure,a settlement proposal is not
binding,but must be reviewed and approved by the Commission as "fair,just,and reasonable,in
the public interest,or otherwise in accordance with law or regulatory policy."IDAPA
31.01.01.276.The Commission "will independently review any settlement proposed to it to
determine whether the settlement is fair,just and reasonable,in the public interest,or otherwise
in accordance with law or regulatory policy."Id
The Commission has reviewed the Application,Settlement,testimony,and comments.
The testimony at the technical hearing and at the public hearing,and the public comments,
greatly contributed to our understanding of the issues.We appreciate the time taken by the
parties and members of the public to provide testimony and comments.
6 One customer opposed the Company's use of radio-frequency "smart meters,"citing to health concerns.Afterreviewingthosestatements,the Commission treated those comments as a formal complaint,opened an independent
docket,and issued a summons to the Company.See Case No.AVU-E-17-11.
ORDER NO.33953 12
Based on our review of the record,we find that the Settlement is fair,justand reasonable
and we approve it.Under the terms of the Settlement,Avista will implement tariff schedules
designed to increase annual base electric revenue by $12.9 million (about 5.1%billed),effective
January 1,2018,and $4.5 million (about 1.7%billed),effective January 1,2019.Natural gas
base revenue would increase by $1.2 million (about 1.9%billed),effective January 1,2018,and
$1.1 million (about 1.8%billed),effective January 1,2019.These rate changes result in
significantlyless additional revenue than Avista originally sought.
The Settlement resulted from hard bargaining and eventual agreement by a diverse group
of Avista's customers and stakeholders.It includes provisions that will benefit customers-
including the stay-out provision,consideration of funding increases for low-income
weatherization and conservation education,and consideration of service rules.In particular,we
find that the stay-out provision does not preclude Avista from applying to reduce base rates if
circumstances warrant.As such,we find that the Settlement is in the public interest and is fair,
just and reasonable.
ICL and Sierra Club ask us to reduce rate base by the amount Avista spent on the
SmartBurn projects at Colstrip,but not to disturb the revenue requirement agreed to in the
Settlement.We find their arguments unpersuasive.Based on the record before us,we conclude
that Avista's investments in the SmartBurn projects were prudent when made.We find that the
SmartBurn equipment,while not required,was a cost-effective way to incrementally reduce NOx
emissions now,thereby likely reducing the size and cost of future emissions controls.See id at
10-11.The record also demonstrates that installingSmartBurn now would allow Avista to collect
boiler data for use in designing future emissions controls.See id.
Further,the Company's witness testified that the investment in SmartBurn was
reasonable even if the units are shut down early.Technical Hearing Tr.at 74.The SmartBurn
equipment has reduced NOx emissions consistent with the manufacturer's expectations.See id.
at 72-73;Thackston Rebuttal at 12.Based on the evidence in the record,we conclude that the
investments were prudent and reasonably contemplated to reduce future investments.As a
result,we conclude the investments should remain in rate base,consistent with the Settlement.
We find ICL's and Sierra Club's arguments to the contrary unpersuasive.Sierra Club's concerns
are somewhat belied by the evidence that Sierra Club did not oppose the SmartBurn investments
in Puget Sound Energy's recent rate case before the Washington Utilities and Transportation
ORDER NO.33953 13
Commission.See Thackston Rebuttal at 12-13.Puget Sound Energy owns a larger share of
Colstrip Units 3 and 4 than Avista,and thus had a larger share of the SmartBurn costs.Id
We also find that Avista's upcoming depreciation study filing is the appropriate forum
for discussions of the depreciable lives for Colstrip Units 3 and 4.Having that discussion in the
depreciation study filing will ensure that all interested parties have adequate notice and
opportunity to review it.
ICL,Sierra Club,and members of the public raised concerns regarding the adequacy and
transparency of Avista's analysis and decisions regarding Colstrip,and about the environmental
and other effects of coal-fired power plants.We encourage all the utilities we regulate to be
inclusive and transparent in their review and decision-making processes.We expect Avista to be
cognizant of this as the Company moves forward in making decisions regarding Colstrip.
Regardless,we find the investments in SmartBurn to date to be reasonable and in the best
interest of Avista's customers.
INTERVENOR FUNDING
On December 22,2017,CAPAI timely filed a Petition for Intervenor Funding,seeking an
award of $9,387.00.See CAPAI's Petition for Intervenor Funding.Intervenor funding is
available under Idaho Code §61-617A,which declares it is the "policy of [Idaho]to encourage
participation at all stages of all proceedings before this Commission so that all affected
customers receive full and fair representation in those proceedings."The statute empowers the
Commission to order any regulated utility with intrastate annual revenues exceeding $3.5 million
to pay all or a portion of the costs of one or more parties for legal fees,witness fees and
reproduction costs not to exceed a total for all intervening parties combined of $40,000.Id.The
Commission must consider the followingfactors when deciding whether to award intervenor
funding:
(a)that the participation of the intervenor has materially contributed to the
decision rendered by the Commission;
(b)that the costs of intervention are reasonable in amount and would be a
significant financial hardship for the intervenor;
(c)that the recommendation made by the intervenor differed materially from
the testimony and exhibits of the Commission Staff;and
(d)that the testimony and participation of the intervenor addressed issues of
concern to the general body of users or consumers.
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Idaho Code §61-617A(2).To obtain an intervenor funding award,an intervenor must comply
with Commission Rules of Procedure 161 through 165.Rule 162 provides the form and content
for the petition.IDAPA 31.01.01 162.
We find that CAPAPs Petition satisfies the intervenor funding requirements.CAPAI
intervened and participated in all aspects of the proceeding,with a focus on low-income
customers.CAPAI's Petition shows that it worked closely with Avista and Staff throughout the
case.CAPAI noted its role in the Company agreeing to meet with CAPAI and other interested
parties to discuss the Company's Low Income Weatherization Assistance and Low Income
Conservation Education programs with the goal of increasing the programs'funding (a provision
addressing this was included in the Settlement).CAPAI describes that it continues to discuss
with the Company and Staff a possible fundingincrease and that CAPAI hopes a resolution will
be reached by the end of the year.
The Commission finds that CAPAI has materially contributed to the Commission's
decision.CAPAI's recommendation materially differs from Staff's testimony,and CAPAI's
participation addressed issues of concern to the general body of customers.Finally,we find the
costs and fees incurred by CAPAI are reasonable in amount,and that CAPAI,as a non-profit
organization,would suffer financial hardship if the request is not approved.
In reviewing Exhibit A of CAPAI's petition,we identified an error in the calculation of
the amount requested.Specifically,Exhibit A lists a total of 57 hours of work on this case.
However,in the calculation of CAPAI's attorney's expenses,Exhibit A shows that 59 hours
multipliedby the attorney's hourly rate for a total expense of $8,850.There is no documentation
to support an additional two hours.Therefore,we used 57 hours of work and recalculated the
attorney's expenses to be $8,550.00,to be added to the other expenses shown on Exhibit A.
Accordingly,we approve an award of intervenor funding to CAPAI in the amount of $9,087.00.
This amount will be recovered from Avista's residential electric customers.
ORDER
IT IS HEREBY ORDERED that the terms of the Settlement agreement regarding
Avista's Application in Case Nos.AVU-E-17-01 and AVU-G-17-01 is approved.
IT IS FURTHER ORDERED that the Company is authorized to implement revised tariff
schedules designed to recover the additional annual electric and natural gas revenue from Idaho
customers consistent with the terms of the Settlement,with revised rates effective January 1,
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2018,and January 1,2019 as set forth in the Settlement.The Company is directed to file the
appropriate tariff schedules with the Commission before those dates.
IT IS FURTHER ORDERED that CAPAI's Petition for Intervenor Funding is granted in
the amount of $9,087.00to be recovered from Avista's residential electric customers.
THIS IS A FINAL ORDER.Any person interested in this Order may petition for
reconsideration within twenty-one (21)days of the service date of this Order with regard to any
matter decided in this Order.Within seven (7)days after any person has petitioned for
reconsideration,any other person may cross-petition for reconsideration.See Idaho Code §61-
626.
DONE by Order of the Idaho Public Utilities Commission at Boise,Idaho this
day of December 2017.
PAUL KJELLANDER,PRESIDENT
KR EM O MISSIONER
ERIC ANDERSON,COMMISSIONER
ATTEST:
Diane M.Hanian
Commission Secretary
I:\Lega1\LORDERS\AVUE1701AVUGl701 cc2 Order.doc
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