20170619Application.pdf

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Avista Cory.
141 I East Mission P.O. Box 3727
Spokane. Washington 99220-3727
Telephone [phone]
Toll Free 800-727-9170
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Commission Secretary
Idaho Public Utilities Commission
472W. Washington St.
Boise, Idaho 83702-5983
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Re: Application of Avista Utilities for Approval of a Depreciation Rate
Dear Commission Secretary:
Enclosed for filing with the Commission is an original and seven copies of Avista's Application
for Approval of a Depreciation Rate. The Company is requesting approval on or before August 31,
20t7.
Please direct any questions regarding this filing to David Machado at [phone].
Sincerely,
. Meyer
Vice President and Chief Counsel for Regulatory and Governmental Affairs
Enclosures
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David J. Meyer
Vice President and Chief Counsel of
Regulatory and Govemmental Affairs
Avista Corporation
141l E. Mission Avenue
P. O.Box3727
Spokane, Washingtor 99220
Phone: [phone], Fa,x: [phone]
IN THE MATTER OF THE APPLICATION OF
AVISTA CORPORATION, dba AVISTA
UTILITIES, FOR APPROVAL OF
DEPRECIATION RATE
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BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
) CASE NO. AVU-E-17-q_3
) CASE No. AVU-G-l7-gr_
) APPLICATION OF AVISTA
) CORPoRATTON
I. INTRODUCTION
Avista Corporation, doing business as Avista Utilities (hereinafter Avista or Company),
at l4ll East Mission Avenue, Spokane, Washington, pursuant to Section 6l-525Idaho Code and
Rule 52 of the Idaho Public Utilities Commission ("Commission Rules of Procedure"), hereby
applies to the Commission for approval of a depreciation rate, on or before August 31,2017, for
the software investment portion of its Meter Data Management System. The Company proposes
to use a straight-line depreciation rate over 12.5 years for this software investment. The
Company requests that this filing be processed under the Commission's Modified Procedure
Rules.
Avista Corporation is a utility that provides service to approximately 378,000 electric
customers and 241,000 natural gas customers in a 26,000-square-mile area in eastem
Washington and northem Idaho. Avista also serves approximately 101,000 natural gas
customers in Oregon. The largest community served in the area is Spokane, Washington, which
is the location of the Company's main office.
AVISTA'S APPLICATION FOR NEW DEPRECIATION RATE PAGE 1
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Communications in reference to this Application should be addressed to:
Kelly O. Norwood
Vice Presidentof
State and Federal Regulation
Avista Corp.
P.O.Box3727
l4l I E. Mission Avenue, MSC 27
Spokane, Washington 99220-3727
Telephone: [phone]
Facsimile: (509) 495-885 1
E-mail : [e-mail]
David J. Meyer
Vice President and Chief Counsel of
Regulatory and Governmental Affairs
Avista Corp.
P.O.Box3727
141I E. Mission Avenue, MSC 27
Spokane, Washington 99220-3727
Telephone: [phone]
Facsimile: (509) 495-885 I
E-mail : [e-mail]
II. BACKGROI]ND
The Commission is empowered to ascertain and determine the proper and adequate rates
of depreciation of the Company's property used in the rendering of retail electric and natural gas
service under the provisions of Idaho Code Section 6l-525. Each utility under the Commission's
jurisdiction is required to conform its depreciation accounts to the rates so ascertained and
determined by the Commission. The Commission may make changes in such rates of
depreciation from time to time as the Commission may find necessary.
Avista implemented its current customer information system, Oracle CC&B ("CC&B"),
in February 2015, replacing the Company's legacy customer information system. CC&B
supports firnctions including customer billing, payment processing, credit, collections, field
requests, customer support, and customer service orders, among others.
Avista will implement a Meter Data Management ("MDM") system from Oracle in the
second half of 2017. Oracle Utilities Meter Data Management ("Oracle MDM") is a platform
including both computer hardware and software applications that provides robust data
AVISTA'S APPLICATION FOR NEW DEPRECIATION RATE PAGE 2
management capabilities. Oracle MDM gathers and processes data from any type, variety, or
brand of meter device. The application loads, validates, stores, and formats the data in ways that
facilitate business processes. Meter data information from this system will be integrated with
other Avista software applications that perform a range of business functions, such as customer
billing and the web presenfinent of customer usage data. The primary integration will be with
Oracle CC&B.
The MDM implementation will support the collection and storage of data from meters in
all of Avista's jurisdictions and will serve as the system of record for customer usage data. This
customer usage data will be integrated with CC&B to support the billing and customer support
functionality of that system. Additionally, this system will enable appointment scheduling and
optimized routing through the integration of the MDM's Service Order Management module
with Oracle CC&B. A majority of the investment associated with the implementation of the
MDM system is related to software. Because of the tight integration between the MDM system
and the Company's Oracle CC&B system, the Company is proposing to depreciate the software
investment associated with the MDM system over a 12.5 yew time frame to align with the
remaining useful life of the Oracle CC&B system.
III. PROPOSAL
Under Section 6l-525 Idaho Code, which authorizes the Commission to determine the
proper and adequate rates of depreciation of property used by a public service company, the
Commission may ascertain and by order fix the proper and adequate rates of depreciation of
utility property. Each utility must conform its depreciation accounts to the rates ordered by the
Commission.
AVISTA'S APPLICATION FOR NEW DEPRECIATION RATE PAGE 3
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Currently, the Commission has approved a depreciable life of five years for both software
and hardware, with a depreciation rate of 20.0 percent. For the MDM implementation, current
estimates indicate that the Idaho share of the MDM system represents approximately
$1.5 million of hardware and approximately $5.9 million of software.
As discussed earlier, the Company installed Oracle CC&B in February 2015. Based in
large part on the trend of other utilities that installed the same type of system, the Company
estimated the useful life of that system as 15 years. Avista proposed a depreciable life of l5 years
for the software component of CC&B, with a depreciation rate of 6.6 percent, which the
Commissions approved in each of the three states in which Avista operates. (For Idaho, see
OrderNo.33130).
The Company plans to replace Oracle CC&B in February 2030, which would be at the
end of its 15 year life. The Company believes the software component of the MDM system
should also be replaced at that same time, given how the two systems are interrelated. Since the
Company plans to implement the MDM system in the latter half of 2017, the life of the software
would be 12.5 yetus, to ensure it is fully depreciated by February 2030. Therefore, the Company
is requesting the Commission approve a depreciable life of 12.5 years for the software
component of the MDM system, with an annual depreciation rate of 8.0 percent.l Once the
MDM system is placed into service, Avista will begin depreciation on the investment.
Therefore, an approved depreciation rate is necessary to have in the August 2017 timeframe (the
point at which the implementation project is expected to be completed).
In discussions with its depreciation consultant, Gannet Fleming, Inc., the consultant
I This rate is the recipro cal of 12.5 years (i.e., I I 12.5 = 0.08).
AVISTA'S APPLICATION FOR NEW DEPRECIATION RATE PAGE 4
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indicated support for a 12.5 year life on the MDM software.2 Avista will use its currently
approved five-year life, or 20.0 percent depreciation rate, on the hardware component of the
MDM system.
For administrative and economic efficiencies, the Company prefers to maintain uniform
utility accounts, including depreciation rates, across its three state service territories. To maintain
consistent depreciation rates across all states, the Company has requested to use a depreciable
life of 12.5 years in Washington and Oregon. Avista anticipates receiving approval for this rate
from these states for the software component of the MDM system, which is system-allocated
plant. Maintaining consistent depreciation rates across all states is critical to avoid multiple sets
of depreciation accounts and records that would impose a costly administrative burden on the
Company and unnecessary expense for the Company's customers.
IV. REQUEST FOR RELTEF
WHEREFORE, Avista respectfully requests that the Commission issue an Order
authorizing the Company's use of a 12.5 year depreciable life, with a depreciation rate of 8.0
percent, for the software component of the MDM system. The Company requests that the
Commission make its determination on or before August 31,2017.
The Company requests that the matter be processed under the Commission's Modified
Procedure rules t}rough the use of written comments.
2 Avista is in the process of completing a depreciation study, which will include discussion of this life for the MDM
system. Following the completion of the depreciation study, the Company will file for updated depreciation rates,
which will include retail rate adjustments to reflect the overall impact of changes in depreciation rates. The
Company's recent general rate case filings (Case Nos. AVU-E-I7-01 and AVU-G-17-01) pro forma adjustment for
the capital addition associated with this MDM project utilizes a 12.5 year depreciable life. This application only
seeks approval ofthe depreciation rate, and will not affect retail rates.
AVISTA'S APPLICATION FOR NEW DEPRECIATION RATE PAGE 5
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Dated at Spokane, Washington this 16tr day of June 2017
AVISTA CORPORATION
BY
Kelly N
Vice President of State and Federal
Regulation
AVISTA' S APPLICATION FOR NEW DEPRECIATION RATE PAGE 6
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VERIFICATION
STATE OF WASHINGTON
County of Spokane
Kelly Norwood, being first duly swom on oath, deposes and says: That he is the
Vice President of State and Federal Regulation of Avista Utilities and makes this verification for
and on behalf of Avista Corporation, being thereto duly authorized;
That he has read the foregoing filing, knows the contents thereof, and believes the same
to be true.
SIGNED AND SWORN to before me this l6s day of June 2\l7,by Kelly Norwood.
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AVISTA'S APPLICATION FOR NEW DEPRECIATION RATE PAGE 7