The URL can be used to link to this page

Home My WebLink About20181203Updated Exhibits.pdfAvista Corp. l4l I East Mission P.O.Box 3727 Spokane. Washington 99220-0500 Telephone 5 09-489-0500 Toll Free 800-727-9170 Via Electronic and Overnight Mail November 30,2018 Commission Secretary Idaho Public Utilities Commission 472 W. Washington St. Boise, ID 83702 RE: Case Nos. AVU-E-17-09 and AVU-G-17-05 Enclosed for filing in the above-referenced Case Nos. are an original and 7 copies of the following documents: Exhibit 7, Schedule 5 - Direct Assignment Protocol updated on August 2,2018. Morris, Supplemental Testimony - Page 6 revisions, striking Q & A regarding Idaho Code 561-327. Exhibit 20, Schedule 1 - Page 63 of the 2017 Avista/Hydro One Proxy regarding the potential change of control payments to executive officers. A service list is attached, with the parties receiving a complete copy of this filing. If you have any questions, please do not hesitate to contact David Meyer at 509-495-4316 or david.meyer@avistacorp.com or Paul Kimball at 509-495-4584 or D. Ehrbar Director of Regulatory Affairs Enclosures A',,rtlIllSTA CERTIFIGATE OF SERVICE IHEREBY CERTIFY that lhave this 30th day of November,2018, served revised documents in the Merger Case Nos. AVU-E-17-09/AVU-G-17-05, upon the following parties, by mailing a copy thereof, properly addressed with postage prepaid to Diane Hanian, Secretary ldaho Public Utilities Commission 47 2 W . Washington Street Boise, lD 83720-5983 diane. hanian@puc. idaho.qov Brad M. Purdy Attorney at Law 2019 N 17th Street Boise, lD 83702 bmpurdv@hotmail.com Brandon Karpen Deputy Attorneys General ldaho Public Utilities Commission 472W. Washington Boise, lD 83720-0074 brandon. karpen@puc. idaho. gov Peter J. Richardson Richardson Adams PLLC 515 N. 27th Street Boise, lD 83702 peter@richardsonadams. com Norman M. Semanko Parsons Behle & Latimer 800 West Main Street, Suite 1300 Boise, lD 83702 NSemanko@parsonsbehle. com ecf@parsonsbehle.com Ronald L. Williams Williams Bradbury, P.C. P. O. Box 388 802 W. Bannock, Suite LP 100 Boise, lD 83702 ron@wi I liamsbradburv. com Larry Crowley The Energy Strategies lnstitute, lnc. PO Box 5146 Boise, lD 83705 crowleyla@aol.com Ben Otto ldaho Conservation League 710 N. 6th St. Boise, lD 83702 botto@idahoconservation. orq Dr. Don Reading 6070 Hill Road Boise, lD 83703 dreadinq@mindsprinq. com Dean Miller 3620 E Warm Springs Ave Boise, lD 83716 Deanimiller@cableone. net ---7/ Paul Kimball Mgr. Compliance and Discovery Aii,rrrrsrA DATE: TO: FROM: SUBJECT: August 2,20tg AllEmployees Ryan Krasselt, VP & Controller Accounting Policy for Direct Assignment of Costs Associated with the Merger of Avista Corporation and Hydro One Avista is required to record costs associated with the Merger in accordance with the Merger Commitments made in the various states and in the FERC order approving the merger as well as regulatory accounting requirements. The following policy defines the merger cost categories and how each category should be recorded. For questions regarding this accounting policy, please contact: Adam Munson, Director of Accountingexl.24TI, or Jennifer Smith, Senior State and Federal Regulatory Analyst at ext. 2098. Accountins for Costs lncurred to Facilitate the Transaction (Transaction Costs) - Proiect 77705315 Allcosts associated with activities incurred to facilitate the closing of the transaction are required to be recorded below the line to a non-utility account (FERC account No. 426500). The following Project and Task will be used for such expenses: Project #Project Description Task 7770531.6 Hydro One Avista Acquisition 426500 ll. Accounting for Transition Costs (lncludins Costs tncurred to ldentifv and Develop Strategic Benefits with Hvdro One) - Proiect 77705331 All costs directly incurred to identify and develop strategic benefits with Hydro One and any other transition costs are required to be recorded below the line to a non-utility account (FERC account No. a26500). Broadly, transition costs refer to all costs necessary post-transaction, to meld or find synergies in corporate cultures and processes. Examples of transition costs include, but are not limited to: . consolidation of technology,. optimization of purchasing,. broad deployment of resources and technologies, and. activities to make the aggregated corporation more efficient and effective. The following Project and Task will be used for such expenses: Avista Corporation Page 1 Exhibit No. 7 17-0g/AVU-G-17-05 P. Ehrbar. Avista Schedule 5, Page 1 of 3 Revised 81212018 Project #Project Description Task 77705331.Hydro One Transition Costs 426500 Revised November 28, 2018 This project and task will be used for activities which are general in nature and are not identifiable to a specific potential strategic benefit. Once a potential strategic benefit is identified and defined, a specific project andlor task shall be established for the purpose of recording cost to achieve, and approved by the Strategic Benefits Core Team. All transition costs will remain below the line unless approved for recovery by the appropriate regulatory authority. General transition costs will be considered for allocation to specific Strategic Benefits tasks as approved for recovery by the appropriate regulatory authority. lll. Sharins of Best Practices lf time and/or expenses are related to general sharing of best practices, costs are required to be charged "below the line". Please direct any questions regarding accounting for best practices to the contacts listed above. The following Project and Task will be used for such expenses: Project #Project Description Task 77705331 Hydro One Transition Costs 426500 lV. Direct Assignment of Costs to Hvdro One Post-Closins Following the date of closing, to the extent Avista employees dedicate time and incur costs supporting the operation of Hydro One, those costs will be directly assigned to Hydro One.lf 2 ln the future, if opportunities arise for the consolidation of certain Avista and Hydro One utility functions, where the utilities have an opportunity to benefit from specialized expertise or to achieve efficiencies, a) the Companies may directly assign or allocate any corporate or administrative costs, common costs, or costs incurred for the benefit of the Utility or Utilities, to a Utility or the Utilities, b) the Companies may procure any corporate or administrative services from a Utility or the Utilities for the Company's benefit, or c) the Companies may procure any corporate or administrative services from each other or agree to directly assign or allocate common costs to each other (Avista would file proposals with the Commission as required). All corporate services provided, and costs incurred, will be direct billed to Hydro One at cost and no margin or profit shall be included and no assets allocated, provided that any amount billed to Hydro lTime and costs incurred include, but are not limited to activities for the following: a) services by the Board of Directors, and executive, management, professional, technical and clerical employees; b) financial and accounting services, corporate governance and compllance services, legal services, audit services, information and technology services, treasury services, investor relations services, governmental and regulatory services, human resources services, communications services, payroll processing services, employee benefits participation, procurement and fleet management, tax and related services, contract negotiation and administration services, insurance and risk management services, environmental services and engineering and technical services; c) the use of office facilities, including but not limited to office space, furnlture, equipment, machinery, supplies, computers and computer software, communications equipment, insurance policies and other personal property; d) the use of automobiles, airplanes, other vehicles and equipment; 2 Likewise, if Hydro One employees were to provide support for Avista's utility operations, such costs would be directly assigned to Avista. The Company expects such assignment of costs, both to Hydro One and from Hydro One, to be relatively small since Avista will continue to operate as a standalone utility. Exhibit No. 7 Case Nos. AVU-E-1 7-09/AVU-G-1 7-05 Avista Corporation P. Ehrbar, Avista Page 2 Schedule 5, Page 2 of 3 Revised 81212018 Revised November 28, 2018 One shall be adjusted to the extent necessary to comply with any U.S. federal or Canadian transfer pricing or similar tax law. Avista will use the same methodology for direct assignment of costs to the proposed Hydro One subsidiary operations, as we currently do for existing subsidiary operations. The following Project and Task will be used for the accounting of such expenses: Project fl Project Description Task 777xxxxx Sub Billing - Hydro One 186200 Avista Corporation Page 3 Exhibit No. 7 Case Nos. AVU-E-1 7-09/AVU-c-1 7-05 P. Ehrbar, Avista Schedule 5, Page 3 of 3 Revised 81212018 1 2 3 4 5 6 1 B 9 REVISED November 27, 2018 copy of which is included as Exhibit No. 74, Schedule 1.) This is indicative of Avista's willingness to work with all affected parties. fr, +v+sta ttas eens eede S61 327 Ee Ehis Eransaetienz as iE relaEes Ee Ehe Eransfer ef preperEies Ee any publie ageney EhaE is erqanized er exisEs under Ehe larss ef any ether sEaEe, Avista witness GovernmenE RelaEiensi rri 11 presenE EesE*mor!r expla*n*nq Ehe IeqislaE*ve histery ef Ehis previsieni iEs purpesei and rshy iE deesn'E apply in Ehis ease, {n sherEi Ehe }egis}aE4ve hisEery malres iE abundanE}y elear EhaE Ehe purpese ef the sEaEuEei passed in 1951i rias te prevenE fublie Utility D*stsEieEs in WashingEon frem aequiring the preperEies ef thte WashinqEen WaEer Ferrer *nvester ersned uEiliEy and neE a munieipal uEilityi se even i€ Ehe ]egislaEien semehew Eeaehed eanadian ents*Eies iE weuld net apply Ee Hyd.re ene, A. llave Avista and Hydro One responded to other issues? 10 11 t2 13 T4 15 1,6 77 1B L9 20 2t 22 23 A. Yes. Avista and Hydro One 24 events in Ontari-o and how there are have explained recent sufficient protections Morris, Supp. 6 Avista Corporation Table of Contents For a narrative description ofthe terms and conditions applicable to the payments quantified in the table below, see the sections entitled "-Pavments to Erecutive fficers in Respect of Equilt' Awartls" and "-Change o.f Control Agreements" above. Potential Change of Contol Payt tents to Executive Oficers The tables below show (i) the compensation that may be paid or may become payable in connection with, or following, the consummation of the merger to each ofthe Company's named executive olficers identified in the most recent proxy statement with respect to the 20 I 7 annual meeting ofCompany shareholders and (ii) the aggregate compensation that may be paid or rnay becorne payable in connection with, or following, the consumnlation ofthe merger to the Company's eight other executive officers. Named Executi!'e Officer Scott L. Morris. Cltairman, Presiclent & CEO Mark T. Thics. Senir.tr l'ite President, CFO & Treusurer Dennis P. Vemrillion. Senior Vice President & ECO Marian M. Durkin, Senior Vice President. General Counsel, CCO & Corporate Secreta r.v Karen S. Feltes, Senior Vice President & CHRO Other Executive (f fficers Aggregate for Eight Other Executive Officers Severance (l ) $ 6,192,7sl s 2,478.889 s I,502,909 s 2,143.597 s 2,020,932 Value of Accel€reted Equity (2) $ 5,851,960 $ r,860.008 $ 1,894.636 $ l ,45 3,3 99 $ 1,.+53,399 Health Benefits (3) $ 32,949 $ 43,760 $ 43.760 $ 32,s20 s 32,520 Outplacement (4) $ 2s,000 $ 25.000 $ 25.000 2 5,000 2 5,000 Outplac€ment (4t $ 200.000 Section 280G Groslup (5) $ 4,692,976 s r,558.549 $0 $ 1,280,965 $ 1,239,266 Section 2E0(; CrosyUp (5) $ 905.204 Torrl (6) s 16,995,636 $ 5,966,206 $ 3,466,305 s 4,93 5,4 8 1 s 4,77 t,tt7 Total$ r4.381,001 $ $ Sererancc (l ) $ 7.445.351 Value of Accelerated Equity (2) $ 5,505,892 Health Benefits (3) $ 324.554 (l ) Seyerance. The estimated amounts listed in this column represent the aggregate value ofcash severance eaclr executive officer would be entitled to receive under his or her Change ofControl Agreenrent in connection with a qualifting termination at any time prior to the third anniversary ofthe effective ttme. Specifically, the executive officer would be entitled to a lump-sum payment equal to the sum of(i) an amount (the "Base and Bonus Severance") equal to three limes (for Messrs. Morris and Thies and Mmes. Durkin and Feltes) or two times (for Mr. Vermillion) the sum of the executive oflcer's (A) annual base salary as in effect rmmediately prior to the qualiSing termination, and (B) "highest annual bonus" (which means the greater of (x) the highest annual bonus paid in the last three full fiscal years prior to the effective time (annualized for partial years olemployment) and (y) the bonus paid for the most recently completed fiscal year (annualized for partial years ofemployment)); and (ii) an amount (the "Pro-Rata Bonus") equal to the executive oflicer's pro-rata highest annual bonus for the tennination year (prorated based upon the nurnber ofdays ofemploylnent with the Company until the tennination date). Severance payments are "double+rigger" in that they would be paid to the executive ofticer only ifsuch executive officer experiences a qualifuing termination at any time prior to the third anniversary ofthe effective time. As noted above in " Chunge o.f Control Agreenrents." thc Cornpany will arncnd thc Changc of Control Agrccmcnts for Mcssrs. Morris, Thics and Vcrmillion and Mmcs. Durkin and Fcltes to providc that cach such individual 63 Exhibit No. 20 Case Nos. AVU-E- I 7 -091 AYU -C- I 7-05 M. Thies, Avista Schedule l, Page I of I