20191231Application.pdf

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Avista Corp.
l4l1 East Mission P.O. Box 3727
Spokane. Washington 99220-0500
Telephone [phone]
Toll Free 800-727-9110
December 30, 2019
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Diane Hanian, Commission Secretary
Idaho Public Utilities Commission
P O Box 83720
Boise, ID 83720-0074
RE: Application of Avista Corporation for an Accounting Order Authorizing Accounting
Treatment of Costs Related to AFUDC (Allowance for Funds Used During Construction).
Dcar Ms. Hanian:
Enclosed is an original and seven (7) copies of Avista's Application for an Accounting Order
Authorizing Accounting Treatment of Costs Related to AFUDC (Allowance for Funds Used During
Construction).
Please direct any questions on this matter to Elizabeth Andrews at [phone] or myself at
(50e) 49s-8620.
P Ehrbar
Director of Regulatory Affairs
Avista Utilities
pat.ehrbar(d.avistacorp.com
s09-495-8620
Enclosures
DAVID J. MEYI]R
VICE PRESIDENT AND CHIEF COUNSEL FOR
REGULAI'ORY AND GOVERNMENTAL AFFAIRS
AVISTA CORPORATION
P.O.BOX3-127
I411 EAST MISSION AVENUE
SPOKANE, WASHINGTON 99220-37 27
TELEPHONE: [phone] I 6
david.mevcr/davistacorp.com
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN TIIIr MATTER OF l'HE APPLICATION OF'
AVISI'A CORPORATION, D/BiA AVISTA
UTILITIES FOR AN ACCOUNTINC ORDER
AUTHOzuZING ACCOLINl'ING AND
RATEMAKING TREAI'MENT OI AFUDC
(ALLOWANCE FOR FLTNDS USI-]D DURING
coNSTRUC frON)
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CASE NO, AVU-E-19. I'
CASE NO. AVU-G-19. O ?
APPLICATION OF AVISTA CORPORAIION
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I. INTRODUCTION
Avista Corporation, doing business as Avista Utilities (hereinafter "Avista" or
"Company"), at l4l I East Mission Avenue. Spokane, Washinglon. pursuant to Section 61-
524 Idaho Code and Rule 52 of the ldaho Public Utilities Commission ("Commission Rules
of Procedure"), hereby applies to the Commission for an order authorizing the accounting and
ratemaking treatment detailed in this Application related to a portion of its calculated
Allowance for F'unds Used During Construction (*AFUDC').
The Company filed an accounting application related to AFUDC on February 1, 2019.
which the Commission approved on May 2,2019 (Order No. 34326 in Docket Nos. AVU-E-
19-02 and AVU-G-19-01). In that application, the Company requested approval to defer
costs related to AFUDC, for both the difference calculated between using the State AFUDC
rate and the FERC AFUDC rate as a regulatory asset (i.e. FERC Account No. 182.3) and for
federal income taxes associated with AFUDC. In that filing, the Company had only
requested to del-er the difference between the State and FERC AFUDC rate lor 2018 and
going forward. This application seeks approval to reclassily a porlion ofAFUDC calculated
beginning in 2010 and through 2017, based on recommendations ofFERC.
Avista is a utilily that provides service to approximately 387,000 electric customers
and 251,000 natural gas customers in a 26,000 square-mile area in eastern Washington and
northem ldaho. Avista Utilities also serves approximately 103,000 natural gas customers in
Oregon. The largest community served by Avista is Spokane, Washinglon, which is the
location of its main officc.
Pursuant to Commission Rule of Procedure 201, the Company requests that this
filing be processed under the Commission's rules for Modified Procedure.
Application of Avista Corporation
CaseNo. AVU-E-I9- & AVU-G-I9-
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I Communications in rel'erencc to this Application should bc addressed to:
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David J. Meyer, Esq.
Vice President and ChicfCounsel for
Regulatory & Govemmental Affairs
P. O. Box372'7
l4l I E. Mission Avenue, MSC l3
Spokane. Washington 99220-37 27
Telephone: [phone]
Facsimile: [phone]
E-mai l : david. meyel?)Etlistacorp.oon
Patrick Ehrbar
Director of Regulatory Affairs
Avista Corporation
P. O.Box3727
14l I E. Mission Avenue, MSC 27
Spokane, Washington 99220 -37 27
Telephone: [phone]
Facsimile: [phone]
E-mail lrick.ehrhar(z vlstaco c0lI
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III. BACKGROUND
The Federal Energy Regulatory Commission (FERC) notilied Avista in December
2017 that they would be auditing the Company's compliance with Form I and 3-Q, and
accounting requirements ofthe Uniform System of Accounts under CFR part 101. During
the course of the audit (which was completed in September 2019), FERC staff made
recommendations regarding the recording of AFUDC and the tax treatment of the equity
Application of Avista Corporation
Case No. AVU-E-I9- & AVU-C-I9-
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II. SUMMARY OF APPLICATION
Avista requests Commission approval to def'er a portion of the costs related to
AFUDC, as follows:
For the period January l, 2010 through December 3l , 2017, authorize the Company to
defer the AFUDC dillerence calculated between using the State AFUDC rate and the
FERC AFUDC rate as a regulatory asset (i.e. FERC Account No. 182.3), which would be
included in rate base, and amortize this regulatory asset over the composite remaining lifb
olthe plant-in-service, as described in this Application. This proposed treatment would
result in no impact to overall rate base, nor impact present customers' rates.
I component ol AFUDC. Based on those discussions, thc Company implemented revised
accounting in 2018 lbr AFUDC. The Commission approved the revised accounting on
May 2,2019 (Order No. 34326). Thc order stated the following:
"We have reviewed the Application and the comments of Commission
Staff. Based on our review, we find it reasonable to approve the
Application. There will be no impact on the Company's overall rate
base, and the move will align the Company's practices with FERC
procedures."
In the Company's original filing, the Company stated that as Avista was still under
audit by FERC, no adjustmenls had been agreed upon or made for years prior to 2018 for
either item identified by FERC.
Avista submits this second Application to comply with a recommendation that
FERC made in its final audit report dated September 19, 2019. included as Exhibit l.
FERC has recommended that Avista reclassily a portion ofAFUDC recorded from January
I , 2010 going forward from plant rate base (FERC Account No. l0l - Plant in Service) to a
regulatory asset rate base (FERC Account No. 182.3 - Regulatory Asset (AFUDC)).
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IV.EXPLANATION OF DEFERRAL AND PROPOSED ACCOUNTING
TREATMENT
AFUDC represents the cost olboth the debt and equity funds used to finance utility
plant additions during the construction period. As prescribed by regulatory authorities.
AFUDC is capitalized, during construction, as part of the cost of utility plant. The
offsetting entries are recorded in the income statement as follows: a) the debt component
of AFUDC is credited to FERC Account No. 432 - Allowance for Borrowed Funds Used
During Construction and b) the equity component of AFUDC is credited to FERC Account
No. 419.I - Allowance for Other Funds Used During Construction. -fhe Company is
Application of Avista Corporation
Case No. AVU-E-I9- & AVU-G-I9-
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permitted, under established regulatory practices, to recover the capitalized AFUDC
through its inclusion in rate base and the provision for depreciation after the related utility
plant is placed in service. Avista capitalizes AFUDC in Washington, Idaho and Oregon on
a monthly basis using the Washington Utilities and 'l'ransportation Commission (WUTC)
approved Rate of Retum (ROR) lrom the most recent general rate case.l The most recent
approved ROR (7.50%) was from the 2017 general rate case (Docket Nos. UE-I70485 and
UG-170486) effective May 1,2018.
On the other hand, the AFUDC FERC rate (6.l2Yo tor 2018) is calculated based on
guidance in the Uniform System of Accounts under CFR part 101. FERC has indicated
that if the FERC AF-UDC rate is different than the state approved rate, the AFUDC
capitalized should be split between utility plant and regulatory asset. The amount
capitalized in utility plant would be based on the FERC AFUDC rate. The amount
included in the regulatory asset would be the difference belween the State AFUDC rate
(currently 7.50%) and the FERC AFUDC rate (6.12o/o for 2018).
Using the proposed accounting described above, the Company's level of rate base
and depreciation/amortization expense does not change. Based on the recommendations by
FERC in the Audit Report, Exhibit l, at page 26, the Company has recalculated the
AFUDC amounts from January I, 2010 through December 3l, 2017 to determine the
amount of excess AFUDC that had been capitalized using the state AFUDC rate over as
compared to the FERC rate. On a system basis, this amount is approximately $37.7
million. After adjusting for accumulated depreciation, the Company would transfer
approximately $32.8 million fiom plant rate base (FERC Account No. 101 - Plant in
I The use of Avista's ROR authorized by the Washington Commission, its majorjurisdiction, as the AFUDC
rate has been consistently used in ldaho since the 1980's.
Application of Avista Corporation
Case No. AVU-E-I9- & AVU-G-I9-
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Service) to a regulatory asset rate base (FERC Account No. 182.3 - Regulatory Asset
(AFUDC)).2
V. REQUEST FORRELIEF
WHEREFORE, Avista respectfully requests that the Commission issue an Order
approving the requested defbrred accounting and ratemaking treatment, as follows:
For the period January 1, 2010 through December 31,2017, authorize the Company to
defer the AFUDC difference calculated between using the state AFUDC rate and the
FERC AFUDC rate as a regulatory asset (i.e. FERC Account No. 182.3), which would be
included in rate base, and amortize this regulatory asset over the composite remaining life
ofthe plant-in-service, as described in this Application.
The Company requests that the matter be processed under the Commission's
Modified Procedure rules through the use of written comments.
DATED at Spokane, Washington, this 30th day ofDecember 2019.
AVIS'fA CORPORATION
By
Patrick Ehrbar
Director of Regulatory Attairs
Avista Corp
r ldaho electric share is approximately 58.5 million and ldaho natural gas share is approximately $0.8 million
Application of Avista Corporation
Case No. AVU-E-l9- & AVU-G-I9-
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VERIFICATION
STAI.U OI WASIIIN(iTON )
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County ofSpokanc )
Patrick Ehrbar, being duly sworn, on oath deposes and says:
That he is the Director of Regulatory Atlairs of Avista Corporation;
That he has read the foregoing Application, knows the contents thereof, and
believes the same to be true.
Patrick Ehrbar
Subscribed and sworn to before me this 30th dav of December. 2019.
Notary Public in and fbr the State
Washington, residing in Spokane
Application of Avista Corporation
Case No. AVU-E-19- & AVU-G-I9-
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