20201229COVID 19 Deferred Accounting Report.pdf

Avista Corp.
141 1 East Mission P.O.Box3727
Spokane, Washington 99220 -05 N
Telephone [phone]
Toll Free 800-727-9170
December29,2020
JanNoriyuki, Secretary
Idaho Public Utilities Commission
11331 W. Chinden Blvd.
Boise, lD 83714
Case No. GNR-U-20-03 (including Consolidated Case Nos. AVU-E-20-03 and AVU-
G-20-03) - Avista COVID-I9 Deferred Accounting Report
DearMs. Noriyuki:
Avista Corporation, dba Avista Utilities (Avista or the Company), hereby submits its
COVID-I9 deferred accounting report, per Commission Order No. 3471 8 of Case No. GNR-U-
20-03 (includingConsolidatedCaseNos. AVU-E-20-03 and AVU-G-20-03) atpage 7:
... Any utillty deferring uncollectible bad debts related to the Emergency must also file a
report with the Commission by December 31, 2020 detailing its current deferral amount
and projections for additional deferrals if the utility is still suspending disconnections at
the time of reporting.
Per CommissionOrder,atpage 10, utilities were granted authorityto accountfortheunanticipared,
Emergency-related expenses due to the COVID-l9 public health emergency by booking the
expenses as regulatory assets (accorurt I 82.3) for possible recovery through future rates, under tre
following conditions : Each utility -
Re
a
a
must analyze the CARES Act NOL provision and apply any benefit to offsetting the
deferral account created for Emergency-related expenses. The utilities must also account
for the decreases in expenses related to reduced employee tavel and taining, etc. due to
the stay-at-home order, with any reduction in these expenses being applied to offset tre
deferral account balance;
may book incremental uncollectible bad debts incurred during the Emergency and
stemming from the suspension of late payment fees and disconnections. In determining
the incremental amounts to be booked to the regulatory asset, utilities should use 2019
levels as theirbaseline - exceptAvista as described in Order 34718.r Any amounts above
baseline levels may be booked in the regulatory asset account;
may include in the regulatory asset account the 2019 level of late fees for the period ftat
late fees were waived, representing the revenue from late fees that would have otherwise
been received absent the Emergency;
may book any additional incremental O&M expenses related to the Emergency into ttre
regulatory asset account;
may track costs related to reduced sales for customer classes that are not included in the
FCA - if the utility has an FCA;
must file a report with the Commission by December 31, 2020 detailing the expenses
deferred and any reduced sales revenues tacked;
may not apply a carryingcharge to theirEmergency-related defenal accounts duringfie
deferral period; and
before any utility may recover expenses booked in the regulatory asset account they must
come before the Commission for a prudencyreview ofthose expenses the utility seeks to
recover.
Following the guidance per Commission Order as discussed above, the Company has identified
and/or deferredthe following direct costs andbenefits associated with the COVID-I9 pandemic.
CARES ActTax Benefit
As described in the Supplemenal filing on May 1,2A20 in Case No. GNR-U-20-03 (including
Consolidated Case Nos. AW-E-20-03 and AVU-G-20-03),the Company will receive a beneft
from carryingback its 2019 NOL to the five prior tax years. The benefit is approximately $7.9M
on a system basis, or approximately $ 1 .6 million allocated to Idaho electric and $ 648,000 allocated
to Idaho natural gas. The Company filed the carry back form duringQ4 2020 and recorded this
benefitasanoffsettoCOVID-l9deferralcosts. Idaho'sshareofthisbenefithasbeendefenedto
account 254 Other Regulatory Liabilities offsetting deferred expenses.
The Company filed several accountingmethod changes fortax purposes wittr its 2019 federaltax
return. The IRS Tax Forms 31 15, Application for a Change in Accounting Method, were filed
with the Commission on October 19,2020. The method changes provided a significant amount of
deductions thatresulted in a 2019 netoperating loss. Withoutthese method change deductiong
the Company would not have recognized a net operating loss and would therefore not have
received this benefit. The service allocations fromthese additional method change deductions are
beingused to allocate the benefit.
The original allocations as provided in the Supplemental filing were based on the historical
allocationofthetaxrepairs deductiononly,since the Companydidnothave estimates forthe otrcr
method changes, as a best estimate for the new method change deductions. This allocation has
now been updated with the actual method change deductions from the 2019 federal tax return
Therefore, the benefits that are actually available to Idaho customers vary from the amount
estimated in the original filing.
I Per Order No. 347 18 Avista will be allowed to use the levels set in its most recent rate cases AVU-E-I 94 and
AW-G-I7-01.
Page? of 4
a
a
a
a
a
Bad DebtExpense
The Company's bad debt expense has significantly increased as a result of the COVID-19
pandemic. ln order to determine the incremental impact on bad debt expense, the Company
compared the actual bad debt expense incurred to the amounts set in each of its jurisdiction's most
recent general rate cases. In all instances, bad debt exceeded the levels built into customers' rabs.
As of October 3l , 2020, actual bad debt expense incurred for Idaho has exceeded the amount
authorized by approximately $ 1.6 million for Idaho electric and $475,000 for Idaho natural gas.
The Company will supplement this report with final deferred bad d$t expense through Decenrber
2020 when available during the first quarter of 2021. Incremental bad debt expense is being
deferred to account 182.3 Regulatory Assets.
Late Pavment Fees/Reconneetion Charges
The Company's Idaho late fee revenues (electric and natural gas in total) have decreasod
approximately $400,000 from March 1 , 2020through November 3 0, 2020 as comparedto the same
period in 2019. The Company is currently analyzingrevenue recognition accountingrules and has
not recorded a defenal for any jurisdiction at this time. In addition, reconnectioncharges are also
being analyzed and a deferral determination will be made at a later date.
Other Incremental Direct Costs
Otherpandemic related response increases and reductions in expenses and revenues will continue
tobeanalyzed;nodeferralhasbeenrecordedinanyjurisdictiontodate. Basedoncompletearmual
data, adetermination as to what is appropriate to additionally include in the defenal account 182.3
Regulatory Assets for additional expenses and254 Other Regulatory Liabilities for additional
benefits to customerswillbe made by the end ofthe year.
Short-Term Loan InterestlFees
In April 2020, the Company entered into a short-term credit agreement in the amount of $100
million to provide additional liquidity to the Company due to the pandemic. The incremental
interest expense and loan fees associated with obtainingttre term loan were analyzed. For Idalro,
as short-term debt is excluded in the authorized capital stucture and d$t costs, actual costs of trc
term loan, net of interest income, were calculated to be approximately $ 160,000 for Idaho electic
and $34,000 for Idaho natural gas as of November 30, 2020. Additional costs associated with
interest expense and loan fees will be recorded forDecembq2020 of approximately $ 5,000 for
Idaho electric and $ 1,000 for Idaho natural gas.
Reduced Sales Revenues
The Company does not plan to fack or request recovery of costs related to reduced sales for
customer classes that are not included in the FCA.
As noted above, all pandemic related response increases and reductions in expenses and reve,lrues
will continue to be analyzed,through year-end 2020. As a result, additional adjustnents to the
deferralbalances will be recorded forldaho electric and Idaho natural gas in Account 182.3
Regulatory Assets for additional expenses and 254 Other Regulatory Liabilities for additional
benefits to customers by year-end Decemb er 2020. The total net deferral balance estimatod for
2020 is not available at this time. The Company will supplement this report with actual final
deferred balances when available during the first quarter of 2021 .
Page 3 of4
The Company has not applied a carrying charge to its Emergency-related defened 182.3
Regulatory Asset I 254 Other Regulatory Liabilities balances during the defenal period. And
finally, in seeking recovery of Avista's net deferred expenses booked in accourt 182.3 Regulabry
Asset / 254 Other Regulatory Liabilities, Avista will come before the Commission for a prudency
review of its deferred expenses in a future proceeding.
Please direct any questions regarding this report to me at 509-495-8601 or
liz. andrews(E avistacorp. com.
Sincerely,
lsl Elizabeth Andrews
Elizabeth Andrews
Sr. Manager, Revenue Requirements
Page4 of4