20230712Andrews Testimony in Support of Settlement.pdf

DAVID J. MEYER
VICE PRESIDENT AND CHIEF COUNSEL FOR
REGULATORY & GOVERNMENTAL AFFAIRS
AVISTA CORPORATION
P.O. BOX 3727
1411 EAST MISSION AVENUE
SPOKANE, WASHINGTON 99220-3727
TELEPHONE: [phone]
[e-mail]

BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION

IN THE MATTER OF THE APPLICATION ) CASE NO. AVU-E-23-01
OF AVISTA CORPORATION FOR THE ) CASE NO. AVU-G-23-01
AUTHORITY TO INCREASE ITS RATES )
AND CHARGES FOR ELECTRIC AND ) DIRECT TESTIMONY OF
NATURAL GAS SERVICE TO ELECTRIC ) ELIZABETH M. ANDREWS
AND NATURAL GAS CUSTOMERS IN THE ) IN SUPPORT OF
STATE OF IDAHO ) STIPULATION

FOR AVISTA CORPORATION

(ELECTRIC AND NATURAL GAS)
RECEIVED
Wednesday, July 12, 2023 11:30:32 AM
IDAHO PUBLIC
UTILITIES COMMISSION
Andrews, Di 1
Avista Corporation

I. INTRODUCTION 1
Q. Please state your name, employer, and business address. 2
A. My name is Elizabeth M. Andrews and I am employed by Avista 3
Corporation (“Company” or “Avista”) as Senior Manager of Revenue Requirements 4
in the Regulatory Affairs Department, at 1411 East Mission Avenue, Spokane, 5
Washington. 6
Q. Have you previously provided direct testimony in this Case? 7
A. Yes. I filed direct testimony and exhibits in this proceeding 8
supporting various adjustments I sponsored, that were included by Company 9
witness Ms. Schultz within her overall electric and natural gas revenue requirement 10
studies prepared for the Company’s proposed Two-Year Rate Plan effective 11
September 1, 2023, through August 31, 2025. The adjustments I supported 12
included the following: 1) Pro Forma Wildfire Plan Expenses, 2) Pro Forma 13
Insurance Expense, 3) Pro Forma EDIT (RSGM)1, 4) Pro Forma Miscellaneous 14
Operations and Maintenance (O&M) Expense, and 5) Pro Forma Colstrip Capital 15
Additions & Amortization Expense. 16
In addition to the various accounting adjustments I sponsored, I discussed 17
the Company’s requests to update its Wildfire Balancing Account baseline to match 18
pro formed wildfire plan expenses, as well as the Company’s proposal to establish 19
an Insurance Expense Balancing Account and baseline to reflect the significant 20
increase and volatility associated with insurance expenses. Finally, I discussed the 21
accounting methodology change related to the Company’s Excess Deferred Income 22
Taxes (EDIT) expense that has occurred since the Company’s prior general rate 23

1 Reverse South Georgia Method
Andrews, Di 2
Avista Corporation

case, and provided an update on the Company’s electric and natural gas deferred 1
federal tax credit balances.2 2
Q. What is the scope of this testimony? 3
A. The purpose of this testimony is to describe and support the electric 4
and natural gas revenue requirement elements of the Stipulation and Settlement 5
(“Stipulation”) filed on June 14, 2023, as well as explain why the Stipulation is in the 6
public interest. The parties to the Stipulation include the Staff of the Idaho Public 7
Utilities Commission ("Staff”), Clearwater Paper Corporation ("Clearwater"), Idaho 8
Forest Group, LLC ("Idaho Forest"), and Walmart Inc. These entities are 9
collectively referred to as the "Settling Parties” and singularly as a “Settling Party.” 10
The remaining parties, the Idaho Conservation League / NW Energy Coalition 11
(“ICL/NWEC”), do not join in the Settlement. 12
Company witness Mr. Ehrbar discusses the non-revenue related elements of 13
the Stipulation agreed to by the Settling Parties, such as electric and natural gas Cost 14
of Service, Rate Spread and Rate Design, as well as other Stipulation components 15
related to the Power Cost Adjustment (PCA) and Fixed Cost Adjustment (FCA) 16
authorized levels. 17
Q. Are you sponsoring any exhibits? 18
A. Yes. I am sponsoring Exhibit No. 19, which is a copy of the 19
Stipulation and appendices filed with the Commission on June 14, 2023. 20
21

2 Company witness Ms. Schultz direct testimony covered accounting and financial data in support of
the Company's Two-Year Rate Plan for the period September 1, 2023 through August 31, 2025. In
that testimony she explained pro formed operating results, including expense and rate base
adjustments made to actual operating results and rate base for the over the two-year period.
Andrews, Di 3
Avista Corporation

II. SUMMARY OF ORIGINAL FILING 1
Q. Please describe the Company’s general rate case request, as filed. 2
A. On February 1, 2023, Avista filed an Application with the 3
Commission for authority to increase revenue effective September 1, 2023, and 4
September 1, 2024, for electric and natural gas service in Idaho. The Company 5
proposed a “Two-Year Rate Plan” with an increase in electric base revenue of $37.5 6
million or 13.6% for “Rate Year 1”, and $13.2 million or 4.2% for “Rate Year 2”. 7
With regard to natural gas, the Company proposed an increase in base revenue of 8
$2.8 million or 6.0% for “Rate Year 1”, and $120,000 or 0.3% for “Rate Year 2”. 9
The Company used the results of the electric and natural gas cost of service 10
studies (sponsored by Mr. Garbarino and Mr. Anderson) as a guide to spread the 11
general increase. In this case, for electric operations, the study showed Residential 12
Service Schedule 01, Large General Service Schedules 21/22, and Pumping Service 13
Schedule 31/32 provide less than the overall rate of return under present rates. All of 14
the other service schedules provide more than the overall rate of return under present 15
rates to varying degrees. For natural gas operations, the study indicated that the 16
General Service Schedule 101 (serving most residential customers) is providing less 17
than the overall rate of return (unity), and Large General, and Transportation service 18
schedules (111/112 and 146) are providing more than unity. 19
Q. What are the primary factors driving the Company’s need for an 20
electric and natural gas change in rates? 21
A. The primary factor driving the Company’s electric and natural gas 22
revenue requirements in RY1 and RY2 is an increase in net plant investment 23
Andrews, Di 4
Avista Corporation

(including return on investment, depreciation and taxes, and offset by the tax benefit 1
of interest) from that currently authorized.3 For RY1 and RY2, electric net power 2
supply expenses also contribute significantly to the incremental electric revenue 3
requirement. Other changes impacting the Company’s revenue requirement requests 4
relate to increases in distribution, operation and maintenance (O&M), and 5
administrative and general (A&G) expenses for both electric and natural gas 6
operations, compared to current authorized levels. 7
Electric specific capital investments for the 2022/2023 period include, among 8
other things, upgrades to certain major generating facilities, such as the Long Lake 9
and Little Falls Plant Upgrades, Cabinet Gorge Dam Fishway and other replacements 10
or upgrades, the Kettle Falls Fuel Yard Equipment Replacement, as well as capital 11
investment associated with the Clark Fork and Spokane River License agreements, 12
discussed by Company witness Mr. Kinney. 13
For natural gas, specific capital investments over the period 2022/2023 period 14
include, among other things, capital investments related to the Gas Facilities 15
Replacement (Aldyl A) and Jackson Prairie Joint Project, as well as Gas 16
Replacement Street and Highway Program, discussed by Company witness Mr. 17
DiLuciano. 18
For power supply, on direct, as discussed by Company witness Mr. Kalich, 19
the level of Idaho’s share of power supply expense effective with Rate Year 1 has 20

3 The specific 2022 through August 2025 pro forma capital expenditures undertaken by the
Company to expand and replace its generation, transmission, distribution and general facilities are
discussed further by Company witnesses Mr. Kinney regarding production investment (including
the Company’s investment in Colstrip Units 3 and 4), Mr. DiLuciano regarding transmission,
distribution and general investment, Mr. Kensok regarding the costs associated with Avista’s IS/IT
projects, Mr. Howell regarding Wildfire Plan investments, and Ms. Hydzik regarding customer
technology projects.
Andrews, Di 5
Avista Corporation

increased by approximately $10.3 million ($29.8 million on a system basis) from the 1
level currently included in base rates. 2
3
III. SUMMARY OF SETTLEMENT STIPULATION 4
Q. Would you briefly summarize the Stipulation? 5
A. Yes. Under the terms of the Stipulation, as discussed further by Mr. 6
Ehrbar, Avista would implement revised tariff schedules designed to increase annual 7
base electric revenues by $22,134,000, or 8.0%, effective September 1, 2023, and 8
increase base revenues by $4,305,000, or 1.4%, effective September 1, 2024. For 9
natural gas, the Settling Parties agree that Avista will increase natural gas base 10
revenue by $1,252,000, or 2.7%, effective September 1, 2023, and increase natural 11
gas base revenue $3,000, or 0.1%, effective September 1, 2024. These rate changes 12
are designed to provide retail revenues necessary to allow the Company the 13
opportunity to earn the rate of return agreed to in the Stipulation for RY1 and RY2. 14
As noted by Mr. Ehrbar, effective September 1, 2023, an electric residential 15
customer using an average of 927 kilowatt hours per month would see a $10.15, or 16
11.9%, increase per month for a revised monthly bill of $95.55. Effective September 17
1, 2024, an electric residential customer would see a $2.06, or 2.2%, increase per 18
month for a revised monthly bill of $97.61. 19
For natural gas, effective September 1, 2023, a natural gas residential 20
customer using an average of 64 therms per month would see a $1.20, or 1.6%, 21
increase per month for a revised monthly bill of $74.62. Effective September 1, 22
2024, a natural gas residential customer would see a $0.03, or 0.0%, increase per 23
Andrews, Di 6
Avista Corporation

month for a revised monthly bill of $74.65. 1
In determining these revenue changes, the Settling Parties have agreed to 2
various adjustments to the Company’s original filing, which are summarized in the 3
Stipulation, and described further in the testimony below. 4
The Stipulation calls for an overall rate of return of 7.19%, determined using 5
a capital structure consisting of 50% common stock equity and 50% debt, an 6
authorized return on equity of 9.4% and cost of debt of 4.97%. 7
With regard to the Two-Year Rate Plan, during the September 1, 2023 – 8
August 31, 2025 rate period covered by this Stipulation, Avista will not file another 9
electric or natural gas general rate case to increase base rates in which rates would go 10
into effect prior to September 1, 2025. This does not apply to tariff filings authorized 11
by or contemplated by the terms of the PCA, FCA, Purchased Gas Cost Adjustment 12
(PGA), or other miscellaneous annual/regular tariff filings. 13
Lastly, the Settling Parties agreed to certain rate spread and rate design 14
changes as described by Mr. Ehrbar in his supporting testimony, as well as other 15
Stipulation components related to the PCA and FCA, as well as agreed-upon 16
meetings/conferences. 17
Q. Please explain how the Settling Parties arrived at the Stipulation 18
in this proceeding. 19
A. The Stipulation is the product of settlement discussions held on June 20
1, 2023. It represents a compromise among differing points of view, with 21
concessions made by the Settling Parties, to reach a balancing of interests. The 22
Stipulation represents a fair, just and reasonable compromise of the issues and is in 23
Andrews, Di 7
Avista Corporation

the public interest. In addition, the Stipulation is the end result of extensive audit 1
work conducted through the discovery process4, including various virtual conference 2
discussions with Commission Staff, and hard bargaining by the Settling Parties in 3
this proceeding. 4
Q. Why is the Stipulation in the public interest? 5
A. The Stipulation is in the “public interest” for several reasons. The 6
Stipulation was the product of the give-and-take of negotiation that produced an 7
“end result” that is just and reasonable. In addition, it is supported by the evidence, 8
demonstrating the need for rate adjustments to provide recovery of necessary 9
expenditures and investment, the costs of which are not offset by a growth in sales 10
margins. The Stipulation enjoys broad-based support from a variety of 11
constituencies, including Clearwater, Idaho Forest, Walmart and Staff. 12
13
IV. ELECTRIC REVENUE REQUIREMENT 14
ELEMENTS OF THE STIPULATION 15
16
Q. Please explain the derivation of the Electric Revenue Requirement 17
outlined in the Stipulation. 18
A. The Settling Parties agreed that electric revenue increases are 19
necessary, effective September 1, 2023 and September 1, 2024. While Avista’s filing 20
requested electric revenue requirement increases of $37.5 million and $13.2 million, 21
effective September 1, 2023 and September 1, 2024, respectively, the Settling Parties 22
agreed-upon adjustments, including the agreed-upon rate of return, result in 23
recommended electric revenue increases of approximately $22.1 million and $4.3 24
million, respectively. These increases are designed to provide sufficient retail 25

4 Avista responded to over 400 production requests (including sub-parts) from the Parties.
Andrews, Di 8
Avista Corporation

revenues for the September 1, 2023 through August 31, 2025 two-year rate period, 1
which would provide the Company with the opportunity to earn the return agreed to 2
in the Stipulation. 3
Q. Please explain the Settling Parties’ agreement with regard to an 4
Authorized Rate of Return, including the Return on Equity. 5
A. The Settling Parties have agreed to an overall rate of return of 7.19%, 6
based on a return on equity of 9.4% (also the current authorized level), an equity 7
component at 50% and cost of debt of 4.97%. By comparison, the Company’s 8
original filing requested an overall rate of return of 7.59%, a return on equity of 9
10.25%, an equity component of 50% and cost of debt of 4.92%. 10
Q. Please provide an overview of the electric revenue requirement 11
adjustments agreed to by the Settling Parties for rates effective September 1, 12
2023 [Rate Year 1]. 13
A. The Settling Parties agreed to an electric revenue requirement 14
effective September 1, 2023, that reflects the adjustments shown below in the 15
excerpted table from the Stipulation: 16
Andrews, Di 9
Avista Corporation

Table No. 1: Electric Revenue Requirement – RY1 1
2
3
4
5
6
7
8
9
10
11
12
As can be seen by a review of the individual line descriptions provided within 13
the summary table above, the adjustments accepted for settlement purposes cover a 14
broad range of revenue and cost categories, including the authorized rate of return. 15
The individual adjustments should not be viewed in isolation; rather, they should be 16
viewed in total as part of the entire Stipulation and are the result of hard bargaining 17
and compromise. 18
Q. Would you please elaborate on the individual line items contained 19
within Table No. 1? 20
A. Yes. A description of the adjustments resulting in the electric revenue 21
requirement, effective September 1, 2023, follows. 22
Cost of Capital – (line a.) The overall revenue requirement reduction related 23
Revenue
Requirement Rate Base
Amount as Filed:37,462$ 1,034,938$
Adjustments:
a.)Cost of Capital (5,343)$
b.)Remove 2024 AMA Capital Additions (3,051)$ (17,554)$
c.)(2,062)$
d.)Remove Officer Incentives and 2023 Officer Labor Increases (418)$
e.)Remove 2024 Union and Non-Union Labor Increases (516)$
f.)Update Regulatory Assessment Fee and Conversion Factor (4)$
g.)Remove Pro Forma 401K Expenses (41)$
h.)Remove Escalated Miscellaneous O&M Expense (2,560)$
i.)Remove Pro Forma WRAP Expenses (121)$
j.)(500)$
k.)Adjust Pro Forma Insurance Expense (298)$
l.)(414)$ (59)$
Adjusted Amounts Effective September 1, 2023 22,134$ 1,017,325$
SUMMARY TABLE OF ADJUSTMENTS TO ELECTRIC REVENUE REQUIREMENT
EFFECTIVE SEPTEMBER 1, 2023
(000s of Dollars)
Revise Wildfire Deferral Amortizations
Miscellaneous Adjustments: Board of Director expenses, Fee Free expense
adjustment, cell phone savings, O&M expense, removal of Sandpoint
Weatherization loans and reclassification of other administrative and general
expenses.
Restate Net Pro Forma Power Supply Expense
Andrews, Di 10
Avista Corporation

to the cost of capital reduces the overall revenue requirement for electric by 1
$5,343,000. The agreed-upon cost of capital components are shown in the table 2
below: 3
4
5
6
7
Remove 2024 AMA Capital Additions – (line b.) This adjustment removes 8
the Company’s capital additions beyond August 31, 2023, included by the Company 9
for Rate Year 1, reflecting only plant investment prior to the September 1, 2023, 10
effective date. This adjustment decreases the overall revenue requirement by 11
$3,051,000 and reduces net rate base by $17,554,000. 12
Revise Wildfire Deferral Amortizations – (line c.) This adjustment revises the 13
Company’s proposed amortization of its two Wildfire Regulatory Deferred Asset 14
balances: 1) Wildfire Resiliency Plan Expense Deferral and 2) Wildfire Expense 15
Balancing Account deferral, for the period July 1, 2020 through September 30, 2022 16
of $8.2 million, from a two (2) year amortization to a four (4) year amortization. This 17
adjustment reduces the overall revenue requirement by $2,062,000. See Wildfire 18
Balancing Account discussion at Section VI. “Other Settlement Components” below. 19
Remove Officer Incentives and 2023 Officer Labor Increases – (line d.) This 20
adjustment reflects the removal of officer incentives and 2023 incremental officer 21
labor proposed by the Company. This adjustment decreases the overall revenue 22
requirement by $418,000. 23
Capital Weighted
Component Structure Cost Cost
Total Debt 50.00%4.97%2.49%
Common Equity 50.00%9.40%4.70%
Total 100.00%7.19%
Andrews, Di 11
Avista Corporation

Remove 2024 Union and Non-Union Labor Increases – (line e.) This 1
adjustment removes 2024 union and non-union labor increases included by the 2
Company, reflecting 2023 labor increases for union and non-union employees. This 3
adjustment decreases the overall revenue requirement by $516,000. 4
Update Regulatory Assessment Fee and Conversion Factor – (line f.) This 5
adjustment reflects the April 2023 adjusted IPUC Regulatory Assessment Fee, per 6
Order No. 35743, of 0.001982, and the impact on the Company’s Conversion Factor. 7
This adjustment decreases the overall revenue requirement by $4,000. 8
Remove Pro Forma 401K expenses – (line g.) This adjustment removes 9
certain pro formed 401K expenses, leaving those actual 401K expenses per the filed 10
historical test period. This adjustment decreases the overall revenue requirement by 11
$41,000. 12
Remove Escalated Miscellaneous O&M Expenses – (line h.) This adjustment 13
removes the escalated O&M expense pro formed by the Company. This adjustment 14
decreases the overall revenue requirement by $2.56 million. 15
Remove Pro Forma WRAP Expenses – (line i.) This adjustment removes the 16
pro formed Western Regional Adequacy Program (WRAP) expenses included by the 17
Company. This adjustment decreases the overall revenue requirement by $121,000. 18
Restate Net Power Supply Expense – (line j.) This adjustment revises net 19
power supply costs as discussed below, decreasing the overall revenue requirement 20
by $500,000. See Power Cost Adjustment (PCA) discussion described by Mr. 21
Ehrbar. 22
• Authorized Net Power Supply (line i.) The Settling Parties agree to 23
leave system net power supply expense as approved in Case No. 24
Andrews, Di 12
Avista Corporation

AVU-E-21-01 totaling $149,279,000, adjusted to reflect items ii. and 1
iii below, resulting in a revised system net power supply expense of 2
$177,585,000. Idaho’s share of net power supply costs reflects a 3
production and transmission (P/T) ratio of 34.47%. 4
5
• Palouse and Rattlesnake Flat Wind (line ii.) The Settling Parties agree 6
to include the Palouse Wind and Rattlesnake Flat Wind Power 7
Purchase Agreements (“PPA”) in base rates at 90%. 90% of actual 8
net power costs for these projects will then be compared to this 90% 9
base amount to calculate the base-to-actual difference that will be 10
reflected in the PCA mechanism. This adjustment increases system 11
net power supply expense $29,313,000. 12
13
• Remove Columbia Basin Hydro Transmission Costs (line iii.) Remove 14
cost of Columbia Basin Hydro Transmission costs. This adjustment 15
decreases system net power supply expense by $1,007,000. 16
17
Pro Forma Insurance Expense – (line k.) This adjustment reduces pro formed 18
insurance expense for certain escalated assumptions used to calculate Rate Year 1 19
insurance expense levels. This adjustment decreases the overall revenue requirement 20
by $298,000. See Insurance Balancing Account discussion at Section VI. “Other 21
Settlement Components” below. 22
Miscellaneous Adjustments – (line l.) The following adjustment reflects the 23
net change in operating expenses related to: 1) removing Board of Director expenses 24
and fees ($242,000); 2) including cell phone savings ($36,000); 3) removing pro 25
forma Fee Free expense ($27,000); 4) removal of historical Sandpoint 26
Weatherization loans5 ($5,000 expense and $59,000 rate base); removal of other 27
miscellaneous transmission O&M expenses associated with the Company’s Wildfire 28
Open Access Transmission Tariff ($102,000) and A&G expenses ($2,000). The net 29

5 Sandpoint weatherization loans relate to weatherization and DSM investment included in rate base
(FERC account 124.350). Beginning in July 1994, accumulation of allowance for funds used to
conserve energy (AFUCE) ceased on electric DSM and full amortization began on the balance based
on the measure lives of the investment. Beginning in 1995, the amortization rates were accelerated
to achieve a 14-year weighted average amortization period, which was completed in 2010.
Remaining as an Idaho rate base item is the weatherization loan balance of approximately $59,000.
Andrews, Di 13
Avista Corporation

effect of this adjustment decreases the overall revenue requirement by $414,000 and 1
rate base by $59,000. 2
Q. Please summarize the impact of these adjustments on the electric 3
revenue requirement agreed to by the Settling Parties effective September 1, 4
2023 [Rate Year 1]. 5
A. The adjustments discussed above, and agreed to by the Settling 6
Parties, reduce Avista’s proposed RY1 electric revenue requirement increase of $37.5 7
million to an electric revenue requirement increase of $22.4 million, resulting in an 8
overall 8.0% electric base rate increase, effective September 1, 2023. The net rate 9
base agreed to by the Settling Parties for electric services is $1.017 billion. Mr. 10
Ehrbar discusses the overall net bill impact to customers in RY1 of 8.7% effective 11
September 1, 2023. 12
Q. Please provide an overview of the incremental electric revenue 13
requirement components agreed to by the Settling Parties effective September 1, 14
2024 [Rate Year 2]. 15
A. The Settling Parties agreed to an incremental electric revenue increase 16
effective September 1, 2024 (RY2), that reflects the adjustments shown below in the 17
excerpted table from the Stipulation: 18
Andrews, Di 14
Avista Corporation

Table No. 2: Electric Revenue Requirement – RY2 1
2
3
4
5
6
7
8
9
10
Q. Please elaborate on the individual line items contained within 11
Table No. 2. 12
A. A description of the adjustments resulting in the electric revenue 13
requirement, effective September 1, 2024 for RY2, follows. 14
Add Incremental 2023/2024 Related Capital and Expenses to Rate Year 2 15
(incremental above Rate Year 1) – (line a.) This item includes certain incremental 16
increases in 2023 and 2024 related to capital and expenses in RY2, above RY1 17
levels, as follows: 18
• AMA 2024 Capital Additions – (line i.) Includes capital additions from 19
September 1, 2023 through August 31, 2024 on an AMA basis, prior to the 20
Rate Year 2 September 1, 2024, effective date. This adjustment increases the 21
overall revenue requirement by $4,888,000 and increases net rate base by 22
$17,554,000. 23
Andrews, Di 15
Avista Corporation

• Property Tax Expense – (line ii.) Includes incremental property tax expense 1
above Rate Year 1 levels, associated with 2023 capital additions. This 2
adjustment increases the overall revenue requirement by $706,000. 3
• 2024 Union Labor Increases – (line iii.) Includes the 2024 union annualized 4
labor increases. This adjustment increases the overall revenue requirement by 5
$410,000. 6
• Employee Benefits – (line iv.) Includes 2024 incremental employee benefit 7
expenses above Rate Year 1 levels. This adjustment increases the overall 8
revenue requirement by $255,000. 9
• 2024 Growth Revenue – (line v.) Reflects the 2024 incremental revenue 10
associated with 2024 growth capital, matching the inclusion of 2024 capital 11
investment. This adjustment decreases the overall revenue requirement by 12
$1,939,000. 13
• Colstrip/CS2 Major Maintenance – (line vi.) Revises the Colstrip/CS2 Major 14
Maintenance expense level included in Rate Year 1 to reflect the revised 15
expense for Rate Year 2. This adjusts maintenance expense to one-third of 16
each amount deferred for calendar years 2022 through 2024. This adjustment 17
increases the overall revenue requirement by $247,000. 18
• Fee Free Expense – (line vii.) Reflects the removal of the expiring Fee Free 19
Amortization and expense on August 31, 2024. This adjustment decreases 20
the overall revenue requirement by $97,000. 21
• Miscellaneous O&M Expense – (line viii.) Reflects an agreed-to reduction of 22
O&M expense. This adjustment decreases the overall revenue requirement by 23
Andrews, Di 16
Avista Corporation

$165,000. 1
Q. Please summarize the impact of these adjustments on the electric 2
revenue requirement agreed to by the Settling Parties effective September 1, 3
2024 [Rate Year 2]. 4
A. The adjustments discussed above, and agreed to by the Settling 5
Parties, reduces Avista’s RY2 electric revenue requirement of $13.2 million to $4.3 6
million, resulting in a 1.4% electric base rate increase, effective September 1, 2024. 7
The net rate base agreed to by the Settling Parties for electric is $1.035 billion. Mr. 8
Ehrbar discusses the overall net bill impact of 1.6% to customers in RY2 effective 9
September 1, 2024. 10
11
V. NATURAL GAS REVENUE REQUIREMENT ELEMENTS 12
OF THE STIPULATION 13
14
Q. Please explain the derivation of the Natural Gas Revenue 15
Requirement outlined in the Stipulation. 16
A. The Settling Parties agreed that natural gas revenue changes are 17
necessary, effective September 1, 2023 and September 1, 2024. While Avista’s filing 18
requested natural gas revenue requirement increases of $2.8 million and $120,000, 19
effective September 1, 2023 and September 1, 2024, respectively, the Settling Parties 20
agreed-upon adjustments, including the agreed-upon rate of return, result in a natural 21
gas revenue increase of $1,252,000 effective September 1, 2023, and a natural gas 22
revenue increase of $3,000 effective September 1, 2024. These changes in revenue 23
are designed to provide sufficient retail revenues for the September 1, 2023 through 24
August 31, 2025 two-year rate period, which would provide the Company with the 25
Andrews, Di 17
Avista Corporation

opportunity to earn the return agreed to in the Stipulation. 1
Q. Is the Authorized Rate of Return, including the Return on Equity 2
the same as that explained above for electric? 3
A. Yes. Consistent with that for electric, the Settling Parties have agreed 4
to an overall rate of return of 7.19%, based on a return on equity of 9.4%, an equity 5
component at 50% and cost of debt of 4.97%. 6
Q. Please provide an overview of the natural gas revenue 7
requirement adjustments agreed to by the Settling Parties for rates effective 8
September 1, 2023 [Rate Year 1]. 9
A. The Settling Parties agreed to a natural gas revenue requirement 10
effective September 1, 2023, that reflects the adjustments shown below in the 11
excerpted table from the Stipulation: 12
Table No. 3: Natural Gas Revenue Requirement – RY1 13
14
15
16
17
18
19
20
21
Q. Would you please elaborate on the individual line items contained 22
within Table No. 3? 23
Andrews, Di 18
Avista Corporation

A. Yes. A description of the adjustments resulting in the natural gas 1
revenue requirement, effective September 1, 2023, follows. 2
Cost of Capital – (line a.) As previously described (see above). This 3
adjustment reduces the overall revenue requirement by $1,066,000. 4
Remove 2024 AMA Capital Additions – (line b.) This adjustment removes 5
the Company’s capital additions beyond August 31, 2023, included by the Company 6
for Rate Year 1, reflecting only plant investment prior to the September 1, 2023, 7
effective date. This adjustment decreases the overall revenue requirement by 8
$142,000 and reduces net rate base by $2,978,000. 9
Remove Officer Incentives and 2023 Officer Labor Increases – (line c.) This 10
adjustment reflects the removal of officer incentives and 2023 incremental officer 11
labor proposed by the Company. This adjustment decreases the overall revenue 12
requirement by $98,000. 13
Remove 2024 Union and Non-Union Labor Increases – (line d.) This 14
adjustment removes 2024 union and non-union labor increases included by the 15
Company, reflecting 2023 labor increases for union and non-union employees. This 16
adjustment decreases the overall revenue requirement by $115,000. 17
Update Regulatory Assessment Fee and Conversion Factor – (line e.) This 18
adjustment reflects the April 2023 adjusted IPUC Regulatory Assessment Fee, per 19
Order No. 35743, of 0.001982, and the impact on the Company’s Conversion Factor. 20
This adjustment decreases the overall revenue requirement by $1,000. 21
Remove Pro Forma 401K expenses – (line f.) This adjustment removes 22
certain pro formed 401K expenses, leaving those actual 401K expenses per the filed 23
Andrews, Di 19
Avista Corporation

historical test period. This adjustment decreases the overall revenue requirement by 1
$10,000. 2
Miscellaneous Expenses – (line g.) Reflects the net change in operating 3
expenses related to: 1) removing Board of Director expenses and fees ($60,000); 2) 4
including cell phone savings ($6,000); 3) removing pro forma Fee Free expense 5
($18,000); and 4) injuries and damages 6-year average expense ($3,000). The net 6
effect of this adjustment decreases the overall revenue requirement by $87,000. 7
Q. Please summarize the impact of these adjustments on the natural 8
gas revenue requirement agreed to by the Settling Parties effective September 1, 9
2023 [Rate Year 1]. 10
A. The adjustments discussed above, and agreed to by the Settling 11
Parties, reduce Avista’s proposed RY1 natural gas revenue requirement increase of 12
$52,000 to $1,252,000, resulting in an overall 2.71% natural gas base rate increase, 13
effective September 1, 2023. The net rate base agreed to by the Settling Parties for 14
natural gas services is $203.6 million. Mr. Ehrbar discusses the overall net bill 15
impact to customers in RY1 of 1.2% beginning September 1, 2023. 16
Q. Please provide an overview of the incremental natural gas revenue 17
requirement components agreed to by the Settling Parties effective September 1, 18
2024 [Rate Year 2]. 19
A. The Settling Parties agreed to an incremental natural gas revenue 20
increase effective September 1, 2024 (RY2), that reflects the adjustments shown 21
below in the excerpted table from the Stipulation: 22
Andrews, Di 20
Avista Corporation

Table No. 4: Natural Gas Revenue Requirement – RY2 1
2
3
4
5
6
7
8
9
Q. Please elaborate on the individual line items contained within 10
Table No. 4. 11
A. A description of the adjustments resulting in the natural gas revenue 12
requirement, effective September 1, 2024 for RY2, follows. 13
Add Incremental 2023/2024 Related Capital and Expenses to Rate Year 2 14
(incremental above Rate Year 1) – (line a.) This item includes certain incremental 15
increases in 2023 and 2024 related to capital and expenses in RY2, above RY1 16
levels, as follows: 17
• AMA 2024 Capital Additions – (line i.) Includes capital additions from 18
September 1, 2023 through August 31, 2024 on an AMA basis, prior to the 19
Rate Year 2 September 1, 2024, effective date. This adjustment increases the 20
overall revenue requirement by $823,000 and increases net rate base by 21
$2,978,000. 22
• Property Tax Expense – (line ii.) Includes the incremental change (reduction) 23
Andrews, Di 21
Avista Corporation

in property tax expense in Rate Year 2 versus Rate Year 1 levels. This 1
adjustment decreases the overall revenue requirement by $18,000. 2
• 2024 Union Labor Increases – (line iii.) Includes the 2024 union annualized 3
labor increases. This adjustment increases the overall revenue requirement by 4
$93,000. 5
• Employee Benefits – (line iv.) Includes 2024 incremental employee benefit 6
expenses above Rate Year 1 levels. This adjustment increases the overall 7
revenue requirement by $61,000. 8
• 2024 Growth Revenue – (line v.) Reflects the 2024 incremental revenue 9
associated with 2024 growth capital, matching the inclusion of 2024 capital 10
investment. This adjustment decreases the overall revenue requirement by 11
$798,000. 12
• Fee Free Expense – (line vi.) Reflects the removal of the expiring Fee Free 13
Amortization and expense on August 31, 2024. This adjustment decreases 14
the overall revenue requirement by $158,000. 15
Q. Please summarize the impact of these adjustments on the natural 16
gas revenue requirement agreed to by the Settling Parties effective September 1, 17
2024 [Rate Year 2]. 18
A. The adjustments discussed above, and agreed to by the Settling 19
Parties, decreases Avista’s RY2 natural gas revenue requirement of $120,000 to 20
$3,000, resulting in a 0.01% natural gas base rate increase, effective September 1, 21
2024. The net rate base agreed to by the Settling Parties for natural gas is $206.6 22
million. Mr. Ehrbar discusses the overall net bill impact to customers in RY2, 23
Andrews, Di 22
Avista Corporation

effective September 1, 2024, is 0.00%. 1
2
VI. OTHER SETTLEMENT COMPONENTS 3
Q. Please discuss the “Other Settlement Components” starting at 4
page 13 of the Stipulation? 5
A. The Settling Parties agreed to a number of “Other Settlement 6
Components” which are discussed below, with the exception of electric and natural 7
gas Cost of Service, Rate Spread and Rate Design, PCA and FCA authorized levels, 8
and meetings/conferences agreed to, which are discussed by Mr. Ehrbar. 9
Q. Please discuss the settlement components agreed to by the 10
Settling Parties related to the Company’s Wildfire O&M Expense Balancing 11
Account and Wildfire Resiliency Plan. 12
A. At paragraph 13 of the Stipulation, the Settling Parties agreed to 13
revise the two-way Wildfire O&M Expense Balancing Account authorized “base” 14
level to $4.367 million annually, effective September 1, 2023. The incremental 15
balance deferred, beyond the existing deferred balance as of September 30, 2022 16
being amortized over a 4-year period in this proceeding (discussed earlier), will be 17
included for review and recovery in future general rate cases. 18
At paragraph 14 of the Stipulation, the Settling Parties agreed to the 19
following Wildfire Resiliency Plan changes: 20
(a) For the Distribution Risk Tree program, the Company will have a third 21
party conduct a study, within a year of Commission Order, to see what the 22
most efficient vegetation management cycle should be in their service area 23
(i.e., 2- or 3-year cycles). 24
(b) The Company will develop a formal process for Undergrounding 25
Distribution Lines related to the WRP to include project criteria, a selection 26
Andrews, Di 23
Avista Corporation

process, and cost-benefit analysis for completed and future undergrounding 1
distribution line projects related to wildfire mitigation prior to the Company’s 2
next general rate case. 3
(c) The Company will develop process guidelines, including a least-cost 4
least-risk analysis, to evaluate pilot projects and to convert them to full 5
programs within a year of a Commission Order. 6
(d) The Company will detail all relationships (such as BLM and Forest 7
Service) it has that may benefit the wildfire mitigation program, contribute to 8
program costs, or provide cost sharing opportunities in its WRP. 9
(e) The Company will detail all funding alternatives and sources it pursued 10
in its WRP and provide an analysis and a comparison of alternatives it 11
considered for each pilot, project, or program when it requests recovery for 12
these costs, including, among other sources, any available funding from 13
current or future federal infrastructure funds. 14
(f) The Company will file a copy of each version of its WRP with the 15
Commission. 16
17
Q. Please discuss the settlement component agreed to by the Settling 18
Parties agreeing to an Insurance Expense Balancing Account. 19
A. At paragraph 15 of the Stipulation, the Settling Parties agreed to a 20
two-way Insurance Expense Balancing Account to defer the difference in actual 21
insurance expense, up or down, from the authorized “base” level of insurance 22
expense included of $4.009 million for electric and $714,000 for natural gas, 23
effective September 1, 2023. The balance in the deferral will be included for review 24
and recovery in future regulatory proceedings. 25
Q. Please discuss the settlement component agreed to by the Settling 26
Parties related Regulatory Amortizations. 27
A. At paragraph 16 of the Stipulation, the Settling Parties agreed to the 28
Regulatory Amortizations as filed by the Company. These regulatory balances and 29
agreed to amortizations include the following new regulatory amortizations, as 30
discussed in the Company’s direct filed testimony of Company witness Ms. Schultz: 31
Andrews, Di 24
Avista Corporation

1) EIM Regulatory Asset – The EIM deferred Idaho electric balance of 1
$699,119 is to be amortized over two years at $349,560 annually. This 2
regulatory asset relates to Avista Case No. AVU-E-20-01 (Order No. 34606 3
dated March 23, 2020) which allowed the Company to defer, with no 4
carrying charge, its Idaho jurisdictional incremental O&M costs associated 5
with joining the California Independent System Operator’s (CAISO) Western 6
Energy Imbalance Market (EIM) until the go-live date. See Schultz, pg. 43, 7
lines 4-10. 8
9
2) COVID-19 Regulatory Asset / Liability – The COVID-19 deferred Idaho 10
electric and natural gas regulatory asset balances of $551,026 (electric) and 11
$238,319 (natural gas) are to be amortized over two years at $275,513 12
(electric) and $119,160 (natural gas) annually. In addition, the COVID-19 13
deferred Idaho electric and natural gas regulatory liability balances of 14
$2,631,505 (electric) and $266,458 (natural gas) are also to be amortized 15
over two years at $1,315,752 (electric) and $266,458 (natural gas) annually. 16
These regulatory balances are a result of Case No. GNR-U-20-03 (including 17
consolidated Case Nos. AVU-E-20-03; AVU-G-20-03; FLS-W-20-02; GSW-18
W-20-01; IPC-E-20-19; and PAC-E-20-04), in which the Commission 19
granted Avista authority in Order No. 34718, dated July 8, 2020, to account 20
for unanticipated, emergency-related expenses due to the COVID-19 public 21
health emergency as regulatory assets for possible recovery through future 22
rates. The Commission further ordered that the utilities must analyze the 23
CARES Act NOL provision and apply any benefit to offsetting the deferral 24
account created for emergency-related expenses. Additional benefits, such as 25
reduced employee travel and training, etc. were to also be accounted for, 26
reducing COVID-19 related expense, and account for these balances as 27
regulatory liabilities. These regulatory balances and amortizations reflect the 28
net deferred balance as of June 30, 2022, totaling a net liability owed 29
customers, of approximately $2.1 million for electric and $28,000 for natural 30
gas, and amortization to be included in base rates and amortized for rebate to 31
customers over two years beginning September 1, 2023 of $1.04 million 32
electric and $14,000 natural gas. See Schultz, pg. 44, lines 6-20. 33
34
3) Wildfire Resiliency Plan Regulatory Asset – The Wildfire Resiliency 35
expense deferred Idaho electric balance of $2,543,283 is to be amortized over 36
four years at $635,821 annually. This regulatory balance is a result of Case 37
No. AVU-E-20-05, in which Avista was authorized in Order No. 34883, 38
dated December 31, 2020, to defer incremental O&M expenses and monthly 39
depreciation expense associated with the Wildfire Plan investment. See 40
Schultz, pg. 43, lines 11-17. 41
42
4) Wildfire Balancing Account Regulatory Asset – The Wildfire Balancing 43
Account expense deferred Idaho electric balance of $5,673,601 is to be 44
amortized over four years at $1,418,400 annually. In the Company’s last 45
general rate case, Case No. AVU-E-21-01, the Commission approved in 46
Andrews, Di 25
Avista Corporation

Order No. 35156 a two-way Wildfire O&M Expense Balancing Account to 1
defer the difference in actual O&M Wildfire expenses, up or down, from the 2
authorized “base” level. This amortization balance includes the Idaho electric 3
deferred costs from September 1, 2021 through September 30, 2022, totaling 4
approximately $5.7 million. The Wildfire Balancing Account will continue to 5
accrue additional wildfire expense deferrals up or down over time, resulting 6
in additional amortizations of these deferrals in future rate case proceedings. 7
See Schultz, pg. 43, line 19 – pg 44, line 5. 8
9
5) Idaho Earnings Test Regulatory Liability – The Idaho electric Earnings 10
Test deferred credit balance of $686,970 is to be amortized over two years at 11
$343,485 annually. As a part of the Settlement Stipulation approved by the 12
Commission in the Company’s 2015 general rate case, Case No. AVU-E-15-13
05 (Order No. 33437 dated December 18, 2015), the Company was ordered 14
to rebate $5.6 million in 2014 electric revenue sharing to customers through 15
electric Schedule 97, or approximately $2.8 million annually through 16
December 31, 2017. This rebate was first approved in the Company’s 2012 17
general rate case, Case No. AVU-E-12-08 (Order No. 32769 dated March 17, 18
2013)6 and was extended through December 31, 2015 as part of Case No. 19
AVU-E-14-05.7 This deferred credit balance is the residual balance 20
remaining as of June 30, 2022 to be amortized as a rebate to customers. See 21
Schultz, pg. 44, line 21 – pg 45, line 10. 22
23
6) Tax Reform Amortization Liability - The Idaho electric Tax Reform 24
deferred credit balance of $130,287 is to be amortized over two years at 25
$66,454 annually. In Case No. AVU-E-18-03, Avista was authorized in 26
Order No. 34276, dated March 19, 2019, beginning April 1, 2019 to use 27
Tariff Schedule 74 to return to customers $5.766 million in temporary tax 28
benefits the Company received under the federal Tax Cuts and Jobs Act of 29
2017 (TCJA) from January 1 – May 1, 2018. This amortization reflects the 30
residual Idaho electric balance plus interest through August 31, 2023, to be 31
included in rates and amortized for rebate to customers. See Schultz, pg. 45, 32
lines 11-20. 33
34
7) AFUDC Equity Tax Balance - The Idaho natural gas AFUDC Equity Tax 35
deferred debit balance of $59,919 is to be amortized over two years at 36
$29,960 annually. As part of Case No. AVU-G-21-03 (Order No. 35150 37
dated August 30, 2021), the Commission authorized the Company to refund 38
to customers through Schedule 178 deferred credit balances associated with 39

6 In the Company’s 2012 general rate case, Case No. AVU-E-12-08 (Order No. 32769 dated March
17, 2013), the Commission ordered Avista to refund to customers one-half of any earnings above
the 9.8% return on equity for each of the years 2013 and 2014.
7 Stipulation and Settlement – AVU-E-15-05 & AVU-G-15-01, p. 14, paragraph 16. Electric Rebate
Extension.
Andrews, Di 26
Avista Corporation

Allowance for Funds Used During Construction (AFUDC)8, as well as 1
depreciation expense and the CARES Act benefits, effective September 1, 2
2021. This amortization collects the residual over-amortized balance. See 3
Schultz, pg. 46, lines 1-8. 4
5
The net amortization of the new regulatory assets and liabilities listed above 6
for items 1) – 7) result in a two-year annual amortization expense agreed to by the 7
Settling Parties of $954,000 for Idaho electric and $16,000 for Idaho natural gas. 8
In addition, the Settling Parties agreed to the as-filed changes to the 9
following existing regulatory amortizations that were discussed and revised in my 10
direct testimony: 11
8) Colstrip Regulatory Amortization – Colstrip amortization as filed by the 12
Company reflects the recovery of Avista’s investment in the Colstrip Units 3 13
and 4 generating facilities (reflecting an accelerated depreciation rate of 14
2027), including the Colstrip capital additions through December 31, 2022 in 15
the Colstrip Regulatory Asset, for recovery over its authorized amortization 16
period. The effect of the change in the amortization of the Colstrip 17
Regulatory Asset decreases the Colstrip Regulatory amortization expense to 18
$728,000 annually. In the Company’s filed case, it explained that the 19
recovery of Avista’s investment in the Colstrip Units 3 and 4 generating 20
facilities and Colstrip Regulatory Asset was per Commission prior Order 21
34276 in Case No. AVU-E-18-03, and Case No. AVU-E-21-03. See 22
Andrews direct, pg. 11, line 2 – pg. 14, line 12. 23
24
9) Excess Deferred Income Tax Amortization (EDIT) – The Company 25
switched its method of amortizing EDIT from the Average Rate Assumption 26
Method (ARAM) to the Reverse South Georgia Method (RSGM) related to 27
cost of removal that had previously not been properly accounted for as 28
required by the IRS. To correct this inadvertent error, the Company made 29
this change in amortization method effective January 1, 2022, increasing the 30
amount of EDIT returned to customers annually by approximately $1.9 31
million on a system basis in 2024 forward. See Andrews direct, pg. 32, line 32
20 – pg. 33, line 11 and Exhibit No. 5, Schedule 1. 33
34
Q. Please discuss the settlement component agreed to by the Settling 35

8 In a prior Avista case, Case No. AVU-G-19-01 (Order No. 34326 dated May 2, 2019), the
Commission approved the Company’s application for accounting and ratemaking treatment related
to its AFUDC.
Andrews, Di 27
Avista Corporation

Parties related the Revenue Normalization Adjustments. 1
A. At paragraph 17 of the Stipulation, the Settling Parties agreed to the 2
test year revenue normalization adjustments, as included by the Company in its as-3
filed case, inclusive of the change to 20-year rolling average “normal” weather and 4
monthly regression factors. 5
Q. Finally, please discuss the settlement component agreed to by the 6
Settling Parties related the Depreciation Rates. 7
A. At paragraph 18 of the Stipulation, the Settling Parties agreed to the 8
depreciation rates, as included by the Company in its as-filed case, for purposes of 9
the agreed-to depreciation expense included in the Company’s filing and agreed to 10
by the Settling Parties in this settlement.9 The depreciation rates as-filed by the 11
Company in this proceeding include the proposed depreciation rates per the 12
Company’s updated Depreciation Application in Case Nos. AVU-E-23-02 and 13
AVU-G-23-02, requesting approval for its proposed change to electric and natural 14
gas book depreciation rates.10 To the extent depreciation rates included in this 15
general rate case, or the effective date of approved depreciation rates (i.e. September 16
1, 2023), as proposed by the Company, vary from the depreciation rates or effective 17
date ultimately approved in Case Nos. AVU-E-23-02 and AVU-G-23-02, the 18
Company will defer the difference in depreciation expense included and approved in 19
this case, versus the actual depreciation expense approved per Case Nos. AVU-E-23-20

9 Inclusion of the updated (proposed) depreciation study depreciation rates in this proceeding results
in an overall decrease in electric and natural gas annual depreciation expense from existing
depreciation expense levels.
10 The Company also requested that the Commission approve deferred accounting treatment if
allocated depreciation rates are not approved by all jurisdictions prior to September 1, 2023,
resulting in a difference between allocated depreciation expense included in Case Nos. AVU-E-23-
01 and AVU-G-23-01, and allocated depreciation expense ultimately approved in the Depreciation
Case Nos. AVU-E-23-02 and AVU-G-23-02.
Andrews, Di 28
Avista Corporation

02 and AVU-G-23-02 on a monthly basis, for review and recovery or return to 1
customers in a future general rate case. 2
3
VII. CONCLUSION 4
Q. In conclusion, why is this Stipulation in the public interest? 5
A. This Stipulation strikes a reasonable balance between the interests of 6
the Company and its customers, including its low-income customers. As such, it 7
represents a reasonable compromise among differing interests and points of view. 8
The terms of the Stipulation represent electric and natural gas base rate 9
changes designed to provide necessary retail revenues over the Two-Year Rate Plan 10
from September 1, 2023 through August 31, 2025. The Settling Parties have agreed 11
that the Company has demonstrated the need for the revenue changes for its electric 12
and natural gas operations, thus providing recovery of its costs over the Two-Year 13
Rate Period. 14
In the final analysis, any settlement reflects a compromise in the give-and-15
take of negotiations. The Commission has before it a Stipulation that is supported by 16
sound analysis and supporting evidence, the approval of which is in the public 17
interest. 18
Q. Does this conclude your direct testimony? 19
A. Yes, it does. 20