20230712D. English Testimony in Support of Settlement Stipulation.pdf

BEFORE THE
IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION )OF AVISTA CORPORATION FOR THE )CASE NO.AVU-G-23-01
AUTHORITY TO INCREASE ITS RATES )AVU-E-23-01
AND CHARGES FOR ELECTRIC AND )NATURAL GAS SERVICE TO ELECTRIC )AND NATURAL GAS CUSTOMERS IN THE )STATE OF IDAHO
DIRECT TESTIMONY OF DONN ENGLISH
IN SUPPORT OF THE SETTLEMENT
STIPULATION
IDAHO PUBLIC UTILITIES COMMISSION
JULY 12,2023
1 Q.Please state your name and business address.
2 A.My name is Donn English.My business address is
3 11331 W.Chinden Blvd.,BLDG 8,STE 201-A,Boise,Idaho
4
83714.
5
Q.By whom are you employed and in what capacity?6
7 A.I am employed by the Idaho Public Utilities
8 Commission ("Commission")as a Program Manager overseeing
9 the Accounting and Finance Department in the Utilities
10 Division.
11 Q.Please describe your educational background and
12 professional experience.
13
A.I was hired by the Commission in 2003 and I have
14
15 provided testimony in numerous proceedings.My educational
16 background and professional experience are provided in more
17 detail in Exhibit No.101.
18 Q.What is the purpose of your testimony in this
19 proceeding?
20 A.The purpose of my testimony is to describe the
21 Application of Avista Corporation ("Avista"or "Company")
22
to increase its rates and charges for electric and natural23
24 gas service in Idaho,describe the proposed comprehensive
25 Stipulation and Settlement ("Settlement")reached by the
CASE NOS.AVU-E-23-01/AVUE-G-23-01 ENGLISH,D.(Stip)107/12/23 STAFF
1 signing parties in this case,and explain Staff's support
2 for the settlement.
3 Q.How is your testimony organized?
4
A.My testimony is subdivided under the following
5
headings:
6
7 Background Page 2
8 Staff Investigation Page 4
9 Settlement Evaluation Page 6
10 Settlement Overview Page 7
11 Background
12 Q.Please describe Avista's original filing.
13
A.Avista made its original filing with the
14
15 Commission on February 1,2023,proposing a two-year rate
16 plan to increase its revenue.The Company requested
17 authority to increase its electric base revenue in Idaho by
18 $37.5 million,or 14.7%,effective September 1,2023 ("Rate
19 Year 1"),and an additional $13.2 million,or 4.5%,
20 effective September 1,2024 ("Rate Year 2").For natural
21 gas,the Company requested an increase in Idaho base
22
revenues of $2.8 million (4.5%)for Rate Year 1,and $0.123
24 million (0.1%)for Rate Year 2.
25 The Company's requested increases were based on a
CASE NOS.AVU-E-23-01/AVUE-G-23-01 ENGLISH,D.(Stip)207/12/23 STAFF
1 historical test period ending June 30,2022,with pro forma
2 adjustments through August 31,2023,for the first increase
3 in the two-year plan,and August 31,2024,for the second
4
increase.Capital additions through August 31,2024,were
5
included in the Company's proposed Rate Year 1 and6
7 calculated on an Average of Monthly Averages ("AMA")basis.
8 For Rate Year 2,capital additions were included through
9 August 31,2025,and were also calculated on an AMA basis.
10 The Company proposed using a capital structure of
11 50%equity and 50%debt,and a return on common equity
12 ("ROE")of 10.25%for an overall weighted average cost of
13 capital of 7.59%.
14
15 Additionally,the Company requested to increase
16 its monthly Basic Charges for electric and natural gas
17 service to $15 per month in Rate Year 1 and $20 per month
18 is Rate Year 2.
19 Q.How was this case processed after the Company's
20 filing was received?
21
A.The Commission issued a combined Notice of
22
Application and Notice of Intervention Deadline ("Notice")23
24 on February 21,2023,establishing an Intervention Deadline
25 of March 14,2023.Intervenor status was subsequently
CASE NOS.AVU-E-23-01/AVUE-G-23-01 ENGLISH,D.(Stip)307/12/23 STAFF
1 granted to Clearwater Paper Corporation ("Clearwater"),
2 Idaho Forest Group,LLC ("IFG"),Walmart Inc.("Walmart"),
3 the Idaho Conservation League and NW Energy Coalition ("ICL
4
and NWEC").The Parties participated in a settlement
5
conference on June 1,2023,which resulted in the
6
7 Settlement filed with the Commission on June 14,2023.The
8 Stipulation was signed by representatives for Clearwater,
9 IFG,Walmart,and Staff ("Signing Parties").ICL and NWEC
10 did not sign the Stipulation.
11 Staff Investigation
12 Q.What type of investigation did Staff conduct to
13
evaluate the Company's rate increase request?
14
15 A.Staff's approach in any general rate case is to
16 extensively review the Company's Application and associated
17 testimony and workpapers,identify adjustments to the
18 proposed revenue requirement,and prepare to file testimony
19 for a fully-litigated proceeding.There were 15 Staff
20 members analyzing this case consisting of auditors,
21 engineers,utility analysts,and consumer investigators.
22
Additionally,five supervisors reviewed the results of all23
24 analysis.
25 Staff auditors reviewed the Company's test year
CASE NOS.AVU-E-23-01/AVUE-G-23-01 ENGLISH,D.(Stip)407/12/23 STAFF
1 results of operations,capital budgets,capital spending
2 trends,operations and maintenance ("O&M")expenses and
3 trends,and verified all of the Company's calculations and
4 assumptions with regard to the overall revenue requirement.
5
The auditors reviewed thousands of transactions,selected6
7 samples,and performed transaction testing in accordance
8 with standard audit procedures.Staff reviewed the
9 Company's labor expense,incentive plans,and employee
10 benefits to ensure the appropriate level of expenditures
11 are included in rates.
12 Staff reviewed both completed and proposed
13
Company investments to determine the prudency of capital
14
15 additions.Expenditures including pension expense,
16 salaries,and O&M expenses were also examined.
17 Additionally,Staff investigated the Company's cost of
18 capital,actual and proposed capital structure,cost of
19 service,and revenue normalization.In total,Staff
20 submitted over 200 production requests,performed an onsite
21
audit of the Company's books,and held several virtual
22
meetings with Company personnel as a part of its23
24 comprehensive investigation.
25 Based on the success of its investigation,Staff
CASE NOS.AVU-E-23-01/AVUE-G-23-01 ENGLISH,D.(Stip)507/12/23 STAFF
1 proposed 21 separate revenue requirement adjustments during
2 settlement discussions,20 of which were either completely
3 or partially accepted by the Company.
4 Settlement Evaluation
5
Q.How did Staff determine that the overall
6
7 Settlement was reasonable?
8 A.In every settlement evaluation,Staff and other
9 parties must examine the risks of losing positions at
10 hearing and determine if the Settlement is a better overall
11 outcome.Staff must evaluate each individual adjustment
12 and determine the likelihood of the Commission accepting or
13 rejecting Staff's rationale for the adjustment.
14
15 Ultimately,Staff's intent in every settlement conference
16 is to negotiate the best possible outcome for customers.
17 Q.Does Staff support the Settlement as reasonable?
18 A.Yes,after a comprehensive review of the
19 Company's Application,a thorough audit of the Company's
20 books and records,an analysis of the Company's class cost
21 of service study,and extensive negotiations with the
22
parties to the case,Staff supports the proposed23
Settlement.The Settlement offers a reasonable balance24
25 between the Company's opportunity to earn a reasonable
CASE NOS.AVU-E-23-01/AVUE-G-23-01 ENGLISH,D.(Stip)607/12/23 STAFF
1 return on its investment and affordable rates for
2 customers.Staff believes the Settlement is in the public
3 interest;is fair,just,and reasonable;and should be
4 approved by the Commission.
5
Settlement Overview
6
7 Q.Would you please describe the terms of the
8 Settlement?
9 A.The proposed Settlement provides a reduction in
10 the Company's requested revenue requirement.Instead of
11 the Company's proposed electric base rate increase of $37.5
12 million (13.6%)and natural gas base rate increase of $2.8
13
million (6.0%)for the first year of the two-year rate14
15 plan,base rates under the proposed Settlement for Idaho
16 electric customers will increase by $22.1 million (8.03%),
17 and base rates for natural gas customers will increase by
18 $1.25 million (2.7%)effective September 1,2023.On
19 September 1,2024,Idaho electric customers'base rates
20 under the proposed Settlement will increase by $4.3 million
21 (1.4%)compared to the requested $13.2 million (4.2%),
22
while natural gas customers'base rates will increase by23
24 $3,000 (0.01%)compared to the requested $120,000 (0.3%).
25 Q.How was the stipulated revenue requirement
CASE NOS.AVU-E-23-01/AVUE-G-23-01 ENGLISH,D.(Stip)707/12/23 STAFF
1 derived?
2 A.For Rate Year 1,the Settlement revenue
3 requirement was calculated by starting with the Company's
4 proposed revenue requirement and subtracting the agreed
5
upon adjustments proposed by Staff and the Parties.The6
7 Calculation of the Settlement revenue requirement is shown
8 on Table No.1 (electric)and Table No.3 (natural gas)of
9 the Settlement.Table No.2 (electric)and Table No.4
10 (natural gas)illustrate the additional pro form
11 adjustments accepted by the Signing Parties to come to a
12 revenue requirement for Rate Year 2.Several agreed upon
13 adjustments to the Company's revenue requirement include14
15 timing differences based on when capital investments would
16 be included for recovery or amortization periods that were
17 extended,while other adjustments were based on different
18 calculation methods or the removal of expenses for
19 recovery.Rather than discuss every adjustment that was
20 proposed and agreed upon,I will highlight the adjustments
21 that had a significant impact to the revenue requirement.
22
Q.Please explain the cost of capital and return on23
24 equity components of the Settlement.
25 A.In its Application,Avista proposed a 50%common
CASE NOS.AVU-E-23-01/AVUE-G-23-01 ENGLISH,D.(Stip)807/12/23 STAFF
1 equity ratio and a 10.25%ROE.The Signing Parties agreed
2 to remain at the currently authorized ROE of 9.4%while
3 accepting the 50%common equity ratio.A 9.4%ROE reduces
4
the Company's requested first-year electric revenue
5
requirement by approximately $5.3 million and requested
6
7 first-year natural gas revenue requirement by approximately
8 $1.1 million.
9 Q.How does the Settlement account for the Company's
10 capital investments included in net rate base?
11 A.In its Application,the Company proposed to
12 include capital investments through August 31,2024,in the
13
calculation of net rate base for Rate Year 1.Consistent
14
15 with prior Commission orders,the Signing Parties agree
16 that only capital investments scheduled to be placed in
17 service before August 31,2023,will be included in the
18 Rate Year 1 revenue requirement.Those capital additions
19 will be in service and benefiting customers when new rates
20 are effective on September 1,2023.
21
For the Rate Year 2 increase,the Company
22
proposed capital additions through August 31,2025,to be23
24 included in the calculation of net rate base.The Signing
25 Parties agreed that any capital investment scheduled to be
CASE NOS.AVU-E-23-01/AVUE-G-23-01 ENGLISH,D.(Stip)907/12/23 STAFF
1 placed in service after August 31,2024,would be excluded,
2 and the net rate base for Rate Year two would be calculated
3 on an Average of Monthly Averages ("AMA")basis.
4
Q.Will you please summarize how employee labor and
5
incentive payments are accounted for in the Settlement?6
7 A.For executive compensation,all incremental wage
8 increases and incentive payments were removed consistent
9 with Staff's recommendation in other rate cases.The
10 Company will recover the Idaho jurisdictional portion of
11 executive salaries at the 2022 test year level.
12 For non-executive labor,the revenue requirement
13
includes the 2022 test year wages plus the incremental wage14
15 increase awarded in 2023.On September 1,2024,the
16 Company will begin recovering the Idaho jurisdictional
17 portion of the contractually obligated 2024 increases for
18 bargaining unit ("union")employees.
19 Q.Please discuss the adjustment to the Company's
20 proposed recovery of deferred Wildfire Deferral.
21 A.This adjustment revises the Company's proposed
22
amortization of its Wildfire Regulatory Deferred Asset23
24 balances as of September 30,2020 ($8.2 million)from a
25 two-year amortization to a four-year amortization.This
CASE NOS.AVU-E-23-01/AVUE-G-23-01 ENGLISH,D.(Stip)1007/12/23 STAFF
1 adjustment also establishes a new base level of Wildfire
2 Resiliency Plan expenses to be recovered through base rates
3 at $4.4 million annually.
4
Q.Will you please explain the escalation of
5
miscellaneous O&M expenses.
6
7 A.The Company applied an annual 7.22%escalation
8 factor to increase certain O&M expenses beyond the
9 historical June 30,2022,test year end ("Base Year").
10 Staff and this Commission have historically opposed
11 escalation factors and Staff would have recommended an
12 adjustment removing the escalation factor in a litigated
13 hearing.For purposes of the Settlement,the Signing
14
15 Parties agreed to increase the previously unadjusted O&M
16 accounts from the June 30,2022,Base Year amounts to the
17 December 31,2022,year-end values to mitigate the impact
18 of inflation and regulatory lag.
19 Q.Will you please discuss the level of Net Power
20 Supply Expense ("NPSE")to be included in base rates?
21
A.The Signing Parties agreed to include in base
22
rates the system NPSE approved in case No.AVU-E-21-0123
24 totaling $149,279,000 with some adjustments.The Palouse
25 and Rattlesnake Flat Wind Power Purchase Agreements that
CASE NOS.AVU-E-23-01/AVUE-G-23-01 ENGLISH,D.(Stip)1107/12/23 STAFF
l have historically been excluded from base rates and
2 recovered at 90%through the Power Cost Adjustment ("PCA")
3 will now be included in base rates at 90%.Additionally,
4
the Columbia Basin Hydro Transmission costs will be removed
5
from system NPSE included in base rates.The total system
6
7 NPSE included in base rates will be $177,585,000.Idaho's
8 share of NPSE is 34.47%,and the authorized PCA Expense and
9 Retail Sales revenue is provided in Appendix A to the
10 Settlement.
11 Q.How does the Settlement allocate the revenue
12 requirement among the different customer classes?
13
A.While the Signing Parties did not agree to a
14
15 specific electric cost of service study or methodology,
16 there was a general recognition that certain customer
17 classes were paying more than their relative cost of
18 service.The Signing Parties agreed that Schedule 25P
19 (Clearwater)should receive 35%of the overall percentage
20 base rate increase each year.Schedules 1 (Residential),
21 21/22 (General Service),and 31/32 (Pumping)will receive
22
130%of the overall percentage base rate increase.The23
24 remaining revenue requirement increase will be spread to
25 all other rate schedules.
CASE NOS.AVU-E-23-01/AVUE-G-23-01 ENGLISH,D.(Stip)1207/12/23 STAFF
1 For natural gas,the Signing Parties agreed to
2 apply the increase solely to Schedule 101 (Residential)
3 customers.The percentage increase to each customer class
4
for both electric and natural gas is shown on pages 18-19
5
of the Settlement.
6
7 Q.Will you address the increase in the monthly
8 Basic Charge?
9 A.Yes.In recognition that the current Basic
10 Charge does not allow the Company to recover the fixed
11 costs associated with customer charges (billing and meter
12 reading)or distribution,the Signing Parties agreed to an
13
increase in the Basic Charge.For residential customers,14
15 the Basic Charge will increase from $8.00 per month to
16 $15.00 per month on September 1,2023,and to $20.00 per
17 month on September 1,2024.The different charges for each
18 rate schedule are included on Appendix F to the Settlement.
19 Q.Do you have any other comments on the Settlement?
20 A.Yes.Staff believes that an important aspect of
21
a two-year rate plan is to provide rate stability and
22
certainty to customers.Although not explicitly stated in23
24 the Settlement,the Signing Parties understand that other
25 than this two-year rate plan,base rates from a general
CASE NOS.AVU-E-23-01/AVUE-G-23-01 ENGLISH,D.(Stip)1307/12/23 STAFF
1 rate case filing will not increase before September 1,
2 2025.Staff believes that the rate stability and
3 certainty,along with the reduced revenue increases,
4 provided in the Settlement,that it represents a fair,
5
just,and reasonable compromise of the positions put forth6
7 by the parties and is in the public interest.Therefore,
8 Staff recommends that the Commission approve the Settlement
9 without material changes or modifications.
10 Q.Does this conclude your testimony in this
11 proceeding?
12 A.Yes,it does.
13
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CASE NOS.AVU-E-23-01/AVUE-G-23-01 ENGLISH,D.(Stip)1407/12/23 STAFF
Professional Qualifications
of
Donn English
Program Manager -Accounting and Finance
Idaho Public Utilities Commission
EDUCATION
Mr.English graduated from Boise State University in 1998 with a
Bachelor of Business Administration degree in Accounting.His
studies concentrated on corporate finance and taxation.He was
a member of the Alpha Beta Psi honor society for Accounting
students.He completed the Annual Regulatory Studies Program,the Advanced Regulatory Studies Program,and the Accounting andRatemakingCourseofferedthroughtheInstituteofPublic
Utilities at Michigan State University.Additionally,heregularlyattendsmeetingandconferencessponsoredbythe
National Association of Regulatory Commissioners (NARUC)and theSocietyofUtilityandRegulatoryFinancialAnalysts.
In 2001,Mr.English became a designated member of the AmericanSocietyofPensionProfessionalsandActuaries(ASPPA)and was
awarded the professional designation of Qualified Pension
Administrator (QPA)and Qualified 401(k)Administrator (QKA).
Mr.English was also a member of the Association of Certified
Fraud Examinators.
BUSINESS EXPERIENCE
Prior to joining the Idaho Public Utilities Commission (IPUC),
Mr.English was a Trust Accountant with a pension
administration,actuarial,and consulting firm in Boise,Idaho.
In 1999,he was promoted to Pension Administrator,and in 2001
he was promoted to Pension Consultant.In that capacity,Mr.English performed actuarial calculations and the required non-
discrimination calculations for hundreds of qualified retirementplans.He completed and filed Form 5500s and represented
clients during audits by the Department of Labor and the
Internal Revenue Service.He also participated on the task
force that wrote questions for the ASPPA administrator and
actuarial exams.
Exhibit No.101
Case Nos.AVU-E 23-01/
AVU-G-23-01
D.English,Staff
07/12/23 Page 1 of 2
Mr.English joined the IPUC in 2003 as a Staff Auditor.In2016,he was promoted to Audit Team Lead,and in 2018 he becametheProgramManagerfortheAccountingandFinanceDepartmentwithintheUtilitiesDivision.In 2020,Mr.English acceptedtheresponsibilityofsupervisingtheTechnicalAnalysisandEnergyEfficiencyteamandwastheProgramManagerforthat teamuntil2022.At the Commission,Mr.English has audited a number
of utilities including electric,water,and natural gascompanies,and provided comments and testimony in numerous casesdealingwithgeneralrates,tax issues,pension issues,depreciation and other accounting issues,and other regulatorypolicydecisions.Mr.English participates in the EnergyEfficiencyAdvisoryGroupsandExternalStakeholderAdvisoryCommitteesforIdahoPower,Avista Utilities,Rocky MountainPower,and Intermountain Gas Company.He is a member of several
of the National Association of Regulatory Utility Commissioners'RARUC)working groups including the NARUC State Working Group
on Performance-Based Regulation,the NARUC State Working Group
on Electric Vehicles,and the NARUC State Working Group on Grid-Interactive Efficient Buildings in collaboration with the
National Association of State Energy Officials (NASEO).Mr.English is the Chair of the NARUC Staff Subcommittee on
Education and Research and the Vice Chair of the NARUC StaffSubcommitteeofAccountingandFinance.Mr.English is also afacultymemberofNARUCRateSchool.
Exhibit No.101
Case Nos.AVU-E 23-01/
AVU-G-23-01
D.English,Staff
07/12/23 Page 2 of 2
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 12TH DAY OF JULY 2023,
SERVED THE FOREGOING DIRECT TESTIMONY OF DONN ENGLISH IN
SUPPORT OF THE STIPULATION AND SETTLEMENT ,IN CASE NOS.AVU-E-
23-01/AVU-G-23-01,BY E-MAILING A COPY THEREOF TO THE FOLLOWING:
PATRICK EHRBAR DAVID J MEYER
DIR OF REGULATORY AFFAIRS VP &CHIEF COUNSEL
AVISTA CORPORATION AVISTA CORPORATION
PO BOX 3727 PO BOX 3727
SPOKANE WA 99220-3727 SPOKANE WA 99220-3727
E-mail:[e-mail] E-mail:[e-mail]
[e-mail]
PETER J RICHARDSON DR DON READING
RICHARDSON ADAMS PLLC 280 SILVERWOOD WAY
515 N 27TH STREET EAGLE,ID 83616
BOISE ID 83702 E-mail:[e-mail]
E-mail:peter richardsonadams.com
Electronic Service Only:
[e-mail]
[e-mail]
[e-mail]
ANDREW P MORATZKA LARRY A CROWLEY
STOEL RIVES LLP THE ENERGY STRATEGIES INSTITUTE
33 SOUTH SIXTH STREET,SUITE 4200 3738 S HARRIS RANCH AVE.
MINNEAPOLIS,MN 55402 BOISE ID 83716
E-MAIL:andrew.moratzka stoel.com E-mail:crowleyla aol.com
JUSTINA A.CAVIGLIA STEVE W CHRISS
PARSONS BEHLE &LATIMER DIRECTOR,ENERGY SERVICES
50 W.LIBERTY STREET,SUITE 750 WALMART INC
RENO,NV 89502 2608 SOUTHEAST J ST
E-MAIL:[e-mail] BENTONVILLE AR 72716
E-MAIL:[e-mail]
CERTIFICATE OF SERVICE
MARIE CALLAWAY KELLNER BRAD HEUSINKVELD
ID CONSERVATION LEAGUE ID CONSERVATION LEAGUE
710 N 6TH ST 710 N 6TH ST
BOISE ID 83702 BOISE ID 83702
E-MAIL:mkellner idahoconservation.org E-MAIL:
bheusinkveld idahoconservation.org
F DIEGO RIVAS
NW ENERGY COALITION
1101 8TH AVE
HELENA MT 59601
E-MAIL:[e-mail]
SECRETARY
CERTIFICATE OF SERVICE