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HomeMy WebLinkAbout20201229Avista Deferred Accounting Report.pdfAvista Corp. 141 1 East Mission P.O.Box3727 Spokane, Washington 99220 -05 N Telephone 509-489-0500 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