AVISTA/100 Morris BEFORE THE PUBLIC UTILITY COMMISSION OF OREGON DOCKET NO. UG-___ DIRECT TESTIMONY OF SCOTT L. MORRIS REPRESENTING AVISTA CORPORATION _____________________________________________________________________ Policy and Operations Avista/100 Morris/Page 1 1 I. INTRODUCTION 2 Q. Please state your name, employer and business address. 3 A. My name is Scott L. Morris and I am employed as the Chairman of the Board, 4 President, and Chief Executive Officer of Avista Corporation (Company or Avista), at 1411 5 East Mission Avenue, Spokane, Washington. 6 Q. Would you briefly describe your educational background and professional 7 experience? 8 A. Yes. I am a graduate of Gonzaga University with a Bachelors degree and a 9 Masters degree in organizational leadership. I have also attended the Kidder Peabody School 10 of Financial Management. 11 I joined the Company in 1981 and have served in a number of roles including 12 customer service manager. In 1991, I was appointed general manager for Avista Utilities’ 13 Oregon and California natural gas utility business. I was appointed President and General 14 Manager of Avista Utilities, an operating division of Avista Corporation, in August 2000. In 15 February 2003, I was appointed Senior Vice-President of Avista Corporation, and in May 16 2006, I was appointed as President and Chief Operating Officer. Effective January 1, 2008, I 17 assumed the position of Chairman of the Board, President, and Chief Executive Officer. 18 I am a member of the Western Energy Institute board of directors, a member of the 19 Gonzaga University board of trustees, a member of Edison Electric Institute board of 20 directors, a member of the American Gas Association, and board director of the Washington 21 Roundtable. On January 1, 2011, I was appointed to the Federal Reserve Bank of San 22 Francisco, Seattle Branch board of directors and in January 2012 I was appointed as Chairman 23 of the Board to Innovate Washington by Governor Christine Gregoire. I also serve on the Policy and Operations Avista/100 Morris/Page 2 1 board of trustees of Greater Spokane Incorporated. 2 During my time as general manager in Oregon, I was appointed by then-Governor 3 John Kitzhaber as a board member of the Oregon Economic and Community Development 4 Commission. I served as a member of the board of directors and as board president of 5 Southern Oregon Regional Economic Development Inc. I served as a director and board 6 president of the Medford/Jackson County Chamber of Commerce. I was a board member and 7 served as board president of the Providence Community Health Foundation. I have also 8 served as a member of the board of directors and a board president for the Medford YMCA, 9 as a member of the board for the Oregon Shakespeare Festival, and the Rogue Valley College 10 Regional Advisory Board. 11 Q. While general manager in Oregon, what were your responsibilities? 12 A. As general manager in Oregon, my responsibilities included accountability for 13 all aspects of business operations for our Oregon properties. 14 Q. What is the scope of your testimony? 15 A. I will provide an overview of Avista Corporation. I will also summarize the 16 Company’s rate request in this filing, the primary factors driving the Company’s need for 17 general rate relief, and provide some background on why utility costs are continuing to 18 increase. A large part of our need for a rate increase is driven by the costs associated with 19 continuing to expand and replace the facilities we use every day to serve our customers. When 20 we replace old equipment with new, it results in higher overall costs to serve customers. 21 My testimony will provide an overview of some of the measures we have taken to cut 22 costs, as well as initiatives to increase operating efficiencies in an effort to mitigate a portion of 23 the cost increases. I will briefly explain the Company's customer support programs in place to Policy and Operations Avista/100 Morris/Page 3 1 assist our customers, as well as our communications initiatives to help customers better 2 understand the changes in costs that are causing our rates to increase. 3 Finally, I will introduce each of the other witnesses providing testimony on the 4 Company’s behalf. 5 Q. Are you sponsoring exhibits in this proceeding? 6 A. Yes. I am sponsoring Exhibit No. 101. Page 1 includes a map of the 7 Company’s service territories, and page 2 includes a map of our natural gas trading hubs, 8 interstate pipelines, and natural gas storage facilities. This exhibit was prepared under my 9 direction. 10 11 II. OVERVIEW OF AVISTA 12 Q. Please briefly describe Avista Utilities. 13 A. Avista Utilities provides natural gas distribution service in southwestern and 14 northeastern Oregon. The Company, headquartered in Spokane, Washington, also provides 15 electric and natural gas service within a 26,000 square mile area of eastern Washington and 16 northern Idaho.1 Of the Company’s 366,305 electric and 325,919 natural gas customers (as of 17 December 31, 2013), approximately 97,486 were Oregon customers. A map showing Avista’s 18 electric and natural gas service areas is provided in Exhibit No. 101. 19 As of December 31, 2013, Avista Utilities had total assets (electric and natural gas) of 20 approximately $3.9 billion (on a system basis), with electric retail revenues of $743 million 21 (system) and natural gas retail revenues of $315 million (system). As of December 2013, the 22 Utility had 1,520 full-time employees. 1 Avista also serves approximately 28 retail electric customers in western Montana. Policy and Operations Avista/100 Morris/Page 4 1 The Company acquired its Oregon natural gas operations from CP National in 1991. 2 Avista serves four counties in southwest Oregon and one county in northeast Oregon, which 3 include Medford, Klamath Falls, Roseburg, Ashland, Grants Pass and LaGrande as shown on 4 page 1 of Exhibit No. 101. 5 The Company’s Oregon service area includes approximately 82 miles of natural gas 6 distribution mains and 2,000 miles of distribution lines. Natural gas is received at more than 7 20 points along interstate pipelines and distributed to approximately 97,000 residential, 8 commercial and industrial customers. 9 Avista purchases natural gas for its distribution customers in wholesale markets at 10 multiple supply basins in the western United States and western Canada. Purchased natural 11 gas can be transported through six connected pipelines on which Avista holds firm 12 contractual transportation rights. These contracts provide access to both US and Canadian- 13 sourced supply. The US-sourced gas represents 20% of the contractual rights, with 14 transportation from the Rocky Mountains. The remaining 80% comes from Alberta and 15 British Columbia supply basins. 16 Avista has a long history of innovation and environmental stewardship. At the turn of 17 the 19th century, the Company built its first renewable hydro generation plant on the banks of 18 the Spokane River. In the 1980’s, Avista developed an award-winning biomass plant (Kettle 19 Falls) that generates energy from wood-waste. 20 Avista was one of the three original developers of the natural gas storage facility at 21 Jackson Prairie. Although there have been corporate changes because of mergers, acquisitions 22 and name changes, Avista, Puget Sound Energy and Northwest Pipeline each hold a one-third 23 share of this underground gas storage facility. Development began in the 1960’s and the Policy and Operations Avista/100 Morris/Page 5 1 project first went into service in 1972. A portion of this natural gas storage facility is used to 2 serve our Oregon customers. 3 Q. Please describe Avista’s current business focus for its utility operations. 4 A. Our strategy continues to focus on our energy and utility-related businesses, 5 with our primary emphasis on the electric and natural gas utility business. There are four 6 distinct components to our business focus for the utility, which we have referred to as the four 7 legs of a stool, with each leg representing customers, employees, the communities we serve, 8 and our financial investors. For the stool to be level, each of these legs must be in balance by 9 having the proper emphasis. This means we must maintain a strong utility business by 10 delivering efficient, reliable and high quality service at a reasonable price to our customers 11 and the communities we serve, and provide the opportunity for sustained employment for our 12 employees, while providing an attractive return to our investors. 13 Q. Please briefly describe Avista’s subsidiary businesses. 14 A. Mr. Thies provides an overview of our recent transactions involving the sale of 15 our Ecova subsidiary, and our purchase of Alaska Energy and Resources Company (AERC), 16 effective July 1, 2014. With the sale of Ecova, Avista Corp.’s primary subsidiary is now 17 AERC, which includes the utility operations of Alaska Electric Light and Power (AEL&P). 18 AEL&P is operated by the same employees operating the utility prior to being 19 acquired by the Company, including the existing management team of AEL&P. AEL&P has 20 60 full-time employees. AEL&P serves approximately 15,900 retail electric customers under 21 the authority of the Regulatory Commission of Alaska, and is the sole electric utility serving Policy and Operations Avista/100 Morris/Page 6 1 the City and Borough of Juneau, Alaska. The following is a diagram of Avista’s corporate 2 structure2: 3 4 5 6 7 8 9 10 11 12 III.