Idaho Public Utilities Commission

Case No. AVU-E-08-01, AVU-G-08-01,

July 9, 2008

Contact: Gene Fadness (208) 334-0339, 890-2712

Public can ask questions about Avista rate case

Staff from the Idaho Public Utilities Commission will present workshops in Moscow and Coeur d’Alene on July 23 and 24 to explain Avista Utilities’ request for electric and gas rate increases for its northern Idaho customers.

In early April, Avista asked the commission for an average 15.8 percent rate increase for its electric customers and 5.8 percent for gas customers. Both public and technical hearings are scheduled for late September.

At the workshops, commission staff will present the company’s case and Avista customers will have an opportunity to ask questions about the issues the commission must consider when deciding rate cases. An accountant from the commission will explain how the commission determines a utility’s revenue requirement and an engineer will explain how that revenue requirement is allocated among customer classes. Representatives of Avista may also be present to answer customer questions.

Avista claims the rate hikes are necessary to meet significant increases in fuel costs as well as increased costs it incurs to purchase power it needs to meet growing customer demand. Avista says it also invested to upgrade its aging infrastructure to increase capacity and reliability. Those investments include upgrades to the Noxon Rapids and Cabinet Gorge hydroelectric projects and the Colstrip thermal project. The company claims it spent more than $130 million to upgrade its electric transmission system. Also included in this rate increase request are $21 million in costs incurred in the seven-year process to relicense Avista’s hydroelectric projects on the Spokane River.

In the natural gas case, Avista’s chief investment is the upgrading of the Jackson Prairie Natural Gas Storage Facility.

For an average electric customer who uses 977 kilowatt-hours a month, the monthly bill would increase from $67.58 to $78.08 if Avista’s increase were granted in full. An average gas customer who uses 65 therms per month would see an increase of $4.91 per month to $80.05 if the gas increase were granted in full.

The commission’s job is to determine if the company acted in the best interest of customers when it made its additional investment. Were the expenses incurred necessary and were they prudently incurred?

The commission receives many comments from customers who say the commission should “just say no.” The commission must judiciously consider all rate increase requests, issue production requests, conduct audits, receive evidence and conduct hearings, during which it hears testimony and cross-examines witnesses. After a case record is closed, the commission, then fully informed, has the authority, to accept, deny or modify, a company’s rate proposal. It deliberates and renders a decision based on the evidence in the record. When the commission denies cost recovery to a utility, it must be able to legally demonstrate why the utility’s costs were not prudently incurred or in the best interest of customers. All commission decisions can be appealed to the state Supreme Court.

State statute requires that regulated electric utilities – who perform an essential and necessary service and cannot quit serving customers as costs increase – must be allowed to recover all prudently incurred expenses. They also must be allowed a reasonable rate of return, which is also set by the commission. The rate of return cannot be excessive, so as to be too unreasonable for customers to pay. But it must also be high enough to attract investment from Wall Street in utility transmission, distribution and generation projects.

Avista last had a general rate case in 2004. It sought an overall increase of 11 percent in electric rates and was granted 1.9 percent, but for residential customers, the increase was 7.1 percent. The gas rate increase was 6.38 percent; the company sought 9.16 percent.

The July 23 workshop will begin at 7 p.m. at the Best Western University Inn, 1516 Pullman Road in Moscow. The July 24 workshop, also at 7 p.m., is at the Best Western Coeur d’Alene Inn at 506 W. Appleway Avenue.