Idaho Public Utilities Commission

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

August 13, 2008

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

PUC taking comments, conducting hearings on proposed Avista settlement

The Idaho Public Utilities Commission is taking public comment and conducting hearings on a settlement proposal in an Avista Utilities electric and gas rate case.

Parties to the case are proposing a settlement that would increase electric rates an average 11.98 percent and gas rates 4.7 percent. The company had originally asked for a 16.7 percent increase in electric rates and 5.8 percent in gas rates. The settlement proposes to cut about $9 million from the annual revenue requirement increase originally proposed by Avista, from $32.3 million to $23.16 million.

Parties proposing the settlement, which still must be approved by the commission, are Avista, Potlatch Corporation, commission staff and the Community Action Partnership of Idaho, which represents customers on low- and fixed-incomes.

If the commission were to adopt the settlement, the monthly bill of a residential customer using 977 kilowatt-hours per month (the average for Avista customers) would increase by $7.89. An average gas customer who uses 65 therms per month would see an increase of about $4.03 per month.

The settlement proposes an increase of $115,000 per year in a fund made available to customers on low- and fixed-incomes through community action agencies. The total allocated to this fund would increase from $350,000 to $465,000. Also, $25,000 is proposed to be made available to community action agency personnel to assist in low-income outreach and conservation education.

Avista has also agreed to participate in any commission-established workshops to examine energy affordability issues and customers’ ability to pay energy bills.

The commission is taking public comment through Sept. 5 on the proposed settlement and is conducting technical and public hearings. The public hearings are Wednesday, Aug. 27, at the Brammer Building, 1225 Idaho St. in Lewiston, and Thursday, Aug. 28 at the Edgewater Resort, 56 Bridge St. in Sandpoint. Both hearings begin at 7 p.m.

At the public hearings, Avista customers will be able to testify to the commissioners who decide the case.

A technical hearing for the attorneys representing the parties in the case and their witnesses is set for Thursday, Aug. 28, at 1 p.m. in the commission hearing room, 472 W. Washington St. in Boise. The technical hearing is open to the public, although public testimony is not taken and is reserved for the public hearings.

The settlement summarizes adjustments to the company’s filing made by the intervening parties in four major areas:

-- The settlement proposes that Idaho’s share of expenses – about $21 million to date -- related to the federal relicensing of hydroelectric projects on the Spokane River be deferred to either 12 months from the date the license is issued or at the conclusion of Avista’s next general rate, whichever comes first. A 5 percent carrying charge on the amount deferred would be included.

-- The settlement proposes that Idaho’s share of expenses related to a confidential litigation be deferred to either 12 months from the date the case is resolved or at the conclusion of Avista’s next general rate, whichever comes first. A 5 percent carrying charge on the amount deferred would be included.

-- The settlement proposes that Idaho’s share of about $1.37 million plus interest in expenses related to the settlement of a lawsuit by the State of Montana against utilities over the use of Montana riverbeds be included in this case.

-- The settlement proposes that Idaho’s share of revenues -- $850,571 – related to Avista’s sale of greenhouse gas credits on the Chicago Climate Exchange be spread over two years and that the revenue be included in this case to immediately flow the benefits to customers.

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

The commission is required by state statute to judiciously consider all rate increase requests. 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. 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. Under the proposed settlement, the company would be allowed to earn a rate of return of up to 8.45 percent with a 10.2 percent return on equity.

If the settlement is challenged by any party that has not signed the settlement, the parties reserve the right to file testimony and cross-examine witnesses. If the commission rejects any part of the settlement or adds material conditions, each party reserves the right to withdraw from the settlement, which could lead to the case going back to hearing.

A copy of the proposed settlement is available on the commission’s Web site at www.puc.idaho.gov. Click on the electric icon, then on “Open Electric Cases” and scroll down to Case No. AVU-E-08-01. The settlement can also be reviewed at the commission’s offices at 472 W. Washington St. in Boise or at Idaho offices of Avista during regular business hours.

Comments are accepted through Sept. 5 via e-mail by accessing the commission’s Website and clicking on "Comments & Questions." Fill in the case number (AVU-E-08-01 for the electric case or AVU-G-08-01 for the gas case) and enter your comments. Comments can also be mailed to P.O. Box 83720, Boise, ID 83720-0074 or faxed to (208) 334-3762.