Idaho Public Utilities Commission

Case No. AVU-E-08-05

August 22, 2008

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

Comment deadline is Sept. 17 on Avista request

Avista Utilities claims its power supply expenses were $23 million more than was collected in customer rates from July 1, 2007 to June 30, 2008. The utility is seeking Idaho Public Utilities Commission approval to increase its Power Cost Adjustment (PCA) surcharge in order to collect the amount it has paid its power suppliers.

The utility is asking to increase the surcharge from the current 0.267 cents per kWh to 0.61 cents per kWh effective Oct. 1. For an average residential customer who uses 1,000 kWh per month, the proposed increase would be about $3.43 per month or 5.4 percent. The commission is accepting comments through Sept. 17 on Avista’s request.

The yearly PCA adjustment is different than a permanent rate increase. (Avista also has a proposed rate increase pending before the commission that, for residential customers, is about 12 percent, or $8.08 per month for a customer who uses 1,000 kWh per month. The commission is conducting hearings Wednesday, Aug. 27, at 7 p.m. at 1225 Idaho St. in Lewiston and Thursday, Aug. 28, at 7 p.m. at the Edgewater Resort in Sandpoint on that proposal.) The PCA is adjusted yearly, while a rate increase remains in place until the company files a rate case. And while a company’s profit can increase from a rate increase, profits cannot increase from a PCA. All of the money collected from the PCA must go to pay off already incurred power supply expense. Avista is required to absorb the first 10 percent of additional power costs. The PCA is a surcharge when power supply costs are higher than anticipated and a credit to customers when those costs are lower.

“For Avista customers, this is one of those years when there is a double whammy of both a permanent rate increase request on top of the annual Power Cost Surcharge request,” said commission President Mack Redford. “Idaho, unfortunately, is not immune from the rapid increases we’re witnessing nationwide in the wholesale gas markets. And to compound the problem, we’re seeing reduced hydro generation.”

About $14.3 million of the increased power costs is attributable to lower hydro generation, the company claims. During the one-year PCA period, hydro generation was 81 average megawatts below normal. When generation from the company’s hydroelectric dams is reduced, the company is forced to go to other sources for power supply, such as its natural gas plants and the wholesale electric market.

About $12.4 million of the increased power supply expenses is attributable to increasing natural gas expenses. Avista uses natural gas to fuel some of its power plants. Current power supply expense allowed for a natural gas rate of $4.81 per dekatherm, but spikes in the wholesale gas price during the year resulted in an average cost of gas at Avista’s Coyote Springs 2 plant of $7.64 per dekatherm.

That $26.7 million increase in gas supply costs was somewhat offset by revenue the company earned by selling surplus emissions credits, which netted $2.9 million for Avista’s Idaho customers.

The commission’s role in a Power Cost Adjustment case is to review Avista’s decisions in procuring power supply to serve its customers. It will examine the company’s wholesale market purchases to ensure it found the most reasonably priced power it could. It also looks to see if the company dispatched power from its own generating sources in a reasonable and cost-effective manner. State statute requires the commission to allow the company to recover power supply expenses that were 1) necessary to serve customers and 2) prudently incurred.

In the face of ever-increasing expenses from all utilities, the commission continues to encourage customers to participate in energy efficiency programs available through community action agencies and the utilities. Customers can also take advantage of level-pay plans and programs that can assist customers on low- and fixed-incomes. Customers can read details about those plans by clicking on “Consumer Information,” on the top left-hand corner of the PUC Website at www.puc.idaho.gov. Those without Internet access can contact the commission at 1-800-432-0369 to request consumer assistance information.

Comments are accepted through Sept. 17 via e-mail by accessing the commission’s homepage at www.puc.idaho.gov and clicking on "Comments & Questions." Fill in the case number (AVU-E-08-05) and enter your comments. Comments can also be mailed to P.O. Box 83720, Boise, ID 83720-0074 or faxed to (208) 334-3762.

A full text of the commission’s order, along with other documents related to this case, is available on the commission’s Web site. Click on “File Room” and then on “Electric Cases” and scroll down to the above case number.