Idaho Public Utilities Commission

September 17, 2008

Case No. AVU-G-08-03

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

Avista lowers PGA request from 14 percent increase to 4 percent

Falling wholesale market prices for natural gas have resulted in Avista Utilities revising its annual Purchased Gas Cost Adjustment (PGA) application from an original average increase of 14 percent to a requested 4 percent increase.

Avista, which serves about 72,000 natural gas customers in northern Idaho, notes that wholesale prices for natural gas have continued to fall and the company has been able to purchase additional natural gas for the coming year, both for underground storage and at hedged forward prices for delivery throughout the year. The company now says it will need to increase its natural gas revenues by $3.3 million instead of the earlier projected $11.6 million.

None of the money collected in the surcharge can go to increase company profits, but most go directly to pay natural gas supply and transportation expenses not covered in existing customer rates. The money collected from the PGA is kept in a separate, deferred account audited by the commission to ensure it is used only for gas supply costs.

Avista is still asking for an Oct. 1 effective date and the comment deadline for the revised application remains Sept. 23.

The PGA is filed annually to reflect changes in the cost of gas purchased by Avista to serve its customers. A portion of the PGA is a projection of what gas costs will be over the next year. Since the projection is never exact, the PGA is adjusted every year to match projected costs with actual costs. If wholesale market prices are lower than the company anticipated and projected prices are not higher than normal, customers can get a one-year credit. If market prices are higher than projected, customers can get a one-year surcharge. In 2006, the PGA was a 2 percent credit and in 2007, a 4.6 percent credit.

For an average Avista Gas customer who uses about 65 therms per month, the one-year PGA surcharge would increase an average monthly bill from $75.14 to $78.10, or $2.96 per month. The actual increase will vary depending on customer use.

Commission staff will review Avista’s gas purchasing policies to ensure that it found the most reasonably priced gas it could and that it also used other tools such as hedging and storage to protect customers as much as possible from market volatility.

Comments are accepted 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-G-08-03) and enter your comments. Comments can also be mailed to P.O. Box 83720, Boise, ID 83720-0074 or faxed to (208) 334-3762.