Idaho Public Utilities Commission

Case No. AVU-G-09-02, Order No. 30714

January 6, 2009

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

Declining wholesale market rates results in Avista lowering gas rates

Declining wholesale natural gas prices mean that Idaho natural gas customers of Avista Utilities will pay lower rates effective today.

Rates for an average residential customer will decline about 4.7 percent as a result of an Idaho Public Utilities Commission order signed today.

Avista, which serves about 72,000 natural gas customers in north-central and north Idaho, has opted to begin returning a larger portion of a growing balance in an account funded by customers to pay for the company’s wholesale gas purchases. Because wholesale prices are lower than anticipated, customers are paying more than market rates. Typically, the Purchased Gas Cost Adjustment (PGA) deferral account is adjusted only once a year on Oct. 1. At that time, customers get either a surcharge when market prices are higher than anticipated or a credit when market prices are lower than anticipated. This year, because of the continued decline in prices, Avista applied to the commission to refund about $4 million of a $5.6 million PGA deferred account to customers now rather than waiting until Oct. 1.

“In order to allow customers to receive the greatest benefit from a decrease in rates during the winter heating season, the commission finds it in the public interest to immediately implement Avista’s rate decrease without further procedural delay,” the commission said.

Avista elected not to refund the entire $5.6 million because it may increase the possibility of a rate increase when the company files its annual PGA this fall. PGA filings do not increase or decrease company earnings. The amount accrued in the PGA account is adjusted every year to reflect the varying price of natural gas. When wholesale prices are higher than anticipated, a surcharge is collected from customers and all that money must be used to pay Avista’s natural gas and transportation expenses. When Avista over-collects, the amount is refunded to customers through a credit.

For an average Avista residential customer who uses 65 therms per month, the decrease will be about $3.89 per month, or 4.7 percent, according to Avista’s calculations.