Idaho Public Utilities Commission

Case Nos. AVU-E-10-01 and AVU-G-10-01

June 16, 2010

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

Commission schedules workshops in Avista case

Staff from the Idaho Public Utilities Commission will conduct workshops for customers of Avista Utilities later this month regarding the utility’s request to increase its electric rates by 14 percent and natural gas rates by 3.6 percent.

At the workshops, commission staff will provide customers an overview of the company’s application and answer questions. Company representatives may also be available.

The workshops are Monday night, June 28, at the Brammer Building, 1225 Idaho St., in Lewiston and Tuesday, June 29, in the student union building on the North Idaho College campus, 1000 W. Garden Ave., in Coeur d’Alene. Both workshops begin at 7 p.m.

On March 23, Avista filed an application to increase its annual revenue by $32.1 million. If the increases were granted in full, the bill of an average residential electric customer (964 kilowatt-hours per month) would increase by $11.40. The gas increase would be about $2.77 per month for a residential customer who uses 63 therms per month.

The commission has already been receiving a number of comments from customers asking it to deny Avista’s application. The commission is free to accept, reject or modify the company’s request. However, the commission cannot, by state law, arbitrarily refuse to consider utility rate increase requests. State statutes require that all regulated utility rate requests be considered by the commission to determine whether the expenses the utility seeks to recover through customer rates were needed to serve customers and if they were prudently incurred. When the commission denies expense recovery it must be able to legally demonstrate why the expenses were not needed or prudently incurred. All commission decisions can be appealed to the state Supreme Court by the utility, intervenors or customers.

Avista claims the increases are necessary because of escalating power supply costs, increased costs to meet new federal requirements that ensure reliability, and the need to replace aging infrastructure.

Power supply contracts that provide Avista customers with about 100 average megawatts, about 10 percent of the company’s entire retail load, expire at the end of this year. The power provided by these contracts is about 3 cents per kilowatt-hour, which is well below the cost to replace that power, according to Avista president and CEO Scott Morris. Avista’s average cost of resources is now about 4.3 cents per kWh. The additional cost to replace the expiring contacts will be about $10 million, according to Avista.

Also included in this case are about $21 million in costs related to a power purchase agreement with the owners of the Lancaster natural gas generating station near Rathdrum. About 80 percent of Avista’s requested increase is attributable to the Lancaster agreement, termination of the low-cost power contracts and increased customer load.

Replacing aging infrastructure has also resulted in increased costs to the company, Morris said. For example, the cost of a transformer that steps down voltage to residential customers has increased to more than $1,400 per transformer. Six years ago the cost was about $750 per transformer. A transformer is needed to serve every three to four residential or small-business customers. About 12 percent of the requested increase is attributable to upgrades of existing infrastructure.

Organizations representing customer groups are intervening in the case to present evidence, cross-examine witnesses and participate in settlement conferences. They include Idaho Forest Products, North Idaho Energy Logs, the Idaho Conservation League, Snake River Alliance and the Idaho Community Action Network, the latter representing low-income customers.

Avista’s last rate case, filed in early 2009, resulted in an average 5.7 percent base rate increase to customers last July after the company requested 12.8 percent in January. However, customers ended up paying 1.5 percent more, after a 4.2 percent reduction in the annual Power Cost Adjustment (PCA) was applied against the base rate increase.

Base gas rates increased by 2.1 percent last year. However, the base rate increase was more than offset by three reductions in the Purchase Gas Cost Adjustment (PGA) portion of customer bills due to the declining prices of natural gas on the wholesale market. Those reductions were 4.7 percent in January, 6.7 percent in June and 22 percent in November. With the PGA reductions, the average residential natural gas bill is now $61.82 per month compared to $83.94 per month at the beginning of 2009.

Avista customers may track the progress of the case on the commission’s Web site at www.puc.idaho.gov. Click on the electric icon, then on “Open Electric Cases” or “Open Gas Cases,” and scroll down to Case Numbers AVU-E-10-01 or AVU-G-10-01. Avista’s application and testimony from its officers is now on the site. As the case progresses, more testimony, including that from other parties in the case and commission staff, will be added.

Customers can file written comments via e-mail by accessing the commission’s Web site and clicking on "Comments & Questions." Fill in the case number above and enter comments. Comments can also be mailed to P.O. Box 83720, Boise, ID 83720-0074 or faxed to (208) 334-3762.