Case No. AVU-E-06-05, Order No. 30161

November 1, 2006

Contact: Gene Fadness (208) 334-0339


Avista surcharge continued, but further study required


A surcharge to allow Avista Utilities to recover extraordinary power supply expenses that are not included in base rates may continue for another year, but must be reviewed before it can be renewed again state regulators ruled on Tuesday.


The Idaho Public Utilities Commission approved Avista’ application for a 12-month extension of the 2.45 percent Power Cost Adjustment (PCA) surcharge, but expressed concern the surcharge is being continued to allow for projected future power supply expenses rather than recovering only those costs directly attributable to the Western energy crisis of 2000-01, the reason the surcharge was created.


Extension of the surcharge does not increase rates. It leaves the surcharge – about 0.163 cents per kWh for residential customers – in place for another year. Revenues from the surcharge do not increase Avista’s earnings. The surcharge is expected to raise about  $4,268,000, which goes directly to pay debts Avista owes its power suppliers.


The surcharge, originally at 19.4 percent, was implemented in October 2001 to allow the company to start paying down a $78 million debt it incurred following the 2000-01 Western states’ energy crisis. In 2005, with the debt down to $26.1 million, the surcharge was reduced to 4.38 percent. In April of this year, the surcharge was reduced to its current level of 2.45 percent.


By June 30 of this year, the deferred balance was down to $1.5 million. But increased expenses that Avista claims are due to a shortfall in hydro generation and to increasing gas fuel expenses for the utility’s thermal generating plants, resulted in the deferral balance increasing to $3.2 million by July 31. The company anticipated that by this fall the balance will grow beyond the $4.3 million in annual revenue the surcharge collects.


The commission said further study of the original intent of the surcharge and future methods for treating extraordinary power supply expense are warranted before the surcharge can be renewed again. “We find that the events that justified implementation of changes in PCA methodology, however, cannot be used to support an unending continuation of the charges,” the commission said. “A thorough review and examination is required.”


In the company’s current PCA filing, it uses a projected increase, rather than an actual increase, in power supply expense to justify its request to continue the existing surcharge level. “This recommended use of projections is a significant departure from the approved PCA methodology,” the commission said.


The commission ordered the company and commission staff to conduct workshops to examine future treatment of extraordinary power supply expense. Avista must file a report filed with the commission by on or before August 15, 2007.


A full text of the commission’s order, along with other documents related to this case, are available on the commission’s Web site at Click on “File Room” and then on “Electric Cases” and scroll down to Case No. AVU-E-06-05.