Case No. AVU-E-07-01

May 14, 2007

Contact: Gene Fadness (208) 334-0339


Avista proposes permanent PCA mechanism


Avista Utilities is proposing a yearly adjustment to rates that will allow the utility to recover extraordinary power supply expenses not included in base rates. The yearly Power Cost Adjustment (PCA) mechanism would be similar to one that has been in place for Idaho Power Co. customers since 1993.


The yearly adjustment increases or decreases customer rates depending on streamflows and wholesale market conditions. During years when water supply for hydroelectric facilities is ample and wholesale electric market conditions are normal, customers typically get a credit. When water supply is short and the company has to acquire electricity from more expensive sources, customers get a surcharge. The credit or surcharge lasts one year and then is renewed based on current conditions and updated projections. During those years when there is a surcharge, the revenue from the surcharge goes directly to pay amounts the utility owes its fuel or energy suppliers. The surcharge is not used to increase company profits.


Last October, the Idaho Public Utilities Commission approved Avista’s application for a 12-month extension of a 2.45 percent surcharge that was originally intended to recover extraordinary power supply costs that resulted from the 2000-01 Western energy crisis. While the commission approved extending the surcharge through June 30 of this year, it expressed concern the surcharge was being continued to allow for projected future power supply expenses rather than recovering only those costs directly attributable to the Western energy crisis.


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 energy crisis. In 2005, with the debt down to $26.1 million, the surcharge was reduced to 4.38 percent. In April 2006, the surcharge was reduced to its current level of 2.45 percent. By June 30, 2006, the deferred balance was down to $1.5 million. But increased expenses that Avista claimed were 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.


In the October order allowing continuation of the surcharge, the commission said there would need to be a thorough review of the surcharge before it could be renewed again. A workshop with Avista and commission staff was held in March and the commission is now taking comment on an Avista proposal to adjust rates up or down on Oct. 1 of each year depending on the amount in the deferral balance.


Further, Avista proposes that the current surcharge of 2.45 percent be continued to Sept. 30 to further pay down the deferral balance before the proposed new PCA goes into effect Oct. 1. Extending the surcharge another three months will result in a smaller increase on Oct. 1, the company maintains. Avista is projecting that the proposed PCA on Oct. 1 will be an increase from 2.45 percent to about 4 percent. The current 2.45 percent surcharge is 0.163 cents per kWh for a residential customer, or about $1.63 a month for a residential customer who uses 1,000 kWh per month.


The commission is taking comment on Avista’s proposal through May 31. Comments are accepted via e-mail by accessing the commission’s homepage at and clicking on "Comments & Questions." Fill in the case number (AVU-E-07-01) 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 notice, along with other documents related to this case, are available on the commission’s Web site. Click on “File Room” and then on “Electric Cases” and scroll down to the above case number.