Idaho Public Utilities Commission

Case Nos. AVU-E-10-01, AVU-G-10-01, AVU-E-10-03

August 10, 2010

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

Website: www.puc.idaho.gov

 

Commission conducting hearings, taking comment in Avista cases

Avista Utilities customers have an opportunity to comment on two proposed rate adjustments.

The first is a proposed settlement to a rate case filed by the company last March that would phase in a 9.25 percent electric rate increase over three years, with the first year increase of 3.6 percent effective Oct. 1. On the gas side, the increase would be 2.6 percent phased in over two years. Commissioners will conduct a telephonic public hearing on that proposal on Aug. 26 at 7 p.m., Pacific Daylight Time.

The second is the company’s annual Power Cost Adjustment, (PCA) which would increase rates for one year an average 2.6 percent, also effective Oct. 1. The commission is taking written comment on that request through Sept. 16.

If the base electric rate increase settlement is approved, the residential rate for an average customer who uses 1,000 kWhs per month would increase by about $3.50 per month from $80.90 to $84.40. If the one-year PCA is approved, an average residential bill would increase by $1.88 per month.

General rate case

When Avista filed its general rate case last March, it requested a one-time 14 percent increase in electric rates and 3.6 percent increase in gas rates. Several parties to the case, including those representing customer groups, have reached a settlement in the case that, with the help of a deferred tax credit, significantly reduces Avista’s original request. The settlement proposes to phase in the rate increase as well as the tax credit to mitigate the impact of the increase given the current state of the economy.

Parties to the case, including commission staff, the Community Action Partnership Association of Idaho and the Snake River Alliance, state they believe the proposed settlement is a better deal for customers than could have been achieved through hearings. In addition to the aforementioned, other parties agreeing to the settlement include Avista Utilities, Clearwater Paper Company, the Idaho Conservation League and Idaho Forest Group LLC.

The commission is not bound by the settlement and will independently review it to determine if it is in the interest of both customers and the utility. The commission may accept, reject or state additional conditions under which the settlement will be accepted. The three commissioners who decide the case will take public testimony in a telephonic hearing on Thursday, Aug. 26, at 7 p.m. Pacific Daylight Time. (Details on how to participate in the hearing are included at the bottom of this press release.)

The commissioners will also conduct a technical hearing on this matter, also on Thursday, Aug. 26, at 9:30 a.m. Mountain Daylight Time in the commission hearing room, 472 W. Washington St., in Boise.

The proposed annual revenue increase for Avista on the electric side is $21.25 million. The company requested $32.1 million. On the gas side, the proposed annual revenue increase is $1.85 million. Avista requested $2.6 million. The proposed increases are to be offset by $17.5 million of deferred income tax. The offset will be phased in over the first two years of the three-year phased rate increase so that increases would be as follows:

-- Oct. 1, 2010 -- 3.6 percent electric and 1.9 percent gas.

-- Oct. 1, 2011 – 3.9 percent electric and 0.72 percent gas.

-- Oct. 1, 2012 – 1.74 percent electric and 0 percent gas.

The settlement also proposes that Avista increase funding for low-income weatherization from $465,000 to $700,000 per year.  The settlement parties also agreed that Avista provide $40,000 to Community Action Partnership agencies for low-income outreach and education programs about energy conservation. The company will also conduct five energy conservation workshops for senior citizens in five Idaho communities no later than Dec. 31, 2011.

The commission is well aware of the impact of rate increases in today’s economy, particularly on customers with low and fixed incomes. It has received dozens of comments from concerned customers asking the commission to deny Avista’s application. While the commission does all it can to find expense reductions and other methods to mitigate the impact of rate increases, state law does not allow the commission to reject rate increases without review. 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 are needed to serve customers and if they are prudently incurred.  The commission may deny expense recovery if the company fails to provide evidence that adequately supports the new expenses as needed to serve customers and 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.  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.

Power Cost Adjustment

Below normal hydro generation and costs associated with the Lancaster generating plant resulted in more power supply expense than included in base rates resulting in Avista’s proposed one-year 2.6 percent PCA surcharge. If approved by the commission, the surcharge would increase from the current 0.344 cents per kWh to 0.532 cents per kWh.

The annual PCA increases or decreases rates depending on conditions outside the company’s control that can dramatically alter power supply expense. Those conditions include variations in hydroelectric generation caused by lack of streamflows or unanticipated changes in fuel costs or wholesale market prices for energy.

During those years when power supply expenses are less than what is already covered in base rates, customers receive a credit. During years when power supply expenses are greater than included in base rates, customers get a surcharge. Both the surcharge and credit last for 12 months and then a new adjustment will be calculated to adapt to changing conditions and updated projections. The updated PCA is effective Oct. 1 of each year. Unlike a general rate case, a PCA increase does not increase company earnings. The PCA surcharge is collected from ratepayers, kept in a deferred account, and then passed directly to wholesale power and fuel suppliers.

Customer comment

To listen in or to testify during the telephonic Aug. 26 public hearing regarding the proposed settlement to the general rate case, customers may dial toll-free 1-800-920-7487. You will be asked to enter a “participant code,” which is 76373262.  Participants are asked to place their calls within 15 minutes before the start of the 7 p.m. Pacific Time hearing although calls will be accepted after the hearing begins. The process will then continue as follows:

The telephonic hearings make it possible for customers to testify without having to leave the comfort of their homes to do so. It also saves the considerable expense of time and travel for commissioners and staff .

Those wanting to provide written comment in the Power Cost Adjustment case must do so by Sept. 16. Comments can be submitted via e-mail by accessing the commission’s homepage at www.puc.idaho.gov and clicking on "Comments & Questions About a Rate Case." Fill in the case number (AVU-E-10-03) and enter your comments. Comments can also be mailed to P.O. Box 83720, Boise, ID 83720-0074 or faxed to (208) 334-3762.