Case No. AVU-E-06-03, Order No. 30141

Case No. AVU-E-06-04, Order No. 30145

October 4, 2006

Contact: Gene Fadness (208) 334-0339




Avista seeks PGA decrease and efficiency tariff increase


The Idaho Public Utilities Commission will take comments through Oct. 24 on two gas rate adjustments proposed by Avista Utilities. The net result of both adjustments will result in about a 2 percent decrease for natural gas customers. Avista serves about 300,000 natural gas customers in three Western states, including 65,000 in northern Idaho.


The first filing, AVU-G-06-03, seeks an approximate 3.4 percent reduction in Avista’s annual Purchased Gas Cost Adjustment (PGA). The PGA reflects changes in the wholesale market price for natural gas. The PGA portion of customer bills, which reflects about half the total bill, is adjusted up or down depending on market conditions. Changes in the PGA do not impact company earnings. In years that there is a surcharge, all the money collected from customers goes to pay Avista’s wholesale gas suppliers. In years of a credit, as this year, the money is refunded to customers in the form of a credit to their monthly bills.


The second filing, AVU-G-06-04, seeks a 1.4 percent increase to the company’s Energy Efficiency Tariff.


The PGA reduction of 3.4 percent, combined with the proposed Energy Efficiency Tariff increase of 1.4 percent, combine for an average 2 percent reduction overall, if adopted by the commission, would become effective Nov. 1.


On Sept. 14, Avista applied to increase the PGA surcharge by 3.2 percent, seeking a weighted average cost of gas (WACOG) of 84.7 cents per therm, up from the current 78.6 cents. The WACOG is the average price a gas utility estimates it will need to acquire the gas it needs for the upcoming year.


On Sept. 29, Avista revised its application, seeking a WACOG of 76.24 cents per therm, a 3.4 percent reduction from the current WACOG. The revised WACOG is based on declining wholesale prices for natural gas and the company’s hedging practices. Avista has bought ahead – at a fixed price – about 60 percent of its estimated gas sales for the next year. It states it will hedge another 20 percent within the next few days in order to take advantage of the recent sharp drop in forward natural gas prices. The company is also incorporating an amount of longer-term hedges into its purchase portfolio to provide an additional degree of rate stability. About 11 percent of the total purchases for the next year have been hedged at a three-year fixed price.


The energy efficiency tariff is used to pay for conservation programs that help customers respond to increasing natural gas prices. The rider has not increased since 2001 and there is currently a $1.5 million deficit in the program for Idaho. The company estimates that the 1.4 percent increase – bringing the total rider up to 1.75 percent of a customer’s total bill – will erase the deficit by the end of the second quarter of 2008.


With the use of energy efficiency programs, Avista hopes to reduce the demand for natural gas by about 1,062,000 therms a year, four times the goal originally established by the program. The programs include those to increase efficiency in appliances, in HVAC systems and at industrial sites.


Those wishing to submit comments in either case must do so by no later than Oct. 24. Comments are accepted via e-mail by accessing the commission’s homepage at and clicking on "Comments & Questions." Fill in the case number (AVU-G-06-03 for the PGA and AVU-G-06-04 for the energy efficiency tariff) 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 order, along with other documents related to this case, are available on the commission’s Web site. Click on “File Room” and then on “Gas Cases” and scroll down to the above case numbers.