Case No. AVU-G-06-03, Order No. 30168

Case No. AVU-G-06-04, Order No. 30167

October 31, 2006

Contact: Gene Fadness (208) 334-0339




Overall decrease in Avista gas rates effective Nov. 1

PGA to decrease while efficiency rider increases


The Idaho Public Utilities Commission has approved two changes to gas rates that become effective Nov. 1 for customers of Avista Utilities. The net result of the two rate adjustments is a decrease of about 2 percent in natural gas rates.


The first filing, AVU-G-06-03, reduces by 3.4 percent Avista’s annual Purchased Gas Cost Adjustment (PGA). The PGA reflects changes in the wholesale market price for natural gas. The PGA mechanism is used to adjust rates to reflect changes in the costs incurred by the company to purchase gas from its wholesale suppliers. Those costs include not only the purchase price, but transportation, storage and other related costs of acquiring natural gas. The company’s earnings are not increased or decreased from changes in prices and revenues relating to the annual PGA. 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, all the money goes to customers.


The second filing, AVU-G-06-04, is a 1.4 percent increase in overall rates due to an increase in the company’s Energy Efficiency Tariff.


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.


“Although lowering the WACOG carries with it the potential of creating a large deferral balance subject to collection from customers in the future if prices turn out to be higher than forecasted, the company has already been able to take advantage of recent sharp drops in forward natural gas prices and has hedged approximately an additional 20 percent of its forecasted load at lower prices,” the commission said. The company hedges by buying ahead natural gas at a fixed price. “We are confident that the company will continue to take advantage of lower prices when the opportunity arises within their established risk management policy.”


The energy efficiency tariff is used to pay for conservation programs that help customers respond to increasing natural gas prices. The rider, now at 0.5 percent of retail rates, has not increased since 2001 and will now increase to 1.75 percent of retail rates.


The rider raised about $300,000 a year, but the company has budgeted $720,000 in demand-side management (DSM) expenses for 2007. For residential customers, the rider increases from just under a half-cent per therm to about 2 cents per therm. For a customer who uses 70 therms per month, the DSM increase would be from 30 cents per month to $1.40.


Avista has identified 27 different measures the utility believes are cost-effective and have significant potential net value in energy savings. These measures total 1,062,000 first-year therm savings, more than four times more the company’s prior DSM goal.


The program includes significant incentives paid to customers in the form of cash rebates for items such as weatherization, high-efficiency hot water heaters, thermostats and high-efficiency furnaces.


 “The commission wishes to commend the company for meeting and exceeding the goals of its DSM program and encourages Avista’s customers to take advantage of the opportunities presented by the company to conserve natural gas resources,” the commission said.


A full text of the commission’s orders, along with other documents related to these cases, are available on the commission’s Web site at Click on “File Room” and then on “Gas Cases” and scroll down to Case Numbers AVU-G-06-03 and AVU-G-06-04.