Wednesday, June 19, 2002

Business

Avista gets OK to keep higher rates
Ratepayers paying 32.1 percent more for power than last year

Bert Caldwell
Staff writer

Washington regulators Tuesday approved with no changes a deal that will leave Avista Utility rates at levels 31.2 percent higher than those of a year ago.

Relief is unlikely before 2007, when a 11.9 percent surcharge is expected to expire.

The ruling by the Washington Utilities and Transportation Commission takes effect July 1.

Since March 15, Avista's 210,000 residential customers have been paying $55.81 per month for 1,000 kilowatt-hours of electricity.

The same amou
nt of power cost $45.37 before a 25 percent surcharge took effect Oct. 1. Payments from the Bonneville Power Administration to Avista have offset some of the increases that might otherwise have taken effect, but businesses do not benefit from that residential exchange program.

The surcharge was reduced to 20 percent March 15, when an interim settlement of a general rate case Avista filed in December made a 5 percent increase permanent and added another 6.2 percent, which brought rates to their current level.

Last month, the company, commission staff, a consumer advocate from the Attorney General's Office and Avista's industrial customers negotiated a settlement to the general rate case that tabled an additional 6 percent increase sought by the Spokane utility.

But more of the increase that took effect in March became permanent. In reducing the surcharge to 11.9 percent, the permanent rate increase was adjusted to 19.3 percent.

The commission held a hastily arranged public hearing on the plan June 10 and a formal hearing with the settling parties June 12.

The commission does not have to endorse a settlement or the recommendations of its staff, but in approving the final plan Tuesday the three members praised the outcome.

"We congratulate and commend the parties for their hard work and cooperation in forging an agreement that brings an impressive array of short-term and long-term benefits," they said in their 24-page decision.

But they also acknowledged the effect higher rates will have on Avista's many low-income customers, noting several provisions of the settlement -- including a $150,000 company contribution to Project Share -- will provide some relief.

The ruling also endorses an "Energy Recovery Mechanism" that will allow Avista to seek rate increases or decreases if its cost of power fluctuates by more than $9 million.

The provision is a first for Washington state, but a similar Power Cost Adjustment in Idaho tracks Avista's power costs there.

Avista Vice President Kelly Norwood said the recovery mechanism will not kick in until the surcharge, which will produce about $28.2 million in annual revenues, retires costs incurred during last year's drought.

That balance was $130 million as of March 31.

Norwood said Avista, with the final resolution of the case, does not expect any further need for a general rate increase in the foreseeable future.

The 19.3 percent permanent portion of the increase, he noted, will pay the costs of new power plant construction or upgrades under way and Avista's increased costs of borrowing money.

The commission had made clear its concern that Avista return to economic stability after two years of upheaval caused by volatility in the cost of electricity and natural gas.

"The ultimate goal is for Avista to regain an investment grade rating on its securities, which will translate into customer benefit," commissioners said in Tuesday's ruling.

•Business writer Bert Caldwell can be reached at (509) 459-5450 or by e-mail at bertc@spokesman.com


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