Avista shouldn’t raise rates, attorneys say

A division of the Washington Attorney General’s Office charged with representing consumer interests says Avista Utilities shouldn’t be allowed to raise electric rates for Washington households by almost 9 percent this year.

“The customers in Avista’s service territory have really had a pretty tough row to hoe since 2000,” when rate increases began accelerating, said Simon ffitch, chief of the Public Counsel Section of the Attorney General’s Office. In a Friday news release, ffitch said his office’s analysis shows that “rate increases of the size proposed by Avista are not justified by operating expenses or necessary to allow the company to maintain a reasonable profit.”

Avista’s rates manager, Don Falkner, disagrees. He said a settlement agreement reached earlier this month by four parties – including Avista, the staff of the Washington Utilities and Transportation Commission, The Energy Project, which represents low-income consumers, and the Northwest Industrial Gas Users organization – fairly distributes the company’s increased expenses.

“Energy costs are rising across the country,” Falkner said. “The company is very comfortable with the settlement that we reached.”

The utilities commission is likely to make a decision on the matter by the end of the year. In addition, a public hearing will be held in Spokane in October, but the date has not been set.

Avista originally filed its proposal in March to raise residential electric rates by 14.3 percent and natural gas rates by 2.1 percent for Washington customers. That proposal would have raised $39 million in additional annual revenues. Then, earlier this month, the company reached a settlement that dropped the revenue figure to about $23 million, and the residential electric rate increase to about 9 percent, with gas rates going up about 0.6 percent. Commercial customers would see different rates of increase.

The Public Counsel’s office and the Industrial Customers of Northwest Utilities oppose the settlement. The rate increase should generate no more than $12 million annually for Avista, ffitch’s office contends. Residential customers’ electric rates should rise by no more than 2.3 percent and natural gas rates, by 0.15 percent, he said.

One major area of disagreement centers around the settlement allowing the company a 10.4 percent rate of return on equity. Avista originally proposed an 11.5 percent rate of return for investors, but that was reduced under the settlement.

“We’re recommending 9.25 percent,” ffitch said. “We think that is a fair return for investors. That makes several million dollars worth of difference right there.” The ICNU recommends a 9.8 percent rate of return in its proposal, said Executive Director Michael Early.

However, Falkner said 10.2 to 10.4 percent is the average rate of return for all resolved rate cases for regulated utilities nationwide this year. “We basically think we’re in the ballpark,” Falkner said, adding that one Florida utility was allowed an 11.5 percent rate of return. The utility is authorized to receive a 10.4 percent rate of return in Idaho, he said.

Chuck Eberdt, manager of The Energy Project, which represents low-income consumers, said his group signed onto the settlement because Avista increased its funding contribution for energy conservation programs and assistance to low-income residents.

“It wasn’t an easy decision,” Eberdt said. “The funding increases are not commensurate with the rate increases. In that sense, we’re not keeping pace; we’re losing a little bit less, which unfortunately seems to be the battle we’re fighting.”