The Idaho Public Utilities Commission’s decision not to let Avista Corp. charge customers for millions of dollars worth of expenses contributed to a drop in the company’s net income for 2004.
Avista’s net income declined from $43.4 million in 2003, or 89 cents a share, to $35.2 million in 2004, or 72 cents a share, the company said in its year-end earnings report Wednesday. The company said the drop was due largely to a write-off of $9.4 million in costs resulting from Idaho regulators’ decision in October.
Income also was hurt by decreased earnings at Avista Energy, the company’s energy trading subsidiary. Earnings there declined from 43 cents per share in 2003 to 20 cents per share in 2004. During a Wednesday morning teleconference with analysts, Avista CEO Gary Ely said 20 cents is the “floor,” or lowest level at which he would want to see Avista Energy’s earnings.
A warmer-than-normal fourth quarter and lower than average stream flows in 2004 also hurt company earnings. The year ended with hydroelectric generation at 95 percent of normal, resulting in $10 million less in cash flow, Avista Utilities President Scott Morris said.
Ely noted that 2004 was the seventh-warmest year on record in the last 110 years. “In the summer, that’s good news for us, but it’s not such good news during the first and last quarters, when we receive over one-half of all our revenues for the year,” Ely said.
However, the decreased earnings were offset by new revenues resulting from higher rates in Oregon and Idaho and by a positive performance at Avista Advantage, the company’s utility billing subsidiary.
The region’s lower-than-normal snow pack suggests below-normal stream flows for 2005, but the company has sufficient power generation to meet customer demand, Ely said. Part of that will come from the half-share of a gas-fired power plant the company recently bought in Oregon. Avista now owns all of the Coyote Springs II plant which can produce up to 300 megawatts of power. One megawatt can power 650 homes.
Avista has already asked Idaho regulators to include part of that $62.5 million purchase in rates for customers in that state. However, that request included a proposal to reduce an existing surcharge, resulting in no net increase to customers’ bills. The Idaho commission is expected to make a decision on that request in March, Avista officials said Wednesday.
The company is likely to propose a rate increase for Washington customers next month, Morris said in the teleconference. “The plan would be to file both a general case on electric and gas in Washington, is where the numbers are leading us to,” Morris said. Any general rate case could take up to 11 months to process and likely would include public hearings.
The $15 million sale of the company’s natural gas holdings in California, expected to close in 2005, also will help pay for the purchase of Coyote Springs II, said Avista Chief Financial Officer Malyn Malquist.
The company’s net income for the fourth quarter was $22.6 million, or 46 cents a share, up from $15 million, or 31 cents a share, in the fourth quarter of 2003.