October 2, 2008 in Idaho

Avista wins rate hikes

Double-digit increases OK’d
By The Spokesman-Review
 

Start putting money away for those winter heating bills.

Avista Corp.’s Idaho customers will see double-digit rate increases on their next monthly statements.

Electricity rates are rising by nearly 13 percent for residential users, while natural gas rates will go up 5.3 percent. The Idaho Public Utilities Commission approved the rates Wednesday. They took effect immediately.

A typical household will pay an extra $12 a month for electricity and natural gas, according to Avista’s estimates. The cost estimates are based on 977 kilowatt-hours of monthly electric use and 65 therms of natural gas a month.

In addition to higher base rates, the utilities commission also approved $6.40 in monthly surcharges for each household, which will allow Avista to pass higher wholesale energy costs to customers. Unlike rate increases, which are permanent, surcharges are adjusted each year based on wholesale costs for electricity and natural gas.

“This commission is not oblivious to the consequences of its rate orders,” utilities commission members wrote, noting the higher bills’ effect on customers, particularly low-income households and elderly residents on fixed incomes. “The volatility in the energy markets, however, shows no sign of abating,” they said.

Avista Corp. initially asked for rate increases that would have generated $37 million in additional revenue. Under a negotiated settlement, Avista agreed to accept $24 million.

Company officials said the additional money is needed to pay for capital improvements, including upgrades to it largest hydropower producers – the Cabinet Gorge and Noxon Rapids dams.

Avista also spent $130 million to upgrade its electricity transmission system, officials said.

The company also expanded its share of a natural gas storage facility in Western Washington. The additional storage allows Avista to buy natural gas when rates are low and stockpile it for the high-demand winter months.

That should help moderate future volatility in wholesale natural gas prices, according to the Idaho Public Utilities Commission.

As part of the settlement, Avista also agreed to increase money for low-income customers’ weatherization projects from $350,000 to $465,000. Only 10 percent of households that receive federal help with their heating bills have adequate insulation.

Community Action Partnership Association of Idaho asked for the additional weatherization money.

About 30 homes can be winterized with the increase, said Lisa Stoddard, executive director for the agency, which serves low-income families.

“Because of the work done on people’s homes, this has a lasting impact,” she said.

Many Avista customers wrote in to the commission, opposing the rate increases and surcharges. Some criticized the salaries of Avista’s top managers or said that the company’s profits were too fat.

The Idaho Public Utilities Commission said that Avista executives’ base salaries are included in electricity and natural gas rates. But bonuses or other cash incentives are paid by the investor-owned utility’s shareholders.

Avista’s top five managers earn a total of $1.45 million in salaries, according to the commission.

As for profits, Avista’s shareholders failed to earn the 8.45 percent rate of return authorized by the commission in 2007, commission members said.

“Avista, like many utilities nationwide, remains in a situation where costs are increasing more rapidly than revenues,” commission members wrote.

Contact Becky Kramer at (208) 765-7122 or by e-mail at beckyk@spokesman.com.


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