September 20, 2008 in Idaho

Avista request gets rough reception

AG office says rate increases unrealistic
By The Spokesman-Review
 

Avista Corp. should cut its request for higher electric and natural gas rates by at least 40 percent, the Washington Attorney General’s office wrote Friday in a stinging critique of the utility’s request for a rate increase worth $37 million.

“We’re in a cycle where Avista and other utilities are having rate cases almost annually,” said Simon ffitch, a senior assistant attorney general. “It’s really tough on customers.”

Avista’s request goes beyond what the company demonstrated it needs, according to ffitch. A rate hike generating $21 million is more realistic, he said.

Executive pay was one of the attorney general’s targets.

The Spokane-based utility should trim nearly $500,000 from the salaries and retirement benefits of its top managers, and another $500,000 from pay-for-performance programs, according to the AG’s Public Counsel Section, which represents residential customers and small businesses in ratepayer cases.

Last year, Avista Chairman and CEO Scott Morris received $452,461 in salary and $1.2 million in total compensation, which includes cash bonuses, stock awards and 401(k) contributions. Morris, the utility’s highest paid employee, will earn a salary of $630,000 this year. His total compensation package won’t be calculated until the end of the year.

“Avista benchmarked their compensation levels to companies that are bigger and more complicated,” said Brad Van Cleve, an attorney for a trade group that represents large industries.

The AG’s office and the trade group – Industrial Customers of NW Utilities – filed joint testimony with the Washington Utilities and Transportation Commission on Friday, challenging Avista’s request.

In addition to questioning salaries, the testimony said Avista should:

•Reduce expenses for advertising, charitable contributions and sporting events by $437,000.

“We think those items tend to promote the image of the company. They don’t do anything to help ratepayers,” Van Cleve said.

•Reduce depreciation expenses on equipment by $2.2 million per year.

Avista’s attorneys were reviewing the comments Friday afternoon. Spokeswoman Debbie Simock said she had no immediate response.

In earlier interviews, however, Avista officials said the company needed the rate increase to upgrade infrastructure and remain healthy financially.

On Tuesday, Avista announced that it had reached a nonbinding settlement with some parties in the rate case. The utility agreed to accept slightly lower rate hikes, but asked that the rate hikes take effect Jan. 1, instead of February or March.

Neither the AG’s office nor large industrial users were part of the settlement.

“We’re quite troubled by the notion of trying to rush this through,” ffitch said. “It has a real dollar impact on customers.”

The Washington Utilities and Transportation Commission expects to issue a decision on Avista’s rate request by February. If the process is accelerated, the increase would hit consumers in the dead of winter, ffitch said.

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

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