Regulators OK decoupling of Avista natural gas costs

Washington state regulators have approved a plan to allow Avista to separate its fixed costs of delivering natural gas from the wholesale cost of that gas.

The rate mechanism, called decoupling, will allow Avista to collect no more than a 2 percent rate adjustment on fixed costs like maintaining natural gas pipelines. The actual percentage will be tied to how much gas is saved through Avista’s energy conservation programs.

The three-year pilot program, approved by the Washington Utilities and Transportation Commission Wednesday, will take effect this fall.

About 80 percent of Avista customers’ natural gas bill is the actual cost of the gas. The other 20 percent is charged for the cost of delivering that gas.

“Before this approval, everything was all mixed together,” said Avista spokeswoman Debbie Simock.

“Decoupling separated the recovery of fixed costs from sales volume.”

Avista recoups costs and makes its profit on the 20 percent fixed-cost portion of customers’ bills.

“We don’t mark up the cost of the natural gas. Whatever we pay the companies we buy the natural gas from is exactly what we charge our customers,” said Simock.

As natural gas prices have risen, natural gas use has declined, making it more difficult for Avista to recoup costs. In essence the old system punished Avista for promoting conservation.

With decoupling, Avista won’t have to repeatedly return to the utilities commission to seek rate hikes to pay costs and make a profit.

“The more successful our customers are at conservation, the more impact that has on our fixed costs, making it more difficult to recover them,” Simock said. “Now if gas consumption goes way down, we’ll still be able to recover our fixed costs.”

While Avista has always had conservation programs, it can now expand those efforts, she added.

“We’ll be rolling out programs to help our customers save even more.”

As for how decoupling will affect rates, Avista Manager of Retail Pricing Brian Hirschkorn said the exact impact won’t be known until some time this summer.

“The bottom line is for 2007 we would expect a rate effect for decoupling of less than 1 percent,” Hirschkorn said.

That would be in addition to any rate hike necessitated by an increase in the price Avista pays for natural gas.

Both would likely take effect on Nov. 1.