Instead of asking for higher rates, Avista Corp. should give its Washington customers a slight break on their electric bills, say staff members at two state regulatory agencies.
The Washington Utilities and Transportation Commission’s staff is recommending a 1.2 percent cut in electric revenues for the Spokane-based utility, which initially asked for a 6.6 percent rate increase. If enacted, the cut would shave less than $1 off of a typical customer’s monthly bill of $81.22.
Separately, the state Attorney General’s Office of Public Counsel is recommending a 5.9 percent reduction, for a $4.79 monthly savings.
“Avista’s proposed rates are too high,” Attorney General Bob Ferguson said a news release. “Our role is to represent ratepayers and ensure they get a fair deal.”
Both entities said Avista didn’t make a convincing case for higher electric rates in its latest request, which was filed in February.
The utility ended 2014 with a strong financial performance, earning about $15 million more than its state-authorized profit margin for that year, according to the UTC’s staff analysis. The utility also received an electric rate hike for 2015, which will generate about $16 million in additional revenue this year, said Chris McQuire, a UTC regulatory analyst.
There’s nothing nefarious about Avista earning a higher return, said Tom Schooley, the UTC’s assistant director of energy regulation. It means the company did a better-than-expected job of controlling costs, he said. But the higher profit margin raises questions about whether Avista really needs additional revenue in 2016, Schooley said.
Avista is asking state regulators for its eighth rate increase in eight years. Company officials have said the increases are driven by hundreds of millions of dollars in capital spending, including upgrades to aging dams, transmission lines, substations and other facilities that produce and deliver electricity and natural gas.
As part of the analysis, UTC staff members reviewed Avista’s expenditures on large capital projects through June 30. The rate request included some future projects, which aren’t allowed in current rates, McGuire said.
“We don’t know with 100 percent certainty if the investment will be made,” he said. “Staff’s response was that the company’s speculative investment in infrastructure in the future did not warrant an increase in rates.”
The attorney general’s office also disputed capital spending projects in the rate request, including whether Avista should roll out Smart Meters for customers.
However, both state agencies backed higher natural gas rates for Avista, which failed to make its authorized profit margin for natural gas operations last year. Avista is requesting a 7 percent increase in gas revenues. UTC staff is recommending at 5.3 percent increase; the AG’s Office, 2 percent.
Avista executives are in the process of reviewing the state agencies’ testimony, said Debbie Simock, a company spokeswoman. The utility’s officials will have an opportunity to offer a rebuttal before the three-member Utilities and Transportation Commission on Sept. 4.
The Utilities and Transportation Commission is charged with setting rates that are fair to customers and allow utilities to earn a reasonable return. The commission considers input from its staff, the company and other parties in the rate case.
A decision is expected in December, with the new rates taking effect in January.
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