20260930Final_Order_No_37187.pdf

Office of the Secretary
Service Date
September 30,2026
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF AVISTA ) CASE NO. AVU-E-26-05
CORPORATION'S POWER COST )
ADJUSTMENT ANNUAL RATE )
ADJUSTMENT FILING ) ORDER NO. 37187
On July 31, 2026, Avista Corporation ("Company") applied to the Idaho Public Utilities
Commission ("Commission") requesting approval of the proposed Power Cost Adjustment
("PCA") surcharge for recovery of deferred power costs for the period July 1, 2025, through June
30, 2026, effective October 1, 2026 ("Application").
On August 6, 2026, the Company amended its Application to correct scriveners errors
("Amended Application").
On August 14, 2026, the Commission issued a Notice of Application and Notice of
Modified Procedure, establishing deadlines for public comments and Company reply comments.
Order No. 37132. Staff and two members of the public filed comments. The Company filed reply
comments. Based on our review of the record, the Commission now issues this Final Order
approving the Company's Amended Application.
BACKGROUND
The PCA is a mechanism that monitors changes in revenues and costs associated with
hydroelectric generation, secondary market prices, thermal fuel costs, and revenues and expenses
from power contracts. Amended Application at 2. The current PCA rebate rate is 0.3010 per
kilowatt-hour ("kWh"), based on an overall rebate of approximately $9.6 million, which the
Commission approved in Order No. 36777, effective October 1, 2025, through September 30,
2026.
THE APPLICATION
The Company proposed a PCA surcharge rate adjustment of 0.1570 per kWh that would
recover approximately $14.6 million from customers effective October 1, 2026. Amended
Application at 3. The Company stated that the proposed surcharge resulted from the expiration of
the existing rebate rate and power supply costs that exceeded the costs embedded in retail rates
during the deferral period. Id. The Company attributed the higher costs primarily to lower market
energy prices, the exclusion of certain wind generation resources from the authorized base for
ORDER NO. 37187 1

September 2025 through August 2026, and higher customer loads during peak months of the year.
Id.
The Company anticipated that the average residential customer using an average of 939
kWh per month would see their monthly bill increase $4.31, or 3.6%, per month. Id. at 6. Other
customer classes would experience differing impacts as a percentage of their monthly bills due to
the uniform cents per kWh application of the PCA surcharge rate.Id. at 5-6.
STAFF COMMENTS
Staff reviewed the Company's Amended Application, supporting testimony, and monthly
accounting records. Staff Comments at 2. The review considered the PCA deferral balances, the
prudence of the Company's actual net power costs ("NPC"), the proposed PCA rate, and the
customer notice and press release. Id. Staff believed the PCA process and the Company's power
costs to be generally prudent and recommended approval of the Amended Application.Id.
Staff audited the Company's NPC by examining natural gas and market power purchases,
transmission revenues and expenses, and other items included in the PCA deferral. Id. Staff
reviewed selected transactions and believed that the Company reasonably and prudently incurred
the sampled costs and that those costs complied with prior Commission decisions and the
Company's risk-management practices.Id. Under the PCA mechanism, customers are responsible
for 90% of the difference between actual NPC and the amount included in base rates, while the
Company bears or retains 10%.Id. Staff verified the Company's total PCA balance of$4,979,318
and recommended that the Commission approve recovery of that amount through the updated PCA
rate.Id. at 3.
The Company calculated an NPC deferral balance of $8,227,143, representing the
difference between actual NPC and the NPC that the Commission authorized in base rates from
July 2025 through June 2026, after applying the Idaho allocation factor and the 90% customer-
sharing component. Id. Staff reviewed the monthly calculations and supporting invoices and
agreed with the Company's calculation.Id. at 4. Staff also agreed with the Company's $1,210,204
Load Change Adjustment,which captured differences between actual customer sales and the sales
levels used to establish base rates.Id.
Staff reviewed several additional components of the PCA calculation, including renewable
energy credits ("REC"s), Clearwater power costs, Energy Imbalance Market (`BIM") expenses,
prior PCA amortizations, REC adjustments associated with Washington renewable-energy
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requirements, and interest on the PCA balance. Id. at 4-6. Staff verified and agreed with the
Company's calculations,including a$961,837 customer credit related to Clearwater REC revenue,
$216,105 in eligible incremental EIM expenses, $8,705,512 in PCA amortization that the
Company returned to customers during the review period, a $2,717,969 REC adjustment, and a
$298,028 net interest expense. Id. at 6-7. Staff also agreed with the Company's projected
amortization of$2,331,366 and projected interest of$33,731 for July through September 2026.Id.
at 7.
Staff believed that the Company's NPC during the PCA period reflected prudent
expenditures.Id. Staff's analysis compared the Company's actual generation,purchases, sales,and
resource costs with the assumptions used to establish base rates.Id. at 7-8. Staff identified several
factors contributing to the proposed PCA surcharge, including approximately $8.3 million less in
market-sales revenue than included in base rates,lower generation from gas and thermal resources
because of higher fuel costs, changes required by prior rate-case settlements, and overall lower
actual customer sales for the year than those embedded in base rates. Id. at 8. Staff noted that the
Company relied more heavily on relatively lower-cost market purchases, wind generation, and
hydro resources. Id. Based on these comparisons, Staff believed that the Company generally
operated its system cost-effectively and that the Company properly reflected adjustments from
prior settlement agreements.Id. at 9-10.
Staff identified issues concerning the Palouse Wind Power Purchase Agreement ("PPA").
Id. at 10. Staff verified that the Company correctly applied the adjustments required by existing
settlement agreements. Id. However, Staff's additional analysis calculated that the Palouse Wind
PPA cost approximately$13 million more than the cost of obtaining the same amount of energy at
market prices during the PCA deferral period, or roughly 150%higher than market costs.Id. at 11.
Staff also calculated that the Palouse Wind PPA costs were substantially more than two of the
Company's newer wind PPAs.Id. Although Staff did not recommend an adjustment in the current
proceeding because of the existing Commission-approved agreements, it recommended that the
Company take additional steps to mitigate the Palouse Wind PPA's impact on Idaho customers in
its next general rate case. Id. at 11-12.
Staff also reviewed the Company's adjustments related to Columbia Basin Hydro, Chelan
Hydro, and the Rattlesnake Wind PPA. Id. at 12. Staff believed that the calculations for these
resources followed the settlement agreements and Commission Orders and were accurately
ORDER NO. 37187 3

reflected in the Company's records.Id. Staff additionally reviewed planned and forced outages at
the Company's generating facilities and believed that the duration and causes of the outages were
reasonable compared with the prior year and that scheduled outages were adequately justified.Id.
at 12-13.
Staff verified that the Company correctly calculated the proposed PCA surcharge rate was
0.1570 per kWh and that the rate should recover the approved PCA deferral balance. Id. at 13.
Staff estimated that the PCA surcharge would increase the monthly bill of an average residential
customer from$119.52 to $123.83, or about$4.31 per month(3.6%).Id. at 13-14.
Staff recommended that the Commission approve the$4,979,318 PCA deferral balance and
authorize the Company to revise Schedule 66 to establish the 0.1570 per kWh surcharge effective
October 1,2026,producing an estimated annual revenue increase of approximately$14.58 million.
Id. at 15-16. Staff also recommended that the Company be required to pursue additional mitigation
of the Palouse Wind PPA's costs in its next general rate case and that the Commission consider
late-filed customer comments.Id. at 16.
PUBLIC COMMENTS
Two customers filed comments and both customers expressed frustration with another
proposed rate increase and urged the Commission to reject the proposed rate increases.
COMPANY REPLY
The Company acknowledged Staff s audit results but argued that the Commission should
not require additional mitigation of the Palouse Wind PPA's impact on Idaho customers beyond
the existing methodologies in the next general rate case. Company reply at 1. The Company
proposed that it support the continued inclusion of the Palouse Wind PPA and explain how the
contract fit within its overall power supply portfolio. Id. The Company noted that, although
Palouse Wind had been uneconomic during the PCA year, that had not always been the case,
particularly because the Company had absorbed 10% of Idaho's share of the project for more than
a decade.Id. The Company emphasized that the PCA compared actual net power supply costs with
authorized costs to assess the prudent management of the overall resource portfolio. Id. The PCA
did not determine which resources or prices should be included in NPS expense.Id. The Company
maintained that a general rate case would provide the appropriate forum to develop a formal record
and determine whether additional mitigation was warranted.Id.
ORDER NO. 37187 4

COMMISSION FINDINGS AND DECISION
The Commission has jurisdiction over the Company's Filing and the issues in this case
under Title 61 of the Idaho Code including, Idaho Code §§ 61-501, -502, and -503. The
Commission is empowered to investigate rates, charges,rules,regulations,practices, and contracts
of all public utilities and to determine whether they are just, reasonable, preferential,
discriminatory, or in violation of any provisions of law, and to fix the same by order.Idaho Code
§§ 61-501, -502, and-503.
The Commission has reviewed the Company's Amended Application, Staff s Comments,
the Company's Reply Comments,and the comments submitted by customers. Based on our review
of the record,we approve the Company's proposed PCA rate, as filed.
The PCA is intended to reconcile differences between the Company's actual net power
costs and the costs reflected in base rates. The record reflects the accuracy of the Company's PCA
calculations and the prudence of the Company's actual net power costs.
The proposed surcharge is a change from the current PCA rebate. The current rebate of
0.3010 per kWh will expire September 30,2026, and the proposed 0.1570 per kWh surcharge will
become effective October 1, 2026. The record reflects several factors contributing to the change,
including lower market-sales revenues, changes in generation and fuel costs, adjustments
associated with prior rate-case settlements, and lower customer sales. These factors resulted in
actual power supply costs exceeding the costs reflected in base rates.
The Commission therefore approves the Company's PCA deferral balance of$4,979,318
and authorizes the Company to revise Schedule 66 to establish a PCA surcharge of 0.1570 per
kWh, effective October 1, 2026.
Although we approve the PCA as filed, the record raises a separate issue concerning the
cost of the Palouse Wind PPA. Staff s review determined the cost of energy obtained under the
Palouse Wind PPA was approximately $13 million greater than the cost of obtaining the same
amount of energy from the market, during the PCA deferral period . Staff argued that the cost of
the Palouse Wind PPA was approximately 150% of the comparable market cost and substantially
exceeded the costs of two of the Company's newer wind PPAs.
We find that Staffs analysis warrants further examination and that the Company's next
general rate case will provide an appropriate forum to examine the Palouse Wind PPA within the
ORDER NO. 37187 5

broader context of the Company's power supply portfolio and to determine whether additional
measures are available or required to mitigate the costs paid by Idaho customers.
For these reasons,the Commission approves the Company's Amended Application as filed
and directs the Company, Staff, and any intervening parties to review the Palouse Wind PPA in
the Company's next general rate case.
ORDER
IT IS HEREBY ORDERED that the Company's power costs deferred for the period of July
1, 2025, through June 30, 2026, are approved as filed.
IT IS FURTHER ORDERED that the Company's proposed tariff modifications to
Schedule 66 of a per kWh PCA surcharge rate of 0.157¢with an effective date of October 1,2026,
are approved as filed.
THIS IS A FINAL ORDER. Any person interested in this Order may petition for
reconsideration within 21 days of the service date of this Order regarding any matter decided in
this Order.Within 7 days after any person has petitioned for reconsideration, any other person may
cross-petition for reconsideration.Idaho Code § 61-626.
ORDER NO. 37187 6

DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this 30th day of
September 2026.
G
EDWARD LODGE, PR F19IDENT
J R. HAMMOND JR., COMMISSIONER
DAYN HA IE, COMMISSIONER
ATTEST:
do i a 3a n c h e z
Commission Secretary
I ALegal\ELECTRIC\A V U-E-26-05_PCA\orders\A V UE2605_final_em.docx
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