20050127Press Release.pdf

--------------------_
u -
IDAHO PUBLIC UTILITIES COMMISSION
Case No. A VU-05-, Order No. 29694
January 27, 2005
Contact: Gene Fadness [phone]
Website: www.puc.idaho.2ov
A vista seeks inclusion of gas plant in base rates
Boise - The Idaho Public Utilities Commission is seeking public comment through March 1 on
A vista Utilties' request to have the $62.5 million purchase price of a natural gas power plant
included in the base from which customer rates are computed.
Adding the Coyote Springs 2 generator to A vista s rate base would add $3.23 million to the
company s revenue requirement, or 1.9 percent above current rates. Adding the plant to base
rates would not increase customer rates because A vista proposes to reduce its current power cost
adjustment surcharge by 1.9 percent. However, the $3.2 million reduction in the power cost
surcharge, which is about a quarter-cent per kWh for residential customers, extends the power
cost surcharge for another 12 months. If A vista s application were approved, the power cost
surcharge would not expire until September 2007.
Coyote Springs 2 is a 280-megawatt natural gas-fired plant in Morrow County, Oregon. A vista
began construction of Coyote Springs 2 (the adjacent Coyote Springs 1 plant is owned by
Portland General Electric) in January 2001. Low-water conditions and record-high wholesale
energy prices during the West-wide energy crisis of2000-01 resulted in Avista not being able to
secure financing for Coyote Springs 2. A vista subsequently entered into an agreement with
Mirant Corporation to sell half the plant to Mirant-Oregon. In July of2003 , Mirant filed for
Chapter 11 bankruptcy protection and Avista negotiated to buy the plant for $62.5 million. The
transaction was finalized on Dec. 30, 2004.
A long-range plan completed by A vista in 2003 identified the need for the company to acquire
about 149 average megawatts from natural gas sources to meet customer demand in 10 years.
Thus, acquiring the remaining half of the Coyote Springs 2 plant (140 MW) is consistent with
the company s long-term resource strategy.
Navigant Consulting, hired by Avista to conduct an analysis of the transaction, reviewed other
comparable transactions of similar gas-fired plants and determined that the average value of
plants in the western United States was $569 per kilowatt, well in excess of A vista s cost of
$439/kW for Mirant's share. Navigant also determined that Avista s purchase price was below
the economic value of the plant, which was in the range of $67 million.
Those wishing to submit comments must do so by no later than March 1. Comments are
accepted via e-mail by accessing the commission s homepage at www.puc.idaho.gov and
clicking on "Comments & Questions." Fill in the case number (A VU-05-1) and enter your
comments. Comments can also be mailed to P.O. Box 83720, Boise, ill 83720-0074 or faxed to
[phone]. Comments should also be sent to the company to David Meyer, Avista
- -
Corporation, PO Box 3727, Spokane, W A, 99220. They can also be e-mailed to
david.meyer(fYavistacorp. com.
A full text of the commission s order, along with other documents related to this case, are
available on the commission s Web site. Click on "File Room" and then on "Electric Cases" and
scroll down to Case No. A VU-05-