1999052799avoidedcost_sw.doc

May 27, 1999

Robert J. Lafferty
Blair Strong
Avista Corporation
PO Box 3727
Spokane, WA 99220 Gregory N. Duvall
Jim Fell
PacifiCorp
424 Public Service Building
920 SW 6th Avenue
Portland, OR 97204
John M. Eriksson
Utah Power & Light Company
1407 W. North Temple
Salt Lake City, UT 84140 Barton L. Kline
Idaho Power Company
PO Box 70
Boise, ID 83707-0070

RE: Case Nos. AVU-E-99-3, IPC-E-99-5, UPL-E-99-2

On May 24, 1999, Avista Corporation filed with the Idaho Public Utilities Commission a revised and updated calculation of the adjustable portion of its avoided cost rate. The adjustable portion under the previous SAR methodology, as you will recall, is based on the variable costs associated with the operation of Colstrip, a coal-fire generating facility in southeast Montana. The same calculated rate revision under the avoided cost methodology is used by Avista, PacifiCorp dba UP&L and IPCo. As computed by Avista, the adjustable rate for Avista, PCp and IPCo will change from 10.00 mill/kWh to 8.86 mill/kWh. This change in the variable rate affects existing contracts under the previous SAR methodology.

The adjustable portion of the avoided cost rates under the present methodology is based on annual average gas prices indexed at Sumas, Washington. As reported by Avista, the indexed gas prices have decreased by $0.09/mmbtu. The approved gas price of $2.35/mmbtu minus the $0.09/mmbtu decrease results in a gas price of $2.26/mmbtu for the 1999-2000 year. This equates to a SAR fuel cost of 16.61 mill/kWh as used in the model.

Enclosed you will find prepared by Staff Engineer Rick Sterling, a new schedule of rates under the present methodology and a detailed sheet of variables for your respective utility. If after reviewing same, you accept the new schedule as accurate, please indicate your approval by letter (or other filing) directed to the Commission in the reserved case docket numbers identified above. The case heading in this matter will read as follows:

IN THE MATTER OF THE ANNUAL REVISION AND UPDATED CALCULATION OF THE ADJUSTABLE PORTION OF THE AVOIDED COST RATES FOR AVISTA CORPORATION DBA AVISTA UTILITIES — WASHINGTON WATER POWER DIVISION, FOR IDAHO POWER COMPANY, AND FOR PACIFICORP DBA UTAH POWER & LIGHT COMPANY.

Please file your respective responses with the Commission on or prior to June 18, 1999. The effective date for the new adjustable rate will be July 1, 1999.

Thank you for your cooperation, please feel free to contact me or Rick Sterling if you have any questions.

Sincerely,

Scott D. Woodbury
Deputy Attorney General
[phone]

Enclosure

bls/L:avoidedcost_sw

May 27, 1999
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