2000519_sw.doc

May 19, 2000

Blair Strong
Paine, Hamblen, et al
717 W. Sprague Avenue, Suite 1200
Spokane, WA 99201-3505

Doug Young
Avista Utilities—WWP
1411 E. Mission
PO Box 3727
Spokane, WA 99220-3727

John M. Eriksson
Stoel Rives LLP
One Utah Center
201 S. Main Street, Suite 1100
Salt Lake City, UT 84111-4904 Rodger Weaver
PacifiCorp
825 NE Multnomah, Suite 600
Portland, OR 97232

Barton L. Kline
Idaho Power Company
PO Box 70
Boise, ID 83707-0070

RE: Case Nos. AVU-E-00-4, IPC-E-00-7, UPL-E-00-2

On April 28, 2000, 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 8.86 mill/kWh to 10.51 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 increased by $0.54/mmbtu. The approved gas price of $2.26/mmbtu plus the $0.54/mmbtu increase results in a gas price of $2.80/mmbtu for the 2000-2001 year. This equates to a SAR fuel cost of 20.58 mill/kWh as used in the model.

The avoided cost rates for Avista, in addition to changing because of fuel price adjustments, have also changed because of new cost of capital numbers adopted by the Commission in Case No. WWP-E-98-11, Order No. 28097 issued July 29, 1999.

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 9, 2000. The effective date for the new adjustable rate will be July 1, 2000.

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:2000avoidedcost_sw

May 19, 2000
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