020813_AVUratecasesettle.pdf

Idaho Public Utilities Commission
Case Nos. AVU-E-12-08 and AVU-G-12-07
February 8, 2013
Contact: Gene Fadness [phone], 890-2712
Website: www.puc.idaho.gov

Settlement softens impact of proposed Avista electric, gas rates

Under a settlement proposed to the Idaho Public Utilities Commission, electric rates for Avista
Utilities customers would increase 1.9 percent but not until October 1. Avista originally
proposed a 4.6 percent increase effective April 1.

The settlement, negotiated among several parties, also proposes to increase natural gas rates
4.9 percent on April 1 instead of the company’s original proposal of 7.2 percent. On Oct. 1,
natural gas rates would increase another 0.3 percent.

Representatives from the utility, along with commission staff, the Clearwater Paper Association,
Idaho Forest Group and the Community Action Partnership Association of Idaho, (CAPAI)
participated in the discussions that led to the proposed settlement, which still must be
approved by the commission. All parties signed the settlement except for CAPAI, which is still
gathering information on the proposed rate impacts before signing.

The proposed electric increase, delayed until October 1, is a 3.1 percent increase to base rates,
raising Avista’s annual revenue by $7.8 million. However, customers would get a $3.86 benefit
due to an Avista settlement with the Bonneville Power Administration regarding BPA’s use of
Avista transmission lines over the last eight years. That credit will reduce the net increase in
electric rates to an average 1.9 percent if the settlement is approved. In total, Avista would be
allowed a $7.8 million increase in annual revenue, down from its original request of $11.4
million.

On the gas side, a 4.9 percent increase would be effective April 1 and 2 percent on October 1.
However, the Oct. 1 increase is offset by a credit in the annual Purchased Gas Cost Adjustment
that reduces the Oct. 1 net increase to 0.3 percent.

If the increases were granted, the bill of an average residential electric customer who uses 930
kilowatt-hours per month would increase by about $2 on Oct. 1. The gas increase for a
residential customer who uses an average 60 therms per month would increase by about $2.82
per month on April 1 and another 31 cents per month on October 1.

The proposed settlement states that Avista will not have base rates adjusted again until Jan. 1,
2015 at the earliest. (This does not include yearly tracking mechanisms such as the Power Cost
Adjustments and the Purchased Gas Cost Adjustment, which can adjust rates up or down
depending on water supply, fuel costs and wholesale market gas and electric prices.) The
settlement allows Avista an opportunity to earn up to 7.9 percent on Rate of Return and 9.8
percent Return on Equity.

A copy of the proposed settlement from the Commission’s Web site is available at:

http://tinyurl.com/aunwsd3

The commission is taking public comment on the proposed settlement. Comments are accepted
via e-mail by accessing the commission’s homepage at www.puc.idaho.gov and clicking on
"Comments & Questions About a Case." Fill in the case number (AVU-E-12-08) and enter your
comments. Comments can also be mailed to P.O. Box 83720, Boise, ID 83720-0074 or faxed to
[phone].
Commission staff will be in north Idaho next week to conduct workshops for Avista customers
on Feb. 12 at 7 p.m. at the Sandpoint Community Hall and on Feb. 13 at 7 p.m. in the Great
Room of the 1912 Center in Moscow.

The public workshops will give customers an opportunity to hear a presentation from
commission staff about how the commission processes a rate case and the specifics of Avista’s
request. Customers will also be able to ask questions and provide feedback to commission staff.
The information provided at the workshop is not to be interpreted as either an endorsement or
opposition to the company’s request.

Later, on March 4 and 5, the three commissioners who decide the case will hear formal
testimony from customers at public hearings, in Lewiston and Coeur d’Alene. Details about
the location of those hearings will be announced soon.

The commission, by state law, cannot accept or deny a requested increase without first
considering the evidence. State law requires that regulated utilities be allowed to recover their
prudently incurred expenses and earn a reasonable rate of return, which is also set by the
commission. The burden of proof is on the utility to demonstrate if additional expenses already
incurred were needed to serve customers and, if so, were they prudently incurred. To read how
a rate case is processed, go to the Commission’s Website at www.puc.idaho.gov and click on
the link, “Why can’t you tell them NO?” under “Hot Links” in the upper right-hand corner.

The requested gas increase is due to the fixed costs of providing gas, such as maintenance to
pipelines. Due to declining wholesale gas prices, the variable portion of gas rates has been
decreasing for Avista customers. In October 2012, Avista electric customers received a 5.6
percent natural gas reduction and 3.4 percent electric rate decrease. Overall, gas rates declined
by 12 percent during 2012.

Avista claims the electric and gas rate increases are necessary to expand and replace its aging
utility infrastructure. About 70 percent of the requested electric increase and 48 percent of the
gas increase are due to increases in plant investment, while the remainder is due to increases in
distribution, operations and maintenance and administrative expenses for both electric and gas
operations. For example, the company replaces about 6,000 distribution poles each year.
Other expense increases are related to hydroelectric plant relicensing, mercury emissions
compliance and federal reliability requirements.
Avista serves about 123,000 electric and 75,000 natural gas customers in northern Idaho.

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