2000831_jh.doc

DECISION MEMORANDUM

TO: COMMISSIONER HANSEN
COMMISSIONER SMITH
COMMISSIONER KJELLANDER
MYRNA WALTERS
RON LAW
BILL EASTLAKE
LOU ANN WESTERFIELD
DON HOWELL
RANDY LOBB
DAVE SCHUNKE
TERRI CARLOCK
ALDEN HOLM
MADONNA FAUNCE
NANCY HARMAN
WORKING FILE

FROM: JOHN R. HAMMOND

DATE: AUGUST 31, 2000

RE: IN THE MATTER OF THE APPLICATION OF AVISTA CORPORATION DBA AVISTA UTILITIES–WASHINGTON WATER POWER DIVISION FOR AN ORDER APPROVING A CHANGE IN NATURAL GAS RATES AND CHARGES. AVU-G-00-3.

On July 31, 2000, Avista Corporation d.b.a. Avista Utilities – Washington Water Power Division (hereinafter “Avista”) applied to the Idaho Public Utilities Commission (hereinafter “Commission”) for authority to implement new rates and charges for natural gas service in the state of Idaho based upon the rising cost of purchasing and transporting natural gas. Avista serves approximately 54,126 customers in Idaho. Over 53,541 of those customers are residential. As computed by Avista, the total requested net annual revenue increase in Idaho is $9,941,262 or 29.04%. The increase in price per therm to residential customers is approximately 27.75%. Residential customers using an average of 75 therms per month under Avista’s proposal can expect an increase in their average monthly bill of $10.78. The change in rates and charges to other customers will vary according to customer class and usage. The Company has requested an effective date of September 1, 2000.
The Notice of Application, Notice of Modified Procedure and Notice of Comment/Protest Deadline was filed on August 9, 2000 and it required all comments to be filed by August 30, 2000. No party has requested a hearing and the Staff finds that this matter can be processed without one.
The overall effect of the proposed changes, if authorized, would be to increase customer rates per therm in the follow amounts:

Class Description
& Schedule

$ Per Therm
General/Large General & Commercial
(Schedules 101,111 &121)

Large General & Commercial Receiving Lump Sum Bill
Credits or Charges
(Schedules 112 & 122)

Interruptible Service & Interruptible Service Receiving Lump Sum Bill Credits or Charges
(Schedules 131 & 132)

Transportation
(Schedule 146)

$0.14436

$0.14436

$0.11763

$Ø
Schedule 155Gas Rate Adjustment
Schedule 155Gas Rate Adjustment (Idaho) is used by the Company to pass through any under- or over-collection of gas costs since its last tracker filing. The Company in this filing proposed no adjustment or changes to its tariff Schedule 155 rates. No charges were proposed by Avista for Schedule 155. Staff agrees with Avista’s position for this proceeding.
Schedule 150Permanent Gas Cost Changes
Schedule 150Permanent Gas Cost Changes (Idaho) is used by the Company to reflect continuing changes in the cost of purchasing and transporting gas for customers. Since rates were last approved, the net change in commodity, demand and storage gas costs results in an increase of $0.14436/therm for firm gas Schedules 101 through 122; an increase of $0.11763/therm for interruptible Schedules 131 and 132; and no change for transportation Schedule 146. As per the Company’s Application, the resultant annual net increase in annual revenue requirement (Idaho) related to Schedule 150 changes is $9,941,262. The Company calculates its current weighted average cost of gas (WACOG) to be $0.348735, an increase of $0.155655 from the previous $0.19308.
Staff recognizing that increasing gas costs appear to be a reality in the Northwest and nationwide feel the request for increased rates is justified. Factors supporting this conclusion are 1) price increases in demand for gas used in peaking gas-fired turbines in California; 2) late injections into gas storage facilities; 3) new pipelines siphoning off less expensive Canadian gas to other markets; 4) expectations for a cold winter; and 5) increased prices of heating oil.
The Commission has received and placed in its formal case file nine (9) written comments from customers. All customer comments oppose the proposed increase in rates Avista has requested. One customer requested that the Commission give careful consideration to the business practices of senior officers of Avista before approving the increase in rates, specifically referencing the class action suit filed on behalf of stockholders of Avista who purchased their common stock between April 7, 2000 and June 21, 2000.
Despite these consumer comments the reality is that the cost of purchasing and transporting gas has increased such that rates must be adjusted. Accordingly, Staff recommends that the requested Schedule 150 rate increases be approved.

CONSUMER ISSUES
The Consumer Assistance Staff recommends that Avista be directed to provide information to its customers concerning the availability of levelized payment plans and assistance programs for needy customers. Staff also recommends that Avista provide information concerning demand side management and conservation changes that customers can implement before the winter heating season commences to reduce their use of gas. Finally, Staff recommends that Avista revise the Comfort Level Billing amount (level payment plan) for those customers already on the program to reflect the increased rates. According to Staff adjusting payments now will prevent participating customers from accumulating arrearages in level pay accounts during the winter heating season. Customers also should be given the opportunity to stop participating and resume regular payment procedures.

COMMISSION DECISION
Should Avista’s Application for an Order approving a change in natural gas rates and charges be approved?

John R. Hammond

M:avug003_jh
DECISION MEMORANDUM 4