08172001.doc

DECISION MEMORANDUM

TO: COMMISSIONER HANSEN
COMMISSIONER SMITH
COMMISSIONER KJELLANDER
JEAN JEWELL
RON LAW
BILL EASTLAKE
LOU ANN WESTERFIELD
LYNN ANDERSON
TONYA CLARK
DON HOWELL
RANDY LOBB
MICHAEL FUSS
TERRI CARLOCK
ALDEN HOLM
BEV BARKER
DAN GRAVES
GENE FADNESS
WORKING FILE

FROM: JOHN R. HAMMOND

DATE: AUGUST 17, 2001

RE: IN THE MATTER OF THE APPLICATION OF AVISTA UTILITIES FOR AN ORDER APPROVING A CHANGE IN NATURAL GAS RATES AND CHARGES. CASE NO. AVU-G-01-2.

BACKGROUND
On July 9, 2001, Avista Utilities (“Avista”, “Company”), a subsidiary of Avista Corporation filed an Application with the Idaho Public Utilities Commission for authority to place into effect revised Schedule 155 – Temporary Adjustments, containing rates and charges for natural gas service in the state of Idaho. If approved, Avista states, the Company’s annual revenue will increase by approximately $6.9 million or about 11.5%. However, the proposed change in rates and charges to customers will vary according to customer class and usage. Avista requested an effective date for revised Schedule 155 of August 9, 2001. Finally, Avista requested that the Commission process its Application using Modified Procedure under the Commission’s Rules of Procedure.
In Order No. 28785 the Commission suspended the effective date of the Avista’s revised Schedule 155 until September 1, 2001. The Commission also elected to process the Company’s Application by Modified Procedure and set the following deadlines for the parties and interested persons to file written comments: August 13, 2001 for interested persons and parties and August 17, 2001 for the Company to file reply comments. The Commission Staff and several Avista customers filed written comments.
STAFF RECOMMENDATION
After review of the Application and supporting materials the Commission Staff finds that Avista has complied with the Commission’s Utility Customer Information Rules by providing sufficient notice to its customers regarding this proposed increase. Staff also finds that Avista has prudently incurred the amounts in its deferral account that the Company is seeking recovery of through this instant Application. These amounts are the result of purchasing gas at unprecedented prices, purchases of financial instruments (“hedges”) to fix the price of gas, and accrued interest on these amounts. These amounts, accrued from September 1999 to March 2001, amount to $22,340,517.25 for purchases of gas, purchases of hedges and accrued interest. Staff recommends that Avista be allowed to recover these amounts over a two-and-half year period through adjustments to its Schedule 155 – Temporary Adjustments, that would raise the Company’s annual revenue by $6.9 million or 11.5%. Staff recommends that the Commission allow it to review the status of the deferral account during the next PGA filing anticipated to take place in one year to verify that the recovery rate proposed in this matter is still prudent. Finally, Staff recommends that the Commission approve Avista’s request to not alter its Schedule 150, thus keeping its WACOG at the same level.
CUSTOMER COMMENTS
As of August 13, 2001, the Commission received 15 written comments and/or informal complaints from Avista gas customers opposed to the rate increase. Customer comments in this case reveal a general concern for the impact utility cost increases have on the general state of the economy for northern Idaho, the effect this rate increase could have on seniors on fixed incomes, the profits the Company has made but is still requesting rate increases and possible mismanagement by the Company which should cause them to streamline their operations rather than requesting a rate increase.
COMMISSION DECISION:

Does the Commission wish to approve Avista Utilities Application in its entirety?

John R. Hammond

Staff: Alden Holm

Avista Utilities is a public utility engaged in the distribution of natural gas in certain portions of Eastern and Central Washington, Northern Idaho, Southwestern and Northeastern Oregon and Northern California.

DECISION MEMORANDUM 3