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Washington Regulators Okay Avista Gas, Electric Rate Settlement

Applying conditions still under review, Washington state regulators Wednesday approved a $22.1 million general rate settlement covering Avista Corp.'s electric and natural gas utility operations for 220,000 electricity and 134,000 natural gas customers it serves in the state. Avista and the settlement parties have a week to accept the conditions from the Washington Utilities and Transportation Commission.

In its prepared response the Spokane, WA-based utility indicated it was reviewing the utility commission's order, which would be effective Jan. 1, meaning a 7.7% increase for the average residential electric customer and less than 1% (0.6%) for gas customers.

As part of the settlement, Avista will increase funding by $800,000 to two existing assistance programs helping limited-income customers. "We know that increased prices present a hardship for many of our customers, especially our limited income customers," said Scott Morris, Avista Utilities president.

The general rate increase includes a $22.1 million boost for electric revenues and just short of $1 million ($968,000) for natural gas revenues, but with some slight adjustments ordered by state regulators the overall increase will be close to the $22.1 million level, Avista said in announcing the regulatory decision.

Profit levels were increased along with equity requirements to lessen the company's preponderance of debt in the debt-to-equity ratio. Avista's rate-of-return (ROR) was set at 9.11%, with a 40% equity ratio, and its return-on-equity (ROE) was sent at 10.4% Under an equity-building mechanism, Avista will increase its equity component to 38% by the end of 2008 from its current level at about 31%.

Avista was denied its request to lower the maximum amount the company either absorbs or benefits from in changes of the cost of power. It is currently $9 million, and the utility wanted to lower it to $3 million. In rejecting this approach, the Washington regulatory commission directed Avista to make a filing by Jan. 31 next year to "initiate a comprehensive review of the Energy Recovery Mechanism, including any proposed reduction of the 'deadband.'"

Avista, which overall serves 330,000 electric and 285,000 natural gas utility customers in three Northwest states (Idaho, Oregon and Washington), gets about 70% of its annual retail electric and natural gas revenues from the state of Washington.

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