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Idaho PUC OKs Rate Changes, Discounted QF Deal for Avista

Completing a triple-play of sorts, the Idaho Public Utilities Commission Tuesday decided three separate issues for Spokane, WA-based Avista Utilities -- a retail natural gas rate net decrease, a retail electric rate net increase, and a 20-year purchased power agreement for up to 11.99 MW as a qualifying facility (QF) project, but at rates less than the published QF tariff. The utility will pay $58.50/MWh, rather than the PUC's $61.60/MWh rate for most QF contracts. Avista wanted to pay $49/MWh.

A subtext to the three actions is how quickly natural gas wholesale rates can turnaround, and in this case drop substantially in the span of two weeks in September. Before that, Avista was looking at a gas rate increase in Idaho.

The power supply deal is with Thompson River Co-Gen LLC, a coal and wood waste-fired facility near a sawmill around Thompson Falls, MT. Environmental groups raised concerns that the facility will degrade the environmental quality and health around Thompson Falls, but the PUC ruled those issues were beyond its jurisdiction.

The Northwest Energy Coalition asked the Idaho regulators for a public hearing to sort out the issues, but the PUC refused, citing the power purchases as falling under the 1978 federal Public Utility Regulatory Policies Act (PURPA), which mandates that utilities buy from QF generators. The coalition questioned whether Thompson River is a true QF project.

On the natural gas side, the Idaho regulators made two decisions Tuesday, the net effect of which was to lover overall retail gas rates for Avista, effective Wednesday (Nov. 1), by about 2%. The annual purchased gas cost adjustment (PGA) produced a 3.4% reduction, which was partially offset by a second PUC decision increasing gas rates 1.4% due to an increase in the combination utility's energy efficiency charges.

Avista originally asked for a PGA increase of 3.2% based on a revised weighted average cost of gas (WACOG) of 84.7 cents/therm, up from the current 78.6 cents/therm WACOG. Two weeks later (Sept. 29), the WACOG estimate was back down to 76.24 cents/therm, and Avista amended its filing to propose a decrease.

"Although lowering the WACOG carries with it the potential of creating a large deferral balance subject to collection from customers in the future if prices turn out to be higher-than-forecast, the company already has been able to take advantage of recent sharp drops in forward natural gas prices and has hedged approximately an additional 20% of its forecasted load at lower prices," Idaho regulators said.

On the electric side, the slight increase is effective Wednesday (Nov. 1) also, created by the expiration of a rate credit and about a 47 cent/month decrease for residential customers due to an increase in Bonneville Power Administration's (BPA's) residential exchange credit. The credit that expired Tuesday was from a past sale of Avista's interest in two power plants that was worth about 1.45% of typical residential monthly bills, and it was partially offset by a second BPA credit increase that reduced average residential bills by 0.75%.

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