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Avista Projects Demand Growth, Touts 'Decoupling'

Avista Corp.'s natural gas utilities in Washington, Oregon and Idaho recently submitted a 2006 integrated resource plan to state regulators that touts "decoupling" as a means to spur efficiency measures while ensuring cost recovery.

Separately, Avista Utilities on Wednesday filed with the Washington Utilities and Transportation Commission a proposed mechanism for separating or "decoupling" its natural gas sales volumes from recovery of the utility's fixed costs for providing gas service to nearly 300,000 retail customers in the three states. Avista's proposal calls for a three-year pilot starting in July, with rate adjustments in any one year limited to no more than 2%, the first of which would be in the fall of 2007.

Avista called the integrated resource plan (IRP) a "roadmap" to meet anticipated demand growth through added gas infrastructure and supplies, many of which come from markets that the utility said have "undergone dramatic changes" in recent years, moving from a regional focus to one that is national and even global. "Customers across the nation have felt the impact of higher energy costs, and natural gas prices continue to be relatively high as compared to historical levels, Avista said in announcing its IRP and Washington state regulatory filing.

Avista's IRP cited several factors that are driving up wholesale gas prices, including oil price spikes and the price relationship with natural gas, the increased use of natural gas in electric generation, along with hurricane and other weather-related events that have impacted the industry.

The IRP takes a 20-year look into the future, Avista said, evaluating options for securing reliable gas sources. Avista said it wants to use the IRP to "balance forecasted demand with new and existing supply alternatives." The efforts will include energy conservation as a means of reducing the total supplies that eventually will be needed, the utility said.

As a one-third partner with Williams' Northwest Pipeline and Puget Sound Energy in the Jackson Prairie Storage Project near Chehalis, WA, Avista said the storage capacity of the facility is currently being increased, and the partners are considering the feasibility of expanding the daily withdrawal capability at the facility.

Withe the dramatic rise of wholesale gas prices in recent years, Avista said its Washington proposal for the decoupling mechanism is all the more important because energy efficiency and conservation programs will become increasingly critical. Under current rate structures in the state of Washington, efficiency/conservation objectives directly conflict with fixed-cost recovery that is tied to a per-therm (sales volume) basis, the utility said.

"Decoupling breaks the link between the volume of sales and the recovery of fixed costs, promoting an increased focus on energy efficiency and conservation," Avista said.

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