Spokane, WA-based Avista Utilities last Wednesday received approval from Washington state regulators for retail natural gas and electric rate increases, effective Friday (Jan. 1). A $557,000, or 0.3%, natural gas hike and a $12.1 million, or 2.8%, electric rate increase were approved by the Washington Utilities and Transportation Commission (WUTC).
Avista officials expressed disappointment in the rate decision, noting that following a partial settlement agreement last September the utility lowered its requests from $4.9 million to $2.8 million for the gas hike and from $69.8 million to $37.5 million for the electric increase. The utility now plans to file another general rate case by the end of the first quarter in 2010, the company said.
Separately, Avista reaffirmed its 2010 consolidated earnings guidance in the range of $1.55-1.75/diluted share, although it noted that the WUTC decision won’t allow the utility to make “meaningful improvement” in reducing regulatory lag in 2010. “Avista expects to manage its capital investment and operating costs, while continuing to provide safe, reliable service,” an Avista spokesperson said.
In another related announcement, Avista said a county Superior Court had affirmed an earlier WUTC decision on Avista’s 2008 general rate cast settlement, rejecting requests for the disallowance of $94,000 in the case. State regulators approved the settlement in December 2008, and a Thurston County, WA, public counsel sought judicial review of the settlement that raised natural gas rates by $4.8 million and electric rates $32.5 million annually.
As part of the latest rate increase, the WUTC granted Avista a 10.2% return on equity (ROE) and a 46.5% common equity ratio, compared to the utility’s request for an 11% ROE and a 47.5% common equity ratio.
Avista CEO Scott Morris said the new rates will fall short of what the utility needs. “The approved rates will not allow us to fully recover our costs for the significant investments made in the generation and transmission infrastructure to serve our customers’ energy needs,” Morris said. “However, the commission’s order does provide additional guidance for procedures and documentation that we believe will facilitate improved cost recovery for both operating expenses and capital in the future.”
At issue was the WUTC’s refusal to allow Avista to recover costs in its current rates that were associated with its purchase of power from a generation plant in Idaho, but the regulators did direct the utility to file for some deferred accounting treatment, with interest, for the added costs and an opportunity to recover the costs in the next rate case. There was also some favorable treatment by the state commission of Avista’s lost margin on its energy efficiency programs.
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