Although they allowed some mathematical corrections sought by the utility, the Idaho Public Utilities Commission last Wednesday denied a request for reconsideration by Avista Utilities’ for its full cost recovery of a natural gas supply deal and cost overruns at the utility’s Boulder Park generation project in Spokane, WA. The computational corrections will have no immediate impact on Avista’s utility rates in Idaho, the PUC said.

The disputed costs were part of an Oct. 8 PUC decision, granting Avista 1.9% electric and 6.38% gas rate increases, compared to requests for 11% and 9% increases, respectively. Parts of those overall rate hike decisions included the PUC’s denial of Avista recovering $4.77 million, or one-third of Idaho’s share of an Avista natural gas purchase deal for its Coyote Springs 2 power generation unit, and another $2.6 million in costs attributed to the Boulder Park general plant construction overruns.

Avista appealed the decision Oct. 29 and now has the option of appealing the PUC denial to the Idaho Supreme Court. The utility has argued that there were extenuating circumstances surrounding the gas purchase and construction overruns that the regulators should consider.

Coyote Springs 2 was not operational when Avista signed its natural gas supply deal, forcing it to sell the gas back into the open market at a loss and go to the electricity spot market to buy power supplies, but Avista Utilities argued that at the time it made the deal for the gas it as “prudent, given what the company knew at the time,” a PUC spokesperson said. Avista argued that the deal fell “within the company’s risk management guidelines.”

Avista further said it should be able to recover the costs of this gas deal because it did not include an affiliate, Avista Energy, as had an earlier gas supply contract that the PUC rejected.

The eventual gas supply deal “both in length (36 months) and financial exposure was unprecedented for Avista and was accompanied by little supporting analysis and paper trail,” the PUC said in denying reconsideration of its October decision.

In the power plant cost overruns, the utility argued that the disallowance was too much, and should have been limited to the PUC staff-recommended $1.1 million at the most for Idaho customers. The PUC countered that customers should not be liable for most of the cost overruns on a generation project, originally estimated at $21 million, that turned out to be 53% higher at $31.9 million. The PUC allowed only a 15% contingency for cost overruns, a PUC spokesperson said.

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