Avista requests electric and natural gas rate increase in Washington Company seeks recovery of costs for capital investments in infrastructure and technology
Increased capital investments is the major driver in Avista's (NYSE: AVA) request filed with the Washington Utilities and Transportation Commission (UTC) to increase electric and natural gas base rates. Avista has requested an effective date of Jan. 1, 2015. The last general rate request filing in Washington was April 2, 2012.
'The majority of the company's rate request comes from the continuing need to expand and replace the facilities and equipment we use every day to serve our customers,' Avista Chairman, President and Chief Executive Officer Scott L. Morris said. 'This includes preserving the life of our legacy hydropower projects that have been providing low-cost, renewable energy for over 100 years. It also includes continuing to systematically replace some of our older energy delivery facilities every year, so that our customers will continue to receive safe, reliable service in the years to come. The cost to replace these facilities is multiple times more expensive than the original cost to install them, which results in a need to increase rates.
'Managing costs is an on-going focus for Avista which helps ensure that our customers continue to have among the lowest energy prices in the country. To help reduce the rate of growth in operating costs, Avista implemented in December 2012 a Voluntary Severance Incentive Plan to reduce the number of employees at the company beginning Jan. 1, 2013. Effective Jan. 1, 2014, Avista also made changes to its pension and post-retirement medical plans for non-union employees that reduce future costs,' Morris said.
Avista's request, if approved, would increase annual electric base revenues by 3.8 percent or $18.2 million and annual natural gas base revenues by 8.1 percent or $12.1 million. Both requests are based on a proposed rate of return on rate base of 7.71 percent with a common equity ratio of 49.0 percent and a 10.1 percent return on equity.
In addition, Avista's electric customers are receiving benefits from two rebates that are currently reducing customers' monthly energy bills by 2.8 percent during 2014. These rebates will expire at the end of 2014. Avista is proposing a new rebate beginning January 1, 2015, related to its sale of renewable energy credits which would reduce customers' monthly bills by 1.1 percent. The net effect of the expiring rebates and the new rebate will result in an increase of approximately 1.7 percent beginning January 1, 2015. These rebates are passed through to customers on a dollar-for-dollar basis and do not increase or decrease the company's earnings.
If Avista's requests are approved, a residential customer using an average 965 kilowatt hours per month would see a total billed increase of $4.89 a month, or 6.1 percent, for a revised monthly bill of $84.98, beginning January 1, 2015. The revised monthly bill includes a proposed increase in the monthly basic charge from $8.00 to $15.00.
A natural gas customer using an average of 65 therms per month would see a $5.23, or 8.5 percent, increase for a revised monthly bill of $66.42. This includes the proposed increase in the monthly basic charge from $8.00 to $12.00.
Avista serves more than 241,000 electric and nearly 152,000 natural gas customers in Washington.
Avista expects capital investments in 2014 of $335 million, up from $280 million in 2013. The investments encompass upgrades and maintenance of generation facilities, transmission and distribution equipment, natural gas pipe, as well as information technology upgrades.
Among the major capital investments in today's filing are portions of the multi-year redevelopment of the 104-year-old Little Falls Powerhouse to increase generation reliability; continuing rehabilitation of the 106-year-old Nine Mile Powerhouse to replace original generators, turbines and other equipment which will increase the generation of clean, renewable, low-cost power; and the 2014 restoration of the 106-year-old Post Falls South Channel Dam structure to preserve the life of this important generating resource.
Information technology upgrades include the replacement of Avista's 20-year-old legacy customer information system which supports traditional utility business functions, such as meter reading, customer billing, payment processing, credit, customer service orders and material management.
Natural gas capital investments include the continuing project to systematically replace portions of natural gas distribution pipe. The project is replacing hundreds of miles of natural gas distribution lines in Avista's Washington, Idaho and Oregon service area that were installed prior to 1987.
Additional information about the rate requests, including a video, is available at www.avistautilities.com/warates.
To assist customers in managing their energy bills, Avista offers services for customers such as comfort level billing, payment arrangements and Customer Assistance Referral and Evaluation Services (CARES), which provide assistance to special-needs customers through referrals to area agencies and churches for help with housing, utilities, medical assistance and other needs. To learn more, visit www.avistautilities.com. There customers can also find information on energy efficiency rebates and incentives, as well as online tools for managing energy use.
Avista Corp. is an energy company involved in the production, transmission and distribution of energy as well as other energy-related businesses. Avista Utilities is our operating division that provides electric service to 364,000 customers and natural gas to 321,000 customers. Our service territory covers 30,000 square miles in eastern Washington, northern Idaho and parts of southern and eastern Oregon, with a population of 1.5 million. Avista's primary, non-utility subsidiary is Ecova, an energy and sustainability management company with over 700 expense management customers, representing more than 700,000 sites. Our stock is traded under the ticker symbol "AVA." For more information about Avista, please visit www.avistacorp.com.
This news release contains forward-looking statements regarding the company's current expectations. Forward-looking statements are all statements other than historical facts. Such statements speak only as of the date of the news release and are subject to a variety of risks and uncertainties, many of which are beyond the company's control, which could cause actual results to differ materially from the expectations. These risks and uncertainties include, in addition to those discussed herein, all of the factors discussed in the company's Annual Report on Form 10-K for the year ended Dec. 31, 2012 and the Quarterly Report on Form 10-Q for the quarter ended Sept. 30, 2013.