Avista, an energy company involved in the production, transmission and distribution of energy, and all other parties participating in the company's electric and natural gas general rate filings, have reached a partial settlement agreement that is expected to resolve a number of major issues in these cases.
The settlement agreement is not binding on the Washington Utilities and Transportation Commission (WUTC), and is subject to WUTC approval. The company has filed its requests with the WUTC to increase electric and natural gas rates on January 23, 2009.
Under the partial settlement agreement, the company and the settling parties have reached agreement on issues in the areas of cost of capital, power supply, rate spread and rate design, and funding under the Low-Income Ratepayer Assistance Program (LIRAP).
Avista’s revised rate increase requests, following execution of the partial settlement agreement, are around $38m for electric and $3m for natural gas, which were reduced from $69.76m and $4.92m respectively. Regarding cost of capital, the partial settlement agreement would set the company’s rate of return on utility investment at 8.25%, with a common equity ratio of 46.5% and a 10.2% return on equity. Recognizing the impact of price increases on customers, there would be an increase in funding for LIRAP.
Dennis Vermillion, president of Avista Utilities, said: “The cost of natural gas to generate electricity was a large portion of the rate request Avista filed in January. Since our filing, prices for natural gas have decreased substantially, and this reduction in natural gas costs is reflected in the partial settlement agreement. About 24% of the electricity needed to meet customer demand is generated using natural gas.”
The issues that were not resolved through the partial settlement agreement would be addressed in further regulatory proceedings before the WUTC including public hearings scheduled for September 30, 2009, and technical hearings before the WUTC in early October 2009.
The issues that remain unresolved include, the prudence of the addition of the Lancaster generating project, capital additions to rate base, labor costs, tree trimming costs, information systems costs, and the proposed continuation of the natural gas decoupling mechanism.
Parties to the partial settlement agreement include Avista, the WUTC Staff, the Public Counsel Section of the Washington Office of Attorney General, the Industrial Customers of Northwest Utilities, the Northwest Industrial Gas Users, and The Energy Project. The NW Energy Coalition does not oppose the agreement.