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Avista Reaches Partial Settlement in Washington Electric and Natural Gas Rate Requests

SPOKANE, Wash., Sept. 4 // -- Avista (NYSE: AVA) and all other parties participating in the company's electric and natural gas general rate filings have reached a partial settlement agreement that would 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. Avista filed its requests with the WUTC to increase electric and natural gas rates on January 23, 2009.

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Under the partial settlement agreement, Avista 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 approximately $38 million for electric and $3 million for natural gas, revised downward from its original requests of $69.76 million, and $4.92 million, respectively.

With regard to cost of capital, the partial settlement agreement would set Avista's rate of return on utility investment at 8.25 percent, with a common equity ratio of 46.5 percent and a 10.2 percent return on equity.

"The cost of natural gas to generate electricity was a large portion of the rate request Avista filed in January," said Dennis Vermillion, president of Avista Utilities. "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 percent of the electricity needed to meet customer demand is generated using natural gas."

Recognizing the impact of price increases on customers, especially limited income and senior customers, funding for LIRAP would also be increased.

"We believe the terms of the partial settlement agreement are fair and are in the best interest of our customers and shareholders," Vermillion said. "We are pleased that the parties to the cases were able to work together to develop a joint recommendation to the Commission that would resolve these major issues."

For those issues that were not resolved through the partial settlement agreement, the issues will be addressed in further regulatory proceedings before the WUTC including public hearings scheduled for Sept. 30 in Spokane, and technical hearings before the WUTC in early October. Issues in the cases that remain unresolved include, among others, 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.

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 353,000 homes and businesses and natural gas to 313,000 homes and businesses in three Western states, serving more than 492,000 customers. Avista's primary, non-regulated subsidiary is Advantage IQ. Avista stock is traded under the ticker symbol "AVA." For more information about Avista, please visit www.avistacorp.com.

Avista Corp. and the Avista Corp. logo are trademarks of Avista Corporation.

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, 2008, and the Quarterly Report on Form 10-Q for the quarter ended March 31, 2009.

SOURCE Avista Corp.

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SOURCE: Avista Corp.

Web site: http://www.avistacorp.com/

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