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Avista Receives Approval for Natural Gas Decoupling Mechanism in Washington

SPOKANE, Wash. – Feb. 7, 2007, 3:00 p.m. PST: Avista (NYSE:AVA) has received approval from the Washington Utilities and Transportation Commission (WUTC) to implement a natural gas decoupling mechanism which will allow Avista to increase focus on energy efficiency programs and services to its 140,000 Washington natural gas customers.

The decoupling mechanism is a three-year pilot program which will allow Avista to separate in the rate structure its fixed costs from the costs of purchasing natural gas to serve customers and to recover a portion of its fixed costs not recovered because of reduced energy usage by customers. Fixed costs are primarily the expenses incurred in owning and maintaining the underground system that delivers natural gas safely and reliably to customers.

Under the decoupling mechanism, annual fixed cost rate adjustments will be capped at no more than 2 percent each year and will be tied directly to the amount of natural gas savings from Avista’s energy efficiency programs during the preceding year. The first rate adjustment will be filed in the fall of 2007 in conjunction with Avista’s annual purchase gas cost adjustment (PGA).

About 80 percent of a residential customer’s monthly bill is the cost of natural gas, with the remaining 20 percent made up of Avista’s fixed cost to provide natural gas service. Avista does not mark up the cost of natural gas purchased to serve its customers, but through the purchase gas cost adjustment (PGA) mechanism the company annually adjusts its prices – up or down – to reflect the actual cost of serving customers.

Prior to the WUTC approval of the decoupling mechanism, Avista’s ability to recover the majority of its fixed operational costs was tied to the natural gas sales volume. When the majority of fixed costs are recovered through sales volumes and those sales volumes are lower than expected, the recovery of fixed costs fall short of the level needed to support ongoing operations of a natural gas distribution system.

Bruce Folsom, Avista senior manager of Demand Side Management, said Avista will continue to build on the company’s tradition of helping customers get the most value from their energy dollar.

“In 2006, our Washington customers saved more than 660,000 therms of natural gas, and we provided about $1.6 million in energy efficiency incentives through our program offerings to residential, commercial, industrial and limited income customers,” Folsom said. “With the decoupling mechanism in place, we will be able to look for new opportunities to help our customers more efficiently manage their natural gas use and save money on their energy bills.”

For information on Avista’s energy efficiency programs and rebates, visit www.avistautilities.com

Avista is an energy company involved in the production, transmission and distribution of energy as well as other energy-related businesses. Avista Utilities is a company operating division that provides service to 346,000 electric and 305,000 natural gas customers in three western states. Avista’s non-regulated subsidiaries include Avista Advantage and Avista Energy. Avista Corp.’s 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, including statements regarding expected rates, costs and demand for electricity and natural gas.  Such statements are subject to a variety of risks, uncertainties and other factors, most of which are beyond the company’s control, and many of which could have a significant impact on the company’s operations, results of operations and financial condition, and could cause actual results to differ materially from those anticipated.

For a further discussion of these factors and other important factors, please refer to the company’s Annual Report on Form 10-K for the year ended Dec. 31, 2005 and Quarterly Report on Form 10-Q for the quarter ended Sept. 30, 2006. The forward-looking statements contained in this news release speak only as of the date hereof. The company undertakes no obligation to update any forward-looking statement or statements to reflect events or circumstances that occur after the date on which such statement is made or to reflect the occurrence of unanticipated events. New factors emerge from time to time, and it is not possible for management to predict all of such factors, nor can it assess the impact of each such factor on the company’s business or the extent to which any such factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statement.

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