Avista Charging Southern Oregon Exorbitant Amounts for Expanding the Gas System

Posted on July 18, 2023 by Charlotte Shuff and John Garrett
Tags, Energy, General Interest

Hands holding six hundred dollar bills on fire

During CUB’s review of Avista’s request for a rate increase, we found that Oregon’s second-largest gas company is charging customers in Southern Oregon exorbitant and unnecessary amounts for expanding its fossil fuel system. This unfairly costs customers millions of dollars a year. CUB is calling on regulators to stop Avista from charging existing customers to expand the gas system and add new customers to the system.

Left unchecked, these unjust costs will grow worse as Avista struggles to meet climate emissions regulations. Avista’s expansion practices are putting company profits before customer finances.

Avista Requests an 8% Bill Increase

Avista is requesting an 8.1% increase for residential customers, about $6.20 per month for households. Winter bills could increase by around $13 a month. If approved, the increase would go into effect on January 1, 2024.

At $10.9 million, Avista’s requested rate hike seeks to raise customers’ bills for:

Higher profit margins for shareholders
Adjusting for inflation (higher cost of goods/services)
Replacing old pipes to improve system safety
Customer-funded subsidies for expanding the gas system

CUB’s priority is a safe and affordable gas system for Oregon households. Some of these costs, like replacing dangerous pipes, are likely reasonable.

However, we have major concerns with Avista’s customer-funded subsidies to expand its system. These subsidies are unreasonably expensive and put customers at financial risk. Every new customer added means more emissions that will have to be reduced and paid for by Avista’s customers.

Unreasonably and Unjustifiably High Costs to Customers

CUB initially investigated Avista’s customer-funded subsidy for expanding its gas system through the lens of climate regulation issues. However, we also uncovered that Avista has been charging existing customers huge amounts for each new customer connection for years. There have been no monetary caps, no effective oversight, and little justification for this harmful practice.

Last year, CUB and regulators at the Public Utility Commission looked into a similar issue for NW Natural. This year, the cap for NW Natural’s new customer connection subsidy is $2,400. Regulators decided to cut NW Natural’s subsidy to $1300 per new hookup by 2024.

By contrast, Avista has no monetary cap for its subsidy. The average Avista new customer hookup subsidy in 2022 was $5,644. This is more than twice NW Natural’s maximum. In 2020, one very high Avista hookup subsidy cost Avista customers $42,032.

These costs don’t stop at the price tag of pipes and labor, though. Gas utilities are allowed to make a profit off of these investments, in addition to charging customers for the investment itself. Between the initial cost, profits, and taxes, the $42,032 hookup subsidy for a single home from 2020 will actually cost ratepayers $108,367 in total. It is clear that Avista is putting its own profits ahead of its responsibility to customers.

CUB’s recommendation for fixing Avista’s hookup subsidy is similar to the plan regulators adopted for NW Natural. First, set a monetary cap on Avista’s hookup subsidy, as NW Natural has, that immediately stops extraordinarily high expenses to Avista customers. Second, phase out the subsidy over the next few years. Next year, existing customers could only be charged a maximum of $2,500 to subsidize a new customer hookup. In 2025, that maximum would drop to $1,250. The subsidy would then be stepped down to zero by 2026.

Worsening Climate Pollution at the Cost of Customers

It is also important to remove incentives for adding new customers in the face of climate policy rollouts. Continuing to ask customers to fund expansion subsidies not only costs them money now but also costs them later.

Oregon’s climate change regulations require a reduction in the combustion of fossil fuels, including natural gas. The state’s Climate Protection Program requires that gas utilities reduce their emissions by 50% by 2035. By 2050, they will need to reduce emissions by 90%.

Every new customer added means more emissions that will have to be reduced and paid for by Avista’s customers.

By continuing to subsidize adding new customers to the gas system, Avista is putting existing customers at risk. Each new hookup costs existing customers: 1) the cost of adding new pipes, 2) the profits and fees of the new hookup, and 3) the increased cost of complying with climate regulations.

Avista Has No Reasonable Plan for Meeting Climate Regulation Affordably

Avista is also filing its plan to meet Climate Protection Plan requirements this year. From what CUB has seen so far, its plan has similar issues to the plan NW Natural filed earlier this year. The utility greatly underestimates the cost of non-fossil gas and is heavily reliant on unproven and poorly supported solutions, in addition to fuel markets that do not exist at all yet.

We have not yet seen a reasonable plan from Avista to meet climate regulations affordably. In place of a realistic plan, Avista is currently suing the Oregon government to stop the Climate Protection Program.

Climate and public interest groups found that Avista is attempting to charge customers nearly $50,000 for legal fees associated with their lawsuit opposing the Climate Protection Plan. These groups include Climate Solutions, the Sierra Club, the Green Energy Institute, the Community Action Partnership of Oregon, and Earthjustice.

CUB supports these groups’ opposition to charging customers for these legal fees. We agree that this is an inappropriate cost for customers to pay in bills.

Next Steps: Avista Rate Case

This case will continue over the next few months. CUB will continue to ask tough questions of Avista and regulators throughout the investigation phase. Decisions on pieces of the requested bill increase will go from August through December. Any changes in rates will start on January 1, 2024.

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