Avista Wants to Raise Oregon Natural Gas Bills
Posted on December 8, 2016 by Bob Jenks
Tags, Energy
Avista Utilities, which provides natural gas service in parts of southern, central, and eastern Oregon, recently filed to raise rates of residential customers by more than 9%. The increase represents a whopping 14.5% increase in the cost of distributing gas to its customers and comes on top of last year’s increase of 5.2% that was enacted last March.
Avista claims that the increase is primarily due to its need to replace aging natural gas pipes, meet load growth, and ensure the reliability of its system during cold weather events. While the filing does show increases related to investments in distribution pipes, the company is seeking an increase in its profit margin, along with employee salaries and benefits.
CUB will spend several weeks analyzing this case and asking Avista a series of written questions before presenting our analysis of their request to the Public Utility Commission (PUC). While it is still early in our analysis, it is clear that there are elements of their filing that need to be challenged.
It is unusual for a utility to request a new rate case in the same year that their last rate case was decided. The general expectation is that once the PUC sets rates for a utility, the utility will manage itself to those rates and only request another rate hike when it can no longer manage its system within those rates.
The fact that Avista is not following this protocol raises concerns for CUB that the company’s capital investment program may be out of control. They seem to believe that capital investment will continue at a pace that is well above load growth. But CUB has yet to see evidence that this is a reasonable projection to make. Avista’s current ratio of debt to equity is about 50/50. Because capital in the natural gas industry is currently so cheap, CUB believes Avista should be working to reduce costs by building more debt into their capital structure.
Additionally, CUB has serious concerns about the disconnect between which customers are causing the need for new investment and which customers are being asked to pay the costs of the new investment. In this case, Avista is asking that residential and commercial customers pay for the entire rate increase. But at the same time, the company admits that nearly all of its load growth is coming from large industrial customers, specifically transportation and special contract customers. This raises a fundamental issue of fairness.
CUB will work diligently to keep Avista accountable both to building a responsible capital structure and treating its residential and commercial customers fairly. We will update you as the case progresses, so stay tuned!
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03/15/17 | 0 Comments | Avista Wants to Raise Oregon Natural Gas Bills