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Wash. state regulators completely deny Avista Utilities any rate increases

Washington state regulators flatly denied all of Avista Utilities' requests to increase its electric and gas rates, saying the utility did not prove it needed the rate increases.

On Feb. 19, Avista Utilities, a division of Avista Corp., applied to increase its electric rates 7.6% to raise $38.6 million in additional revenue and to increase its natural gas rates by 2.8% to get $4.4 million in additional revenue, effective Jan. 1, 2017.

The utility also asked for an additional increase of $10.3 million in electric revenues starting Jan. 1, 2018, and $900,000 more for gas beginning on that same date.

"Avista failed to carry its burden to show that its current rates are not fully sufficient to meet its needs," the Washington Utilities and Transportation Commission said in a Dec. 15 order that the commissioners approved on a 2-to-1 vote.

The regulators also said Avista failed to demonstrate that it required an attrition adjustment to increase rates effective Jan. 1, 2017. "The record does not support a determination that Avista will experience increased demands for capital expenditures or operating expenses that are beyond the company's ability to control," the WUTC said.

Avista's rates accordingly will remain the same as they are now.

This was Avista's ninth general rate case filed since 2005, and the fourth since 2012, in which it sought to introduce an attrition adjustment as the basis for, or as a major factor in, determining its revenue requirements, the commission said in its order. Nearly half the order was devoted to recounting past rate cases.

Just six weeks after the commission granted attrition adjustments in Avista's last rate case, the company filed this general rate case, according to the order. Referring to its 2015 attrition rates order, in which it directed the company to develop an historical test year, WUTC said, "It appears Avista had very little time and, hence, opportunity to take into account the direction the commission gave."

"Avista's case begins and ends with its attrition study, albeit with results adjusted upward for certain capital investments that may occur during the rate period, which the company describes as 'after-attrition adjustments,'" the commission said.

Commissioner Phillip Jones dissented and instead supported an electric revenue increase of $26 million and a natural gas increase of $2.4 million. He said the use of a modified historical test year, as the other commissioners wanted, would not result in just and reasonable rates.

"I share Avista's view that in an era of relatively low load growth and high capital expenditures, the company faces a fundamental, almost structural, mismatch between revenues, operating and maintenance expenditures," Jones said.

Avista Corp. Chairman, President and CEO Scott Morris expressed extreme disappointment in the commission's decision. "This outcome does not allow us to recover our costs for significant investments made in our infrastructure, and it appears the order is not supportive of the company making the necessary investments that will allow Avista to continue to provide safe, reliable service to our customers," Morris said in a press release.

"In addition, Avista cannot earn the commission-authorized 9.5% return on equity or a fair return for shareholders," he continued.

"The commission's decision will likely raise serious concerns from financial stakeholders and the rating agencies regarding the level of support from the Washington jurisdiction," Morris concluded.

The company said it plans "to pursue all available remedies toward a reasonable end result," such as filing a petition for reconsideration with the commission, and if that fails, appealing to the Thurston County Superior Court.

Avista maintained that the WUTC's decision is inconsistent with the evidence presented in the record and that the commission's own staff supported revenue increases of over $20 million. (WUTC dockets UE-150204 and UG-150205).