Capital investments in infrastructure, technology and system maintenance are the main drivers in Avista Utilities' requests filed with the Washington Utilities and Transportation Commission to increase electric and natural gas base rates.
The proposal includes an 18-month rate plan, with new rates taking effect Jan. 1, 2017 and Jan. 1, 2018. Under this plan, Avista would not file a rate case for new rates to be effective prior to July 1, 2018.
Avista's requests, if approved, are designed to increase annual electric revenues by 7.6 percent or $38.6 million, and annual natural gas revenues by 2.8 percent or $4.4 million on Jan. 1, 2017. A portion of the 2017 electric request, just under 2 percent, is related to the expiration of a long-term power supply contract that has provided benefits to customers for nearly 20 years.
In addition, Avista's requests, if approved, are designed to increase electric revenues by 3.9 percent or $10.3 million, and natural gas revenues by 1.0 percent or $0.9 million on Jan. 1, 2018. Avista has proposed to offset the electric increase, for the January through June 2018 time period, with Energy Recovery Mechanism dollars. As a result, customers would not see an electric billing increase effective Jan. 1, 2018.
The electric and natural gas requests for 2017 and 2018 are based on a proposed rate of return on rate base of 7.64 percent with a common equity ratio of 48.5 percent and a 9.9 percent return on equity.
Current investments include upgrades and maintenance of generation facilities, transmission and distribution equipment, natural gas pipe and new meter technology, some of which are large, multi-year projects that have been in-progress. Avista's rates are cost-based, where the cost included in customer rates reflects the cost of the equipment when it was installed. The costs to replace facilities and parts of our system are many times more expensive today than when originally installed. This is one of the primary reasons for the rate request.
Among the major capital investments in today's filing are:
· the ongoing and multi-year redevelopment of the 106-year-old Little Falls Powerhouse on the Spokane River to increase generation reliability and continuing rehabilitation of the 108-year-old Nine Mile Powerhouse on the Spokane River, including the replacement of original generators, turbines and other equipment which will increase the generation of clean, renewable power.
· the ongoing project to systematically replace portions of natural gas distribution pipe, including hundreds of miles of natural gas distribution lines in Avista's service area that were installed prior to 1987.
· technology investments for deploying advanced metering infrastructure (AMI) in Washington. These meters allow for two-way communication between Avista and customers' meters, and the technology creates the foundation for future customer benefits, including faster outage detection and restoration of service, plus near real-time energy use information and energy usage alerts. These capabilities will allow customers to better understand and manage their energy use.
The 18-month proposal would change the cycle of base rate adjustments from winter to summer months. With this, customers would be aware of any rate adjustments prior to entering the winter heating season. Future general rate cases would likely be filed in the summer months, with rate adjustments expected to occur the next summer.
If Avista's requests are approved, a residential electric customer using an average of 957 kilowatt hours per month could expect to see a billed increase of $6.83 per month, or 8.2 percent, for a revised monthly bill of $89.62, beginning Jan. 1, 2017. The revised monthly bill includes a proposed increase in the monthly basic charge from $8.50 to $9.50.
Under the proposal, residential electric customers would not experience a billed rate increase on Jan. 1, 2018 due to a rebate related to the ERM. The ERM rebate would offset the base rate increase of 3.9 percent for January through June 2018.
If the requests are approved, a residential natural gas customer using an average of 66 therms per month could expect to see a billed increase of:
· $2.13, or 3.5 percent for a revised monthly bill of $63.50, beginning Jan. 1, 2017. This includes a proposed increase in the monthly basic charge from $9.00 to $9.50.
· $0.79 per month or 1.2 percent for a revised monthly bill of $64.29, beginning Jan. 1, 2018. There would be no change to the basic charge at this time.
· The actual percentage increase for electric and natural gas customers would vary by customer class and depend on how much energy a customer uses.
Avista serves more than 246,400 electric and nearly 154,300 natural gas customers in Washington. The commission has up to 11 months to review Avista's requests.