Avista defends proposed hike

COEUR d’ALENE — Despite $73.6 million in net income last year, Avista President and CEO Scott Morris said the company needs a proposed net electric rate increase of 7.8 percent and a natural gas rate increase of 3 percent in Idaho.

Ultimately, he said, it will benefit its customers.

“It’s a difficult concept for customers,” Morris said during a meeting with the Hagadone News Network. “I think they think I’m getting it all.”

A profit allows Avista to continue to be among the region’s most green, reliable and inexpensive power providers, Morris said.

“It’s a catch 22. From our customers perspective we want to run as efficiently as we can, but they do need us to be profitable because we take that money and reinvest it in the business,” he said.

Many people were angry with Avista after getting record bills that covered the cold snap in December. While costs will drop in the spring and summer due to reduced usage, people shouldn’t expect lower rates.

“With all of the issues around generation and power supply, you’re going to see continued price pressure. Not just with Avista Utilities, but every utility,” Morris said. “The price of generation is going to continue to rise.”

He said Avista faces an array of challenges to keep costs down, provide reliable power, and please shareholders. The Spokane-based company splits income equally between paying dividends to shareholders and reinvesting in the business.

“We need to tell our story better,” he said.

For instance, it’s spent $26 million on the dam relicensing process — environmental studies, legal fees — for the Spokane River, which could be completed mid-year.

The company needs to maintain electric and natural rates so it can show a profit and receive a favorable credit rating, which affects its interest rate when borrowing money, Morris said.

Avista’s current rating, BBB minus, will get it about 8 percent interest rate. If it incurs too much debt, that rating can fall.

“When we borrow money from a bank, the interest expense is just a pass through to customers,” he said.

The Idaho Public Utilities Commission has another six months to review Avista’s filings for its latest proposed hike designed to produce $31.2 million in revenue for electric service and $2.7 million in revenue for natural gas service.

Last year, IPUC approved a 12 percent hike in electric rates and a 4.7 percent increase in natural gas for Avista that took effect Oct. 1. Together, they’re were designed to increase annual revenues by $27.1 million.

Morris said the money eventually affects credit ratings.

“It’s hard for customers to understand, but it’s in their better interests to be up here in a healthy state (of credit rating) because it means lower interest expense. But to do that means you‘ve got to have higher equity and you’ve got to make a reasonable return for your shareholders.”

He said most customers — Avista serves 121,000 electric and over 93,000 natural gas customers in Idaho — want to know why their bill is high and what can be done to lower it.

“The best way to save money for our customers is if we don’t have to build a new generating resource, if we can encourage energy efficiency,” Morris said. “That’s why we push it so much.”

The company wants its customers to be more energy efficient in a number of ways, such as sealing drafts, using insulation in attics and placing plastic over windows in the winter.

It wants them to be aware of how many electrical devices are running in their homes, and understand that some, like plasma TVs, are energy hogs.

“We have to do a better job as a company thinking of ways to try to help our customers get action-oriented around energy efficiency, to do the things they really can do to save energy,” he said. “Think back to what you plugged into your home 10 years ago versus what you have plugged in today. Our customers are using huge amounts of electricity.”

Avista’s stock closed at $14.42 Wednesday, compared to a 52-week high of $23.58.