AG's Office Opposes Avista Corp. Rate Hike Request; Recommends Decrease.

Business/News Editors

SEATTLE--(BUSINESS WIRE)--May 5, 2000

The state Attorney General's office today filed papers formally opposing a rate increase for Avista Corp. and recommending instead that the utility's rates be decreased.

In papers filed with the Washington State Utilities and Transportation Commission, the Attorney General's office contends that the requested increase would produce an excessive profit margin and would force Washington state consumers to pay for company restructuring, a name change and expansion.

As a result, the Attorney General's office is recommending that Avista's rates be reduced by at least $2 million for its electric customers, and $1 million for its natural gas customers.

"The company is free to pursue its other business interests, but not to charge its consumers for the costs of expansion and restructuring," said Assistant Attorney General Simon ffitch (cq), head of the Attorney General's Public Counsel office. Public Counsel represents consumer interests regarding the rates, services and business practices of investor-owned telephone, electric and natural gas utilities in the state.

Avista has asked the UTC to approve a 14 percent rate increase for its residential electric customers and a 6.5 percent rate increase for its natural gas customers. The increase would add about $10 to the monthly bill of customers who use electric heat, and add $2.74 to the average monthly gas bill of residential and small commercial customers.

Concerns raised by the Attorney General's office include:

-- Avista's requested profit margin is excessive. Allowing the

company a rate of return comparable to other similar companies

would by itself reduce the requested rate increase by 50

percent.

-- Administrative costs, particularly executive salaries, have

grown dramatically. Overall administrative costs have more

than doubled since Avista's last rate increase. The Company

has attempted to assign these costs disproportionately to

utility customers, rather than to the unregulated businesses

that Avista also operates.

-- Avista's request to charge utility customers for the expense

of changing the company name from Washington Water Power to

Avista should be denied.

-- Avista is not entitled to its request for extra profit of more

than $1.25 million each year for good management. Apart from

the low cost of hydroelectric power, Avista actually exceeds

other regional utilities in its administrative costs.

-- The requested increase of the monthly customer charge from $3

to $5 is harsh and burdensome for low-income customers and

those who use only small amounts of energy.

In addition to asking for rate increases, Avista also wants to redesign its electric rate structure. Under the proposal, the company would shift to a two-tiered system from its existing three-block structure. The result would be lower costs to the utility's high-use customers and greater costs to others.

"This makes no sense," said ffitch. "The proposed structure would significantly undermine the conservation savings achieved by the company since its last rate increase and would encourage people to use more, rather than less, electricity," he said.

Avista has the opportunity to file rebuttal testimony and further evidentiary hearings will be held July 10-14. Final recommendations to the WUTC will be made in August. The public can send letters of comment to the WUTC in Olympia.