All-Party Settlement Agreement Reached Providing for the Continuation of Energy Recovery Mechanism
June 08 2006 - 9:00AM
PR Newswire (US)
If approved, the settlement provides for the continuation of the
company's energy recovery mechanism and reduces the company's
"deadband" along with other modifications. SPOKANE, Wash., June 8
/PRNewswire-FirstCall/ -- Avista Corp. (NYSE:AVA) and other parties
have reached an agreement that, if approved, would provide for the
continuation of Avista's energy recovery mechanism (ERM) with
certain agreed-upon modifications and would become effective as of
Jan. 1, 2006. The settlement states the ERM would be reviewed after
five years. (Logo:
http://www.newscom.com/cgi-bin/prnh/20040128/SFW031LOGO) The
agreement is subject to approval by the Washington Utilities and
Transportation Commission (WUTC). The parties' recommendation to
approve the settlement is not binding on the WUTC. In Washington,
the ERM is an accounting method to track certain differences
between actual power supply costs and the amount included in base
rates. This difference primarily results from changes in purchased
power and fuel costs, as well as variations in the level of
hydroelectric generation and retail loads. An initial amount of
power supply costs in excess or below the level in retail rates is
either absorbed or retained by the company, which is referred to as
the "deadband." Under the ERM, costs or benefits in excess of the
"deadband" are shared with customers. Under the settlement,
Avista's annual "deadband" would be reduced from $9 million to $4
million, and a 50/50 sharing of annual power supply costs between
the company and its customers would apply to amounts between $4
million and $10 million. Once annual power supply costs exceed $10
million, 90 percent of those costs would be deferred for future
surcharge or rebate. The remaining power supply costs are an
expense of, or benefit to, the company without affecting current or
future customer rates. Other agreed upon modifications address
issues such as long-term power contracts, power generating plant
outages and transmission. During the first quarter of 2006 actual
ERM-related power supply costs were $5.2 million less than that
included in base retail rates, and Avista retained a $5.2 million
benefit under the $9.0 million "deadband." A revision of the ERM
"deadband" and sharing components, per the settlement, would result
in a reversal of $0.6 million of the $5.2 million benefit. If
approved, the settlement seeks to balance the interests of the
company and its customers, while further reducing the volatility in
the company's earnings that has been caused by variations in
hydroelectric generation, as well as prices for fuel and purchased
power. Under the ERM, Avista will continue to make an annual filing
to provide the opportunity for the WUTC and other interested
parties to review the prudence of and audit the ERM deferred power
cost transactions for the prior calendar year. Avista made its
annual filing with WUTC in March 2006. Besides Avista, the parties
to the agreement are the Industrial Customers of Northwest
Utilities, the Public Counsel Section of the Washington Attorney
General, and the staff of the WUTC. The WUTC staff's independent
recommendation to approve the settlement is not binding on the
WUTC. Avista Corp. is an energy company involved in the production,
transmission and distribution of energy as well as other
energy-related businesses. Avista Utilities is a company operating
division that provides service to 338,000 electric and 297,000
natural gas customers in three western states. Avista's
non-regulated subsidiaries include Avista Advantage and Avista
Energy. Avista Corp.'s stock is traded under the ticker symbol
"AVA." For more information about Avista, please visit
http://www.avistacorp.com/. NOTE: Avista Corp. and the Avista Corp.
logo are trademarks of Avista Corporation.
http://www.newscom.com/cgi-bin/prnh/20040128/SFW031LOGO
http://photoarchive.ap.org/ DATASOURCE: Avista Corp. CONTACT:
media, Catherine Markson, +1-509-495-2916, or , investors, Jason
Lang, +1-509-495-2930, or , or Avista 24/7 Media Access,
+1-509-495-4174, all of Avista Corp. Web site:
http://www.avistacorp.com/
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