AVISTA CORPORATION (NASDAQ:AVA) Files An 8-K Other Events

AVISTA CORPORATION (NASDAQ:AVA) Files An 8-K Other Events

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Item 8.01 Other Events.

On December 15, 2016, the Washington Utilities and Transportation
Commission (Commission or UTC) issued an order related to Avista
Corporation’s (Avista Corp. or the Company) Washington electric
and natural gas general rate cases that were originally filed with
the UTC in February 2016. The UTC order denied the Company’s
proposed electric and natural gas rate increase requests of $38.6
million and $4.4 million, respectively.
On December 23, 2016 Avista Corp. filed a petition with the UTC
for reconsideration and alternately for rehearing (Petition) of
the Companys 2016 general rate cases to arrive at new electric
and natural gas rates that are fair, just, reasonable and
sufficient.
The Commissions Order and Avista Corp.s Response
As previously reported, the primary reason given by the Commission
in reaching its conclusion is that, in Avista Corp.’s request, the
Company did not follow an appropriate methodology to show the
existence of attrition, as between historical data and current and
projected data. Further, the order states that among other things,
the Company did not demonstrate, as a necessary condition to being
allowed an attrition adjustment, that the Company has suffered from
chronic under-earning caused by circumstances beyond its ability to
control. The Company disagrees with the UTC as to various questions
of fact and law.
In support of its decision, the Commission stated that Avista Corp.
did not demonstrate that the Companys current revenue is
insufficient for covering costs and providing the opportunity to
earn a reasonable return during the 2017 rate period. The
Commission also stated that Avista Corp. did not demonstrate that
the Companys capital expenditures and increased operating costs are
both necessary and immediate.
Avista Corp.s response to the Commissions order in the petition
points to evidence in the case that demonstrates, contrary to the
Commissions findings, the following:
Current retail rates are not sufficient for the 2017 rate
period, and therefore a revenue increase is necessary.
Commission Staff agrees that current rates are not
sufficient.
The costs associated with the growth in rate base and
operating expenses are growing at a faster pace than revenue
from retail sales, and therefore a revenue adjustment is
necessary to close this gap. The revenue adjustment to close
this gap is sometimes called an attrition adjustment.
Commission Staff agrees that a revenue adjustment is
necessary to close this gap.
All of the capital projects and operating expenses included
in the case by Avista Corp. are necessary in the time frame
proposed in order for the Company to continue to provide
safe, reliable service to customers. No party in the case
identified a single capital project that should not be
completed in the time frame proposed by Avista Corp. (other
than Public Counsels general opposition to Advanced Metering
Infrastructure).
Avista Corp. presented all of the studies and analyses in
this case, consistent with the Company’s previous filings
with the Commission, and the Commission Staff acknowledged
that Avista Corp. provided such studies.
Avista Corp. earned close to its allowed return on equity
during each of the years 2013 through 2015, and into 2016.
This opportunity was possible only with the revenue increases
related to attrition adjustments, and an attrition adjustment
is also necessary for 2017.
The Commission Staff itself supported electric and natural gas
revenue increases totaling over $20 million. Commissioner Jones
dissented and did not support the decision. In his dissent,
Commissioner Jones supported an electric revenue increase of $26
million, and a natural gas increase of $2.4 million.
On December 27, 2016 the UTC issued a Notice of Opportunity to File
Answers to Petition for Reconsideration or Rehearing. In its Notice
the Commission requested parties to the case to file written
answers to Avista Corp.s Petition no later than January 13, 2017.
The Commission also provided notice that it expects to enter an
order resolving the Petition no later than March 16, 2017.
Judicial Review
If a satisfactory result is not achieved through reconsideration or
rehearing, Avista Corp. may seek judicial review.
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