On December 15, 2016, the Washington Utilities and Transportation Commission (Washington Commission) rejected, in a 2-1 decision, Avista’s proposal to increase electric rates by 7.6 percent and natural gas rates by 2.8 percent. Rather than reduce the utility’s rate increase, the Washington Commission took the unusual action of simply rejecting in its entirety by concluding that Avista failed to carry its burden to show that its current rates are not fully sufficient to meet its needs.
Avista had proposed an electric and gas rate increase in February 2016, which was only 44 days after the Washington Commission granted the utility a rate increase. The Washington Commission was concerned that Avista waited less than two months to file a new rate case, and that the case was Avista’s had filed near annual general rate cases over the last decade. For example, the Washington Commission wryly noted that since a utility typically needs months to prepare a general rate case for filing, Avista had very little time and opportunity to take into account the direction the Washington Commission gave its rate case order, only six weeks prior to filing.
A key area of dispute was Avista’s proposal for an “attrition” adjustment. Attrition occurs when the assumptions underlying rates last approved change so quickly that the utility does not have a reasonable opportunity to earn its allowed rate of return. The Washington Commission ultimately concluded that Avista failed to demonstrate that its increasing capital costs and expenses are caused by factors beyond the Company’s ability to control, a showing the Commission stated was necessary to support an attrition adjustment.
The Commission also decided that generic cost of service proceedings may provide an opportunity for establishing greater clarity and some degree of uniformity in cost of service studies. Cost of service studies are used to allocate the utilities overall costs between various groups of customers (e.g., residential, commercial, industrial, etc.). The methodologies for cost of service studies are arcane, complex, and capable of widely divergent outcomes.
Commissioner Phil Jones wrote a strongly worded dissent disagreeing with Chair David Danner and Commissioner Ann Rendahl. Commissioner Jones concluded that Avista had adequately carried its burden in justifying a need for additional revenue.
Disclaimer
These materials are intended to as informational and are not to be considered legal advice or legal opinion, nor do they create a lawyer-client relationship. Information included about previous case results does not assure a similar future result.
