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News Release
Commission Gives Avista Utilities An 
Incentive To Minimize Natural Gas Costs

August 10, 1999 (1999-031)
Contacts: Ron Eachus, Chairman, 503 378-6611; Roger Hamilton, Commissioner 503 378-6611; Joan H. Smith, Commissioner, 503 378-6611; Ron Karten, Public Information Officer, 503 378-8962
Salem, Ore. – The Oregon Public Utility Commission (OPUC) today approved an innovative mechanism that gives Avista Utilities an incentive to reduce the cost of the natural gas it supplies to its customers.
The two-and-a-half year plan allows the company greater flexibility in buying natural gas while tying customer prices to a benchmark that is below historical prices. Savings are expected to be $170,000 - $672,000 annually compared with recent market prices.
Avista serves the southern part of the state, including the cities of Medford, Roseburg, and Klamath Falls, and some parts of eastern Oregon.
A key element of the plan allows Avista Energy, an unregulated entity with a much larger portfolio than Avista Utilities, the regulated parent corporation, to capture efficiencies and leverage the best deals it can in the larger natural gas commodity market.
"Avista Energy and its shareholders take on more risk related to gas procurement operations under this plan, resulting in gas cost savings and less risk for Oregon customers," said Ron Eachus, Chairman of the Commission.
If the company beats the benchmark, it will profit from the savings. If the benchmark is lower than the cost of the company’s purchases, the company will hold its Oregon customers harmless at the level of the benchmark, effectively providing a daily volatility shield for these customers.
The plan also provides greater seasonal price stability for the customer. It increases the company’s ability to invest in commodity contracts to insulate customers from wintertime price spikes. Customers will not be totally insulated from market price swings, but 57 percent of winter supply volumes and 37 percent of annual volumes will be protected with derivative contracts.
Through this plan, Avista will have an incentive to make extra money by selling natural gas to customers not regulated by the Commission (off-system sales), and by marketing excess interstate pipeline capacity to other companies (capacity releases). Under this mechanism, the company will share about 80 percent of the revenues from these sales with customers.
In addition, the company has promised some $50,000 annually in administrative savings to be returned to customers.
The plan also enables the Commission to continue to review and audit all transactions related to the plan.
The experiment ends on March 31, 2002.
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