Avista

Home > Rates and Pricing > Where Does the Money Go?

Where Does the Money Go?

We know that no one wants a price increase, so we work hard to keep our costs low while continuing to provide safe, reliable energy services. But in today’s utility environment, it is simply not possible to reduce our expenses enough to offset the significant cost increases we’re experiencing to meet the energy needs of our customers and meet mandatory compliance requirements.

For the first time in Avista’s over 120 year history, the majority of our electricity is not produced by hydropower.  We now rely on a mix of resources – natural gas, coal, biomass, wind and purchased power contracts - to deliver the electricity. The cost of generating and purchasing power to serve our customers is known as power supply costs.

These costs, as you see on the pie charts, make up most of the requested electric rate requests in both states. While we typically generate about 93 percent of our own power, we also have some long-term, low-cost contracts in place to purchase power from other energy producers to meet the energy needs of our customers.

But, as these contracts expire, we have to replace the low-cost electricity with power that is significantly more expensive in today’s market. Currently, you pay about 4 and one-half cents a kilowatt-hour for electricity. However, replacement power for new long-term resources is now costing between 7 and 11 cents, depending on how that power is generated. Click here to see a video on power supply costs in this rate case.

We’re upgrading our Noxon Rapids hydroelectric project by replacing 1950’s turbines with more efficient units that will produce additional clean, renewable power.

We expect power supply costs will continue to increase as other power contracts expire and as renewable energy like wind power becomes a larger part of our resource mix.

Utility equipment and facilities are big and expensive. Capital investments in upgrading our aging infrastructure, such as generation facilities, power lines, poles and substations, is another key driver in the requested rate increase in both states. In the next five years, our relatively small company will need to spend about $1.2 billion on infrastructure and other requirements. This does not include costs associated with any climate-change requirements. These investments will also contribute to the need for future rate filings.

We’re in the middle of a multi-year program to upgrade each of the four 1950’s-era turbinesat our Noxon Rapids hydroelectric project in Montana and are performing upgrades to some our recently relicensed Spokane River hydroelectric projects. These upgrades will increase the amount of clean, renewable power available to serve customers.

Some capital investments include upgrading equipment that has been serving our customers for over 70 years. The aged equipment is being systematically replaced to ensure reliability and to carry additional power to serve customers. Unfortunately, the replacement equipment is vastly more expensive than the original.

We’re replacing 50-year-old transformers and poles to ensure reliability and to carry additional for serving customers.

One example is the price for a 15 kVA distribution transformer – that’s the transformer found on power poles in most neighborhoods. In the past six years, the cost for each has nearly doubled from about $800 each to over $1,400. The costs for other materials common in the utility industry like steel, copper and cement have also increased dramatically. It is not possible to cut other costs enough to absorb these increases.

Aging infrastructure isn’t limited to Avista. Other utilities in our region, as well as across the country are also experiencing rate increases because of the need to replace old equipment.

Helpful Links

Bill Management

Energy Efficiency

Rates and Pricing

Rates in Action