Jul 30 , 2012
Avista customers see benefits of natural gas abundance
You’ve probably seen the headlines: “Natural gas prices fall to 10-year low,” or “Natural gas prices continue to drop.” But are these headlines really telling the whole story, and what do they mean to you as a natural gas customer of Avista? We’ve been talking about natural gas as a cleaner, more efficient and reliable source of energy for a long time now, but what about the economics of natural gas? How do new sources of natural gas affect wholesale costs, and how does that translate to your energy bill?
The good news is if you are an Avista customer, you have been seeing the benefits of increased natural gas supply and lower prices for some time. Through rate decreases proposed by Avista and approved by state regulators, Avista customers have seen the wholesale price of natural gas decrease by more than 48 percent since 2008.
But the relationship between headline-making wholesale prices and what you see on your bill each month is not always that clear cut. Over the next few weeks through this natural gas pricing series, we’ll discuss the cost components that make up a customer’s natural gas bill and try to clear it up a bit.
Natural gas bills include wholesale gas costs, interstate pipeline transportation costs and costs for equipment and people to get the natural gas to the customer
|There are three main drivers of your natural gas
energy bill: Whole sale gas costs; fixed
transportation costs; equipment and people.
Click to see the full chart.
There are three main drivers of your natural gas energy bill:
1. The cost of purchasing natural gas on the wholesale market is about 38 cents of every dollar you pay for natural gas. This cost is passed through to you without any mark-up or profit to Avista.
2. The cost to transport the natural gas on pipelines from the source or supply basins to Avista’s system is about 17 cents of every dollar you pay for natural gas. This cost is also passed through without any mark-up or profit to Avista.
3. The cost of the equipment and people it takes to safely and reliably deliver natural gas through our distribution system to your home or business is about 45 cents of every dollar you pay for natural gas. State regulators provide Avista the opportunity to earn a fair return, or profit, on the investment our shareholders have made in the facilities used to provide service to you.
You probably don’t think much about it when your gas furnace kicks on, or when you turn on your gas stove or use water that is heated with natural gas. But, like electricity, it’s taken a journey to get to you. Before we can deliver it to your home, Avista has to first purchase the natural gas and have it transported through large pipelines over long distances to our delivery system. The combined costs of purchasing and transporting natural gas to our system for delivery to you make up more than half of your natural gas bill. Avista doesn’t mark up these costs or make any money on this – customers pay what we pay.
When we purchase natural gas from the wholesale market, our goal is to secure reliable gas supply at the lowest cost so we can keep your costs as stable and low as possible.
Natural gas – grown at home
Natural gas is an abundant resource found throughout the United States and Canada. Since 2007, domestic natural gas production has increased, primarily due to the advances in natural gas drilling that have allowed production from previously untapped shale gas formations
throughout North America. The Energy Information Administration
now estimates that at today’s consumption levels there is enough natural gas to last the United States almost 100 years.
Avista is fortunate to be located near two prolific natural gas supply basins; the Western Canadian Sedimentary Basin, primarily located in Alberta and British Columbia, and the Rocky Mountain basin in Wyoming, Utah and Colorado. Not only is the North American natural gas resource base vast, the American Gas Association
describes it as “a home‐grown North American fuel whose efficient use by power plants, homes and businesses contributes to cleaner air.” Beyond the comfort and warmth it brings to our homes, natural gas is also recognized for its environmental attributes and contribution to American energy independence.
Wholesale prices are market driven
|Over the past decade, wholesale
natural gas prices have been volatile,
at times increasing sharply and then
dropping just as sharply.
Click to see full chart.
Natural gas is a commodity. Ultimately the cost is set by the market. As in most free markets, natural gas prices are primarily influenced by supply and demand. Over the past decade, wholesale natural gas prices have been volatile, at times increasing sharply and then dropping just as sharply. Factors that have contributed to the volatility of natural gas prices including supply, demand, severe weather events like Hurricanes Katrina and Rita in 2005, and access to shale natural gas supply.
Avista’s purchasing plans provide more stability and help keep costs low
Avista wants what our customers want: an adequate supply of natural gas at affordable prices. Our goal is to strike a balance of ensuring reliable supply at competitive prices for our customers, and stabilizing natural gas prices so our customers see fewer fluctuations in their energy bills. Our employees in natural gas purchasing work every day to do this in several ways:
• We purchase natural gas from the supply basins mentioned above. These purchases are a mix of fixed price long-term, medium-term, and near-term purchases, which allow us to lock in prices for the future, and purchases on the short term market (also called the “cash” or “spot” market).
• We secure capacity rights on six large pipelines to assure delivery of supply from the supply basins to Avista’s distribution system.
• We’re part owner of Jackson Prairie, an underground storage facility in Washington State, so we can purchase natural gas and store it until we need it. We often purchase natural gas during warm‐weather months, when it traditionally costs less, and store it for delivery to our customers for use on those cold winter days.
Our natural gas purchasing plans are reviewed and revised annually to reflect evolving market conditions. Sound purchasing practices and decades of experience have helped us keep costs lower and more stable for our customers. In fact, Avista is paying some of the lowest wholesale natural gas prices among our utility peers in the region. It means our customers have some of the lowest natural gas rates in the northwest.
We’re also thinking ahead. Periodically Avista updates our 20-year outlook, which looks at how we can meet our customers’ natural gas needs over the long term, in a reliable manner at the lowest cost. We call this our Integrated Resource Plan.
We updated it in 2009, and we are currently in the process of completing our 2012 plan, which will be available at the end of the year.
As we mentioned earlier in the article, the combined costs of purchasing and transporting natural gas to our system for delivery to you can be more than half of your natural gas bill. These costs can also affect your electric bill. In our next article, “Natural Gas Pricing 101, Part 2: Natural Gas Supply and Your Bill,” we’ll explain more about how, with approval by state regulators, we pass these costs directly through to customers.
Later, we’ll discuss the remaining portion of your natural gas bill. “Natural Gas Pricing 101, Part 3: Natural Gas Delivery and Your Bill” will explain how your energy rates are also driven by the rising costs of the equipment and people it takes to get natural gas to your home safely and reliably.
Jul 10 , 2012
The Burke-Thompson Falls A and B trans-
mission structures were originally constructed
in 1924. Avista crews are replacing the old
wooden poles with taller, steel poles. The
new design will stage the poles closer to
the center of the right of way, which will
improve efficiency, as the likelihood of a
tree falling on the line diminishes. The new
design requires 50 percent fewer poles as
To access the Burke-Thompson Falls A and
B transmission lines, we’re building three
temporary bridges so our equipment can
safely cross. Shown below, a temporary
bridge a crew is setting over the existing
Avista upgrades nearly 90-year old equipment to improve safety and reliability
At the east end of the Silver Valley stands the Burke-Thompson Falls A and B transmission lines. Our customers in this region depend on these primary “arteries” of power to deliver electricity to their homes and businesses.
Situated in a remote location near the Idaho/Montana border, maintaining the Burke-Thompson Falls lines carries its own set of challenges. And part of the solution is rebuilding 8-miles of lines to better serve our customers.
The rural reality
The Silver Valley is known for its beautiful forests and ample snow in the winter. The rural reality – lots of snow and trees don’t bode well for transmission lines.
“The snow levels can get very high in that area,” said Kellogg Operations Manager Bob Beitz. “When outages occur in the winter, we can't access them without a Sno-Cat. When our crews jump out of the cat, they are up to their armpits in snow. Trying to replace a pole in those conditions is a herculean effort.”
All that snow can weigh heavily on the forested areas near the power lines, which can result in falling branches and toppling trees. Even if our rights of way are 100-feet wide, falling trees can cause power outages.
The solution: A rebuild to alleviate outages and concerns
This year, we’re rebuilding 8 miles of electric transmission lines from Burke to the Montana border to improve the safety and reliability of delivering power to our customers. The project carries a price tag of $2.5 million. It’s part of Avista’s ongoing investments to maintain and upgrade our electric system.
The transmission lines were originally constructed in 1924. Though updated several times over the decades, many of the original structures still exist and will be replaced this year. We’ll be re-using the existing wire for the project.
Avista crews are replacing the old wooden poles with taller, steel poles. The new design will stage the poles closer to the center of the right of way, which will improve efficiency, as the likelihood of a tree falling on the line diminishes. The new design requires 50 percent fewer poles as well.
Investing in the future
Many parts of our system are 30, 40 and even 50 years old. Some of the poles on the Burke-Thompson Falls A and B lines are nearly 90 years old.
As we rebuild this section of our electric transmission system, we’ll also have to build three temporary bridges to accommodate the heavy equipment necessary for the construction project.
It’s a big job, but it’s well worth the effort. This is another example of what it takes to provide safe, reliable service for our customers, now – and in the future.
Jun 12 , 2012
Coyote Springs 2 is combined cycle generation plant that uses natural gas and steam
Avista’s generation unit at Coyote Springs has been disassembled since May 4 as major overhauls take place for the first time since the plant was built. The springtime timing is beneficial, since the maintenance requires the combined cycle plant to be offline during work.
Coyote Springs 2, near Boardman, Oregon is a combined cycle generation facility because it has a gas turbine that exhausts waste heat into a heat recovery steam generator, which provides steam to a steam turbine. Each turbine has its own generator that sends the electricity produced to the generator step-up transformer.
Portland General Electric Company owns Unit 1 and oversees daily general operations and maintenance activities for both units. Avista owns Unit 2 and does special projects and major maintenance for Unit 2, including this one.
The project involves overhauling the natural gas and steam turbines in Unit 2 as part of scheduled major maintenance work, required at regular intervals in the plant’s life. Avista’s thermal engineering group is coordinating the project and some of the work is being performed by Avista’s mechanical structural crews.
“This is the first time some parts of the steam turbine have been disassembled since it went in service on July 1, 2003,” Andy Vickers, Manager of Generation & Substation Support, said.
See photos of the dissassembled steam and natural gas unit in the slideshow above.
Reassembly is taking place over the next couple of weeks, and the unit is expected to be back online by the end of June.
Jun 01 , 2012
Customers continue benefiting from rebate and incentive programs to reduce energy use
Post by Anna Scarlett
Avista customers in Washington could see a decrease in their electric and natural gas rates beginning Aug. 1, if the Washington Utilities and Transportation Commission approves the company’s request to reduce surcharges that fund the company’s electric and natural gas energy efficiency programs.
The decreases are being requested to balance the amount of funding required for Avista to operate its energy efficiency programs, including the rebates and incentives paid to participating customers for installing energy saving measures. The requests are a part of Avista’s annual report to Washington regulators regarding the funding of the company’s energy efficiency programs.
If Avista’s requests are approved, electric customers in Washington would see an overall 1.9 percent decrease, or $1.47 a month for residential customers using an average of 989 kilowatt hours. Natural gas customers in Washington would see an overall 1.3 percent decrease, or a 79-cent per month reduction for residential customers using 68 therms. These tariff adjustments have no impact on company earnings.
Last year customers in Avista’s three-state service area received more than 43,000 rebates and incentives totaling almost $16 million. The energy savings are enough to power more than 5,300 Inland Northwest homes for a year and serve 2,300 homes with natural gas for a year, or almost 64,000 megawatt hours and 1.7 million therms of natural gas.
Of the rebates paid in 2011, more than 28,000 were to Washington customers totaling $11.4 million, more than 12,000 rebates to Idaho customers totaling $3.7 million, and Oregon customers received 2,300 rebates totaling $1.2 million. The most popular energy and cost-saving measures for residential customers included purchasing Energy Star ® appliances, installing high efficiency natural gas furnaces, and upgrading insulation. The average residential rebate for single family homes was $105.
Approximately $1.7 million was provided for weatherization for qualifying low-income customers in Washington and $595,000 for Idaho customers. An additional $40,000 was provided for conservation education for Idaho customers.
Information on energy efficiency rebates and incentives Avista offers for residential, commercial and low-income customers is available at www.everylittlebit.com, along with other energy-saving information.
May 30 , 2012
Over the past few years, we’ve heard from our customers and employees that they want more information on how we do business in areas like utility operations, environmental stewardship and our community impact. We’re glad you asked!
That information and more is available in our fourth annual report on our performance, “Together We Will Build Shared Value,”
now online at avistautilities.com.
Our primary mission is to provide the energy you need for your life. The back story is all about what goes into providing that energy and how often this has additional benefits to the customers and communities we serve. That’s shared value.
In this year’s report, we tell many stories of how shared value is created throughout our business. For example, in the Utility Operations section we talk about how Avista must meet state-mandated energy savings targets. As part of our sustainable business practices, the report is published online
We’ve made PDF files available of the entire report and four of its sections for your convenience in sharing the report with others.
Shared value is at the heart of what Avista does every day. We hope you’ll take the time to read this year’s report and give us your feedback
. We want to hear from you about how – together – we can continue to build shared value.
Apr 02 , 2012
We need to invest about $250 million each year over the next five years to continue updating and maintaining our system to serve our customers’ energy needs
The new Noxon Rapids Dam Unit 4 turbine is
lowered into place earlier this year. This 4-year,
$45-million project is coming to a close in 2012.
An employee works to replace old wooden poles
(left) with a new steel structure (right). Steel
structures are more expensive, but typically last
longer than wooden ones.
A line crew runs a new, higher-gauge power lines
over a two block distance in downtown Spokane.
Work like this ensures a more reliable system
that’s ready when you need it.
An employee wears protective gear while using a
grinder at a natural gas job site in Spokane
Valley. We do our best to work safely on the
system that delivers you energy.
Today Avista filed requests with the Washington Utilities and Transportation Commission
to increase overall net electric rates by 5.9 percent, and natural gas rates by 6.8 percent in Washington only. The UTC has up to 11 months to review the filings and issue a decision.
What does this mean to you? If you’re an Avista electric customer in Washington with average use and the Commission approves the requests, you would see an increase of $4.94 per month or about 16 cents a day, for a revised bill of $83.91. If you’re a natural gas customer in Washington with average use, you would see an increase of $4.23, or about 14 cents a day, for a revised monthly bill of $65.78.
So why is Avista asking for more rate increases? The simple answer is that it costs more each year to provide safe, reliable energy to you. Meeting our customers’ energy needs reliably and responsibly, while still complying with state and federal requirements, is our first obligation, even when it costs more.
About 40 percent of your electric bill and 35 percent of your natural gas bill covers the cost of delivery – the equipment and people needed to provide safe, reliable energy service to you. Maintaining and updating our generation plants (some that are more than 100 years old) and substations, along with more than 18,000 miles of power lines, a quarter of a million poles, and nearly 8,000 miles of gas pipeline, is a big job that doesn’t stop, and one that costs more each year. When we replace or update old equipment with new equipment and technology, it costs many times more than when it was installed. It’s much like when you update your older home or vehicle. Imagine replacing flooring, cabinets and appliances in a kitchen built 40 years ago, and how much more those items cost today than they did in the 1970s.
This was the primary reason for the proposed increase in our last request and we expect it to continue to cause a need for increased rates in the future. We’ll need to invest about $250 million each year over the next five years to continue updating and maintaining our system to serve our customers’ energy needs. And, while our customers still pay some of the lowest prices in the northwest, we’re not the only utility facing rising costs and an aging system.
Keeping rates increases as low as possible
Even so, we work hard to manage our own costs and keep rate increases as low as possible. In the filings, Avista proposed a proposed one-year Energy Recovery Mechanism bill decrease, which is a rebate to customers based on power supply costs, to help offset the increase. About 60 percent of a customer’s electric bill and 65 percent of a natural gas bill is the cost of generating or purchasing electricity and purchasing natural gas to meet customer needs. Power supply costs were lower in 2011, due to factors such as declining natural gas prices and favorable hydroelectric conditions.
We also proposed through this request to help ease the burden of the increase on low-income customers with increased funding for Avista’s energy assistance programs.
Don’t forget, Avista offers services for customers such as comfort level billing, payment arrangements and Customer Assistance Referral and Evaluation Services (CARES), which provides assistance to special-needs customers through referrals to area agencies and churches for help with housing, utilities, medical assistance and other needs. To learn more, visit www.avistautilities.com
Executive salaries in Wash. rates aren’t going up
So what about executive salaries, and how much do the salaries and incentives of our executive officers affect your rates? Not as much as you might think. Avista has proposed that the amount of executive officer salaries and incentives included in rates remain at their 2011 levels.
Approximately 25% of total officer salary and incentives is included in Washington retail rates, which makes up less than ½ a penny of every dollar you pay in rates. This adds up to about 40 cents of your monthly bill if you’re an electric customer with average use, and less than 75 cents if you get both electric and natural gas service. The bottom line is executive salaries aren’t driving energy costs up, rather it’s the rising costs of doing business and taking care of our system.
We realize in these difficult economic times it can be a struggle for people to pay their energy bills. We’ll keep working to reduce costs and improve efficiency while continuing to provide reliable, responsible energy at some of the lowest prices in the Northwest.
Mar 01 , 2012
If you are an Avista customer in Washington or Idaho, you will see a decrease in your natural gas rates starting today, March 1. The wholesale cost of natural gas is a major driver in the price you pay per month for gas. The cost of natural gas makes up about 65 percent of your bill. This cost is passed through directly to you without mark up.
With the new lower rates now in effect, a residential customer in Washington using an average of 67 therms per month will see a decrease of $3.90, or 6.0 percent, for a revised monthly bill of $60.73. An Idaho residential customer using an average of 62 therms per month will see a $3.46, or 5.7 percent, decrease for a revised monthly bill of $57.50. Avista has approximately 149,000 natural gas customers in Washington and 76,000 in Idaho.
The utility commissions in both states quickly approved Avista’s Feb. 13 requests to lower natural gas rates because of declining wholesale prices. This request is called a Purchased Gas Cost Adjustment (PGA). The PGA approval is good news for you, so we wanted to pass these price decreases on to you as quickly as we could.
PGA filings are typically made once a year in the fall to balance the cost of wholesale natural gas purchased by Avista to serve you. Given the decline in wholesale natural gas prices, Avista proposed to decrease the natural gas rates our customers pay to better reflect current market prices for natural gas.
Feb 13 , 2012
An Avista natural gas crew installs a new length of
pipeline in January 2012.
Avista announced today that it has filed a request to lower overall natural gas prices for customers in Washington (6.4%) and Idaho (6%). Just like at your local gas station, the price for natural gas ebbs and flows. Unlike your local gas station, Avista only changes its prices once or twice a year with the approval of the state utility commission. If approved by the commission, the lower rate would be effective March 1.
Below is our news release that details the filing. We’re talking about this filing on our Facebook page, www.facebook.com/avistautilities
. We welcome your comments.
Avista requests lower natural gas prices for Washington and Idaho customers
Avista today filed Purchased Gas Cost Adjustment (PGA) requests with the utility commissions in Washington and Idaho to reduce overall natural gas prices by 6.4 percent and 6.0 percent respectively, to be effective March 1.
If the request is approved by the Washington Utilities and Transportation Commission (WUTC), a residential customer in Washington using an average of 67 therms per month would see a decrease of $3.90, or 6.0 percent, for a revised monthly bill of $60.73. Washington commercial customers could expect decreases of 7.6 percent for large general service schedule 111, 8.2 percent for extra large general service schedule 121 and 9.5 percent for interruptible sales service schedule 131.
If the request is approved by the Idaho Public Utilities Commission (IPUC), an Idaho customer using an average of 62 therms per month would see a $3.46, or 5.7 percent, decrease for a revised monthly bill of $57.50. Idaho commercial customers could expect decreases of 7.3 percent for large general service schedule 111 and 9.7 percent for interruptible sales service schedule 131. Avista has approximately 149,000 natural gas customers in Washington and 76,000 in Idaho.
“We know many of our customers are concerned about expenses in this economy, and we want to pass these price decreases on to them as quickly as we can,” said Dennis Vermillion, president of Avista Utilities. “The increase in natural gas supply, along with continuing soft demand, is creating the current environment of falling natural gas prices.”
PGA filings are usually made annually in the fall to pass through changes in the cost of natural gas Avista acquires to serve customers. The direct cost of natural gas makes up about 65 percent of an Avista customer’s bill, and this cost can fluctuate up and down based on market prices. Given the decline in wholesale natural gas prices, Avista is proposing to decrease the natural gas rates our customers pay to better reflect current market prices for natural gas. The remaining 35 percent of a customer’s bill covers the cost of delivering the natural gas to customers – the equipment and people needed to provide safe and reliable delivery of service. These costs are changed with state approval of a general rate case request.
Avista does not mark up the cost of natural gas that is purchased to meet customer needs. These changes in natural gas costs and the PGA rate adjustments do not increase or decrease Avista’s earnings.
If approved by the WUTC, overall revenues from Washington customers would decrease by $9.9 million, and if approved by the IPUC, overall revenues from Idaho customers would decrease by $4.1 million.
Avista’s rate applications are proposals, subject to public review and a decision by the WUTC and the IPUC. Copies of the applications are available for public review at the offices of the WUTC and the IPUC, as well as at Avista, and they are available on the WUTC’s website at utc.wa.gov
and the IPUC's website at puc.idaho.gov
. The commissions will begin a review of Avista's applications and will seek public input on the company's request.
Jan 18 , 2012
If you’ve traveled along Highway 95 in North Idaho by Silverwood recently, you may have seen Avista natural gas crews working alongside 6 miles of the busy highway. The Idaho Department of Transportation is reconstructing a portion of Highway 95 from approximately Chilco to Athol.
Avista has to move its existing pipeline and is expanding the capacity of the pipeline from 3 to 6 inches. Expanded capacity helps serve existing customer needs and helps prepare infrastructure for the future. The estimated cost for this project is around $1.4 million. Part of Avista's requests for customer rate adjustments typically includes infrastructure work like this project.
Jan 06 , 2012
Crews brave the cold to bring reliable service to you in $1.4 million project
If you’ve traveled along Highway 95 in North Idaho by Silverwood recently, you may have seen Avista natural gas crews working alongside the busy highway. We wanted to let you know what they are up to. Our crews are relocating and increasing capacity for six miles of natural gas pipeline to accommodate a newly constructed highway.
The Idaho Department of Transportation is reconstructing a portion of Highway 95 from approximately Chilco to Athol. The highway will expand from two to four lanes, which is great for safety and traffic, but means Avista’s existing 3-inch natural gas pipeline needs to move to a new right-of-way on the east side of the road.
Avista is expanding the capacity of the pipeline from 3 to 6 inches too. Expanded capacity helps serve existing customer needs and helps prepare our infrastructure for the future. The estimated cost for this project is around $1.4 million. Part of our requests for customer rate adjustments typically includes infrastructure work like this project.
You can see from the slideshow of pictures that the crews are clearing a pathway, laying down 40-foot lengths of yellow plastic pipe, fusing them together and then burying the pipeline with sandy soil. The sandy soil protects the pipeline from being touched rocks or hard objects that could put pressure on the new pipeline. After the line is in place it will be pressure tested before being brought into service.
The project started in mid-December and should be completed by mid-March. One of the biggest hurdles the crews had to overcome recently was frost. At times crews had to dig through 12 to 24 inches of frozen ground to make a trench that goes much deeper. Typically large projects like this aren’t completed during winter months, but Avista and other utilities agreed to do the work now to accommodate the Idaho Department of Transportation’s aggressive schedule. Luckily snow hasn’t been an issue yet, but if it does, our crews will work through that too.