Natural gas utility agrees to lower rate hike, curb new hookups after groups intervene

Customers of Oregon’s second largest natural gas utility are likely to be spared a potential 8% rate increase after environmental groups and the watchdog Oregon Citizens’ Utilities Board intervened. 

Groups including the Sierra Club, Climate Solutions and Earthjustice fought for months a request submitted by Avista to the state’s Public Utilities Commission to raise customer rates so the company can cover the costs of political and legal activities and expansion.

Avista agreed in a settlement Friday to request a 5% increase on residential customers rather than an 8% increase, which will need to be approved by the commission. If approved, the increase would go into effect on Jan. 1, 2024. The company also agreed not to charge customers for those legal and political activities, as well as some costs of expansion.

The decision affects Avista’s 105,000 customers and means the company would no longer use ratepayer money to lobby against climate change or subsidize new gas hookups.

“As in any settlement, there is a certain give and take, and concessions were made in an effort to reach what we believe is a balanced and constructive outcome,” Lena Funston, an Avista spokesperson, said in an email.

Questionable expenses

Avista has already raised rates in the past year-and-a-half. For residential customers, rates have gone up 18% since November 2022, an increase the company attributed to global supply and demand issues exacerbated by extreme weather events and Russia’s war on Ukraine. NW Natural, the state’s largest natural gas utility has raised rates in the same period. 

Avista’s latest request moved the citizens’ board and environmental groups to investigate the expenses Avista claimed it needed ratepayers to help cover, including lawyers who the company has paid during the last five years to fight the state’s climate law. Under the Climate Protection Program, Oregon’s overall greenhouse gas emissions need to be cut 50% by 2035 and 90% by 2050. At least 26% of that reduction will have to come from natural gas utilities.

Natural gas is almost entirely methane gas, among the most potent climate-warming greenhouse gases, which trap heat in the atmosphere contributing to global warming. One-third of global warming today is due to human-caused emissions of methane, according to the U.S. Environmental Protection Agency.

The groups opposed to the rate hike also found Avista was using ratepayer money to subsidize the high upfront costs of connecting new customers to the gas grid. Typically, rather than charging new customers upfront for the cost of connecting to gas, companies recoup the costs through rate payments. According to Bob Jenks, executive director of the Citizens’ Utilities Board, getting more people connected to natural gas at artificially low prices is antithetical to meeting the state’s climate goals. 

“It’s no longer justifiable to subsidize growing the gas system,” Jenks said. 

An average residential hookup for a new Avista customer costs $6,000 upfront, but Avista has charged as much as $42,000 for a new hookup, according to paperwork filed by the company in the rate case. 

“They won’t get that back over the lifetime of that customer unless that customer stays for 200-years or something,” Jenks said. “There’s no way that’s ever economically justified.” 

Lastly, the environmental and citizen groups found Avista wanted ratepayers to cover more than $90,000 the company had spent on membership and participation in industry and lobbying groups such as the American Gas Association and the NW Gas Association, which often lobby against legislation to curb greenhouse gas emissions to slow the worst impacts of climate change.

The settlement

Under a settlement reached between Avista and the groups, Avista would no longer use ratepayer money on lawyers fighting climate laws. It also would no longer use ratepayer money to cover industry group activities and to cover the high costs of hooking up new customers. 

For the next year, Avista could only use ratepayer money to cover up to $2,500 of the upfront cost of a new customer hookup, and within the next four years that would decline until there is no longer any subsidy. Any new Avista customers would need to pay the high upfront costs of getting connected to the gas grid themselves. 

“Ultimately ratepayers will be saving billions of dollars in subsidies,” Jenks said. 

Avista could, however, still use ratepayer money to expand its main pipelines carrying gas, despite opposition from the environmental groups and the citizens’ board. 

Under the settlement, Avista has also agreed to more than double its budget for a program that helps low-income customers weatherize their homes and become more energy efficient from $800,000 to $2 million.