Avista rate hikes approved with warning

Washington regulators granted part of Avista’s request for higher rates Friday, but also said the electric and natural gas utility must conduct annual expense audits to make sure that ratepayers aren’t illegally saddled with costs that should be borne by shareholders.

The new rates, effective Dec. 1, could be adjusted downward if irregularities are found, according to an order signed by the Washington Utilities and Transportation Commission.

The action came after an audit by the state attorney general’s office, which found that Avista had billed utility customers for $38,000 in expenses that the company’s shareholders should have paid. Those items included:

• Professional portraits and first-class travel for the board of directors;

• Employee gifts, a retirement party and employee entertainment at a sporting event;

• Dues and fees to civic organizations, such as Rotary and chambers of commerce;

• Charitable contributions, advertising to improve Avista’s corporate image and moving costs for a company executive.

Those expenses were part of Avista’s rate proposal, submitted to regulators in March. But since they were flagged by the AG’s Office of Public Counsel’s audit, they were not included in the new rates.

“We are concerned that a broader investigation will reveal many more such instances,” the WUTC’s three-member commission said in Friday’s order, which directed Avista to perform the annual expense audits and train employees to reduce errors.

Commissioners reserved the right to adjust the new rates if the audit reveals additional errors.

“We are confident that the company can and will do better,” the commissioners said in the order. “Given the attention to these matters, we expect that future filings will be free of blatant errors and accounting adjustments that are unquestionably improper.”

Avista spokeswoman Debbie Simock said the company’s internal audit is already under way.

The Spokane-based utility processes more than 3 million transactions per year, including 500,000 expense transactions, she said.

“We understand that a small number of errors could occur,” Simock said. “We’re certainly going to take the steps to make sure that these types of errors do not occur in the future.”

The commission is charged with ensuring that investor-owned utilities, such as Avista, provide safe and reliable service to customers at reasonable rates, while allowing them the opportunity to earn a fair profit.

Avista and other investor-owned utilities can only recover certain types of costs from their ratepayers. Other costs must be borne by the company’s shareholders.