Washington state-based energy transmission and distribution
) has filed for a gas rate decline of 10.7% under its Purchase Gas
Cost Adjustment ("PGA") program with the Public Utility Commission
of Oregon ("PUC"). If approved Avista's 96,000 customers in the
Oregon region will reap the benefit from this rate decrease from
November 1, 2012.
The proposal of rate reduction by Avista comes on the heels of
lower wholesale natural gas prices, owing to its abundant supply in
the US. Along with this, the rates take into account the
acquisition of the Klamath Falls Lateral, which is expected to
result in customer savings of roughly $1 million annually from
The company usually files PGA's each year to bring about
symmetry between the real cost of natural gas purchased and the
amount included in the rates. Avista had previously filed electric
and natural gas rate decline cases of 2% and 8% respectively in the
Idaho region in late July 2012 and is further planning to file
general rate cases in Idaho in the second half of 2012.
On receiving approval from the regulatory authority, rate
adjustments will take place in two stages. The first adjustment
will be effective from November 1, 2012 while the second will come
into effect from January 1, 2013. If PUC sanctions the proposed
rates, Avista's annual top-line results related to the natural gas
segment will witness an aggregate decline of $10.8 million by
January 1, 2013.
The first adjustment would lead to a revenue decrease of $10.0
million (9.9%) while the second a decrease of $0.8 million (0.8%).
The company does not mark-up the cost of natural gas it purchases
and as a result Avista's earnings remain unaffected.
Avista's total natural gas consumer bill constitutes 55% from
its combined cost of purchase of gas and transport while the
remaining 45% includes the cost of supplying natural gas, the
equipment and workers required for safe and reliable service.
We believe there is a sense of uncertainty as PUC could overrule
the rate decline proposed by the company which could hurt
customers' confidence. This could impact the company's stock
position severely in the market.
For 2012, the company expects earnings in the range of
$1.62-$1.85 per share. Due to reduction in retail loads, Avista
expects its earnings to diminish by 10 cents to 12 cents per share
in 2012.The Zacks Consensus Estimate for the third quarter and full
year 2012 are currently pegged at 19 cents per share and $1.65 per
Avista Corporation holds a Zacks #4 Rank implying a short-term
Sell rating. The company's closest competitor is
Avista Corporation is an energy company involved in the
production, transmission and distribution of energy as well as
other energy-related businesses. Avista Utilities provide electric
service and natural gas in eastern Washington, northern Idaho and
parts of southern and eastern Oregon.
AVISTA CORP (AVA): Free Stock Analysis Report
IDACORP INC (IDA): Free Stock Analysis Report
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