Avista Corporation AVA has made a filing to Idaho Public Utilities Commission (IPUC) for approving its annual fixed cost adjustment (FCA) in Idaho. If lent a nod, the overall annual electric and natural gas revenues in the region will decrease by $7.2 million (2.9%) and $2.7 million (4.5%), respectively. The nod is expected to be implemented with effect from Oct 1, 2018, for electricity and Nov 1, 2018, for natural gas.
The last filing by the company for annual rate adjustment with IPUC was made on Aug 1, 2017. It was done in order to increase overall electric revenues by $2.8 million (1.1%), which was effectively enforced on Oct 1, 2017. These annual filings for fixed cost adjustments are separate from those general rate case petitions, which have no material impact on the company’s earnings as well as are unrelated to the company’s proposed acquisition by Hydro One.
Customer-Centric Benefits
If the proposed filing is approved by the IPUC — the company’s residential electric customers — whose usage is on an average of 910 kilowatt hours (KWh) per month, the monthly bill will accordingly be reduced from $88.49 to $84.33, a decrease of $4.16 per month (4.7%).
Also, the residential natural gas customers of the company, whose usage is on an average of 63 therms per month, will witness lower expenses on their monthly bill from $48.31 to $46.28, an improvement of $2.03 per month (4.2%).
Rationale Behind the Rate Decline
Rate reduction is nothing new in the Utility space. In the United States, government regulations dominate this sector. Therefore, utility providers frequently file for rate changes with the state utility commission to keep their revenue requirement competitive in tandem with the changing market conditions.
The average monthly residential electricity bill in Idaho is $88 KWh per month, lower than the average monthly bill in the United States, which is approximately $107 KWh. Also, the average monthly consumption in the region is 1,010 KWh per month, greater than the average national monthly consumption of 903 KWh. So, the higher electricity consumption pattern in Idaho with modest monthly cost supports the company’s filing for rate reduction from $88.49 to $84.33 in the region with a view to strengthen the customer base as well as better serve the increased demand for electricity.
Price Movement
In the past year, shares of Avista have outperformed the industry it belongs to. The stock has rallied 25.4% against the broader industry’s decline of 1.1%.
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Zacks Rank
Avista currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks from the Zack Utility Sector are Ameren Corporation AEE, CMS Energy Corporation CMS and UGI Corporation UGI, each holding a Zacks Rank of #2 (Buy).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Ameren’s earnings are expected to grow 6.5% over the period of 3-5 years. In the last 30 days, per the Zacks Consensus Estimate, the bottom line for 2019 have moved up from $3.23 per share to $3.24 by 0.3%.
CMS Energy’s earnings are expected to rise 6.4% over the 3-5 year period. In the last 30 days, the stock has seen the consensus estimate for next-year earnings move north from $2.50 per share to $2.51 by 0.4%.
UGI’s earnings are expected to gain 8% over the long-term period. In the last 30 days, per the consensus mark, the earnings for 2019 have been revised upward from $2.86 per share to $2.87 by 0.4%.
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