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Spokane-based Avista Corporation (NYSE:AVA), a $2.92 billion utility provider with a "GOOD" InvestingPro financial health rating, has proposed rate increases for both electric and natural gas services in Idaho, as detailed in a recent filing with the Idaho Public Utilities Commission (IPUC). According to InvestingPro analysis, the company currently appears overvalued compared to its Fair Value estimate.
The utility provider, which operates in the Electric & Other Services Combined sector under the standard industrial classification, has submitted a multi-year general rate case that could see new rates come into effect in September 2025 and September 2026 if approved by the Commission.
The company is aiming for an increase in annual base electric revenues by $43.0 million, or 14.0%, starting September 2025, followed by an additional $17.7 million, or 5.0%, in September 2026. Similarly, Avista has proposed an increase in annual base natural gas revenues by $8.8 million, or 17.7%, in September 2025, with a further $1.0 million, or 1.7%, in September 2026.
These proposed rate adjustments are founded on a 10.4% return on equity and a 50% common equity ratio, with a 7.68% rate of return on rate base.
The primary reasons cited for the proposed increases are ongoing capital infrastructure investments, which include the replacement of wood poles, upgrades to natural gas distribution pipes, continued investment in wildfire resilience plans, and technology. With a debt-to-equity ratio of 1.22 and revenue growth of 10.22% over the last twelve months, these investments reflect the company’s expansion strategy.
Additionally, rising operations, maintenance, and power supply costs are driving the need for these changes. For a comprehensive analysis of AVA’s financial position and growth prospects, investors can access the detailed Pro Research Report available on InvestingPro.
The IPUC is expected to take up to nine months to review these filings and make a decision. This process is a standard regulatory requirement to ensure that rate adjustments are justified and align with the public interest.
This information is based on a press release statement from Avista Corporation, as reported in their recent 8-K filing with the Securities and Exchange Commission.
In other recent news, Avista Corporation has been facing regulatory challenges with the Washington Utilities and Transportation Commission (WUTC) granting partial approval for the company’s requested rate increases. This approval includes an $11.9 million increase for the first rate year and a $68.9 million increase for the second rate year for the electric division, and a $14.2 million increase in the first rate year and a $4.0 million increase in the second year for natural gas.
These approved amounts fall short of Avista’s requested increases, with the WUTC approving 52% of Avista’s two-year electric revenue proposal and 83% of its two-year natural gas revenue request. BofA Securities has reiterated an Underperform rating on Avista’s stock despite adjusting its estimates for the company upwards for the years 2025 through 2028.
Jefferies has also initiated coverage on Avista with a Hold rating, indicating potential for return on equity improvement but noting challenges in the Washington market. In terms of earnings, Avista reported an increase in earnings per share for the third quarter of 2024 but lowered its full-year 2024 earnings guidance due to higher power supply costs and other expenses.
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