Babyland Diaper Service here operates two 250-pound dryers and four 115-pound machines—compared with the 15-pound dryers typical in most homes.

So when rates for natural gas, which heats the dryers, go up, it hurts, says Dan Anderson, owner of Babyland, at 1520 E. Trent.

"It causes more difficulties, because we can't pass it all on to our customers," Anderson says. The 250-pound dryers are too expensive to replace, at $75,000 each, to get more energy-efficient machines, he says.

"There are only so many things we can do to be more energy efficient," he says. "We don't dry any partial loads."

Babyland is one of many businesses and public-sector ratepayers here using sizable amounts of energy that could be stretched in coming months by Avista Corp. rate increases, stemming from market forces and litigation fallout. The rate increases, some known and others proposed and still pending, come at a time when many businesses are struggling due to big drop-offs in their own revenue.

Avista is awaiting approval by the Washington Utilities and Transportation Commission (WUTC) of a settlement agreement that would boost electric base rates for its Washington customers by an average of 9.1 percent and natural gas base rates by an average of 2.4 percent. The Spokane-based utility company hopes to implement those increases Jan. 1.

They would follow on the heels of:

•A Nov. 1 electric rate increase of about 3 percent for Avista's residential and small-farm customers in Washington, following a decision by the Bonneville Power Administration that reduces by about $20 million the amount of money Avista expects to receive next year through the BPA's residential exchange program. The program distributes financial benefits of the federal Columbia River power system.

"We are still analyzing the entire residential exchange situation, and we don't know just yet what course of action we might take. It's possible we'll appeal (the BPA benefit reduction), but we just don't know at this point," says Avista spokeswoman Debbie Simock.

For Idaho, the reduction in benefits from the residential exchange program would increase electric rates 6.4 percent. That increase is still pending before the Idaho Public Utilities Commission (IPUC), Simock says. IPUC staff members have recommended approval, she says.

•A Nov. 1 natural-gas rate increase of 1 percent for Avista customers in Washington, following the WUTC's approval of a purchased gas adjustment (PGA). Natural gas rates are adjusted annually to reflect wholesale market prices. That increase, though, followed a 6 percent PGA decrease last year.

•An Oct. 1 combined electric rate increase of 18.1 percent for small commercial customers in Idaho, after the IPUC approved both Avista's general rate case request for higher base rates for electricity and the utility's annual power cost adjustment (PCA). The last general rate case for Avista in Idaho was in 2004, Simock says.

Large commercial customers saw electric rates increase a combined 16.1 percent, when both the general rate case and PCA were approved by the IPUC, she says.

The utility's natural gas rates in Idaho went up a combined 9.3 percent for small commercial customers, when the IPUC approved the general rate case and PGA. Large commercial customers saw a combined 7.1 percent rate increase for natural gas.

Ken Groh, director of facilities management for Spokane-based Rosauers Supermarkets Inc., says the higher utility rates hurt the company's bottom line, adding, "We'll have to absorb that cost."

For this year, Rosauers budgeted for a 3 percent to 4 percent electric-rate increase, he says. Budgeting for Avista's currently proposed rate increases for Washington ratepayers will be more difficult, he says. "That's almost a double-digit increase," Groh says of the proposed general rate increase.

Ken Langel, director of development for CLC Restaurants Inc., of Missoula, Mont., which operates 36 Taco Bell outlets, including 23 in Eastern and Central Washington, says, "I am not in favor of an increase in rates for either electricity or natural gas. Such increases will have a negative impact on our bottom line. However, I applaud Avista for being aggressive in providing significant and meaningful incentives for businesses to purchase and install more energy-efficient equipment."

Energy-efficiency incentives

Like other commercial customers in Washington and Idaho, Rosauers and CLC have received incentives from Avista in return for operating more energy efficiently.

In 2008, Rosauers took advantage of $40,000 in energy-efficiency incentives, such as by retrofitting refrigerator cases with more energy-efficient fan motors. "The high-efficiency motors; they pay off real quick," Groh says.

It also has reduced lighting levels during early-morning and late-evening hours, he says.

Rosauers installed controllers to regulate the amount of electricity used on frozen food door and frame heaters. The heaters keep condensation off the door frames and glass, and water off the floor, he says. Also, Rosauers has switched from incandescent bulbs for its readerboards to light-emitting diode (LED) lights.

Simock says it's more cost-effective for Avista to offer commercial customers like Rosauers incentives for being more energy efficient than it is to acquire new energy sources, such as purchasing power on the open market.

So far in 2008, the Avista energy-efficiency program has helped customers save more than 52 million kilowatt-hours of electricity, enough to power more than 4,300 homes for one year, she says. The increased efficiency saves more than 16,000 tons of carbon-dioxide emissions annually, which is the equivalent of taking 2,660 vehicles off the roads for one year, she says.

The utility's energy-efficiency program also has helped customers save more than 1.4 million therms of natural gas so far this year, which is enough to supply the needs of nearly 1,700 homes for a year, she says.

Ann Carey, national account executive for Avista, says the utility offers incentives to promote energy efficiency and to offset commercial ratepayers' up-front expenses when they update to greener facilities and equipment.

Avista offers site-specific, or custom, incentives for energy-efficiency projects, she says. The utility can help identify opportunities within a commercial facility that may help a business to minimize its use of energy. Businesses and customers interested in obtaining energy-efficiency incentives should contact Avista first, before starting a project that will make the operation more energy efficient.

Cutting usage

Tim Wood, interim director of maintenance and operations for Spokane Public Schools, says the school district budgeted for an anticipated overall utility-cost increase of 11.55 percent, for electricity, natural gas, water, sewage, refuse, and recycling, for a fiscal year that began Sept. 1.

The school district received more than $219,000 in incentives from Avista in 2006 and $248,000 in 2007, Wood says. The incentives were for energy-efficient upgrades in areas such as food-service equipment, lighting, and water heaters, he says.

The district also has developed new buildings using the latest national energy-efficiency standards, he says.

Wood says the district hopes to reach the 2007 incentive dollar amount again this year, and big projects at Shadle Park and Rogers high schools that are following high energy-efficiency building guidelines will help. If the district achieves that 2007 incentive level, it should be able to offset projected natural gas cost increases, he says.

"We look at every aspect of our energy consumption," Wood says.

The city of Spokane has taken advantage of available energy-efficiency incentives and rebates, says city spokeswoman Marlene Feist.

From 2000 through 2007, Avista assisted the city on about 130 energy-efficiency measures, saving the city about $1.8 million in energy costs annually, Feist says. Also, the city has received around $1.35 million in incentives from the utility for those projects, she says.

For the last several years, she says, the city has focused on replacing the light bulbs in traffic signals with LED bulbs. That work alone has netted the city about $179,000 in incentives from Avista and $57,000 in annual savings on the city's electric bill, she says.

The city partially renovated the heating, ventilation, and air-conditioning system at City Hall earlier this year, which Feist says "will save us 10,663 therms of natural gas and 729,000 kilowatt-hours of electricity (per year)," and result in incentives of about $77,000 from Avista.

Meanwhile, a few weeks ago, a large air-handling fan at City Hall failed, she says. The city expects to get $126,000 in incentives for the fan replacement, she says.

She says the city has done a lot of smaller projects, too, such as replacing motors and installing compact fluorescent light bulbs in its facilities.