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November 30, 2005

We'll Have to Buy It or Save It

There are three ways that utility customers get the electricity that they use everyday. One, their utility generates it, through some kind of power plant fueled by coal, natural gas or a renewable resource like wind. Two, their utility buys it on the open energy market, either through a short or long-term contract. And three, customers can reduce the amount of electricity they use in the first place so that their utility doesn't have to produce it or buy it.

Which method is cheapest? If you said three, go out and treat yourself to a compact fluorescent lightbulb. As we've said here in the past, the cheapest kilowatt is the one that doesn't have to be produced in the first place. That's why CUB has always supported steady and substantial investment in energy efficiency efforts, making sure that the power that is produced or purchased goes as far as possible.

Up until 2002, utilities' spending on energy efficiency was quite erratic. If power prices were high, they'd spend more on energy efficiency. If power prices were low, they'd cut back drastically on energy efficiency investments.

But the best way to make sure you get the most energy efficiency in the long run is to invest in it consistently over time. Unfortunately, during the late 1990s, energy efficiency investments reached all-time lows because power was relatively cheap. But that meant that when the energy crisis hit the West Coast in 2000 and 2001, energy usage was quite high, and both people and businesses got hit hard as energy prices went through the roof. If utilities had been investing in energy efficiency at the same level during the late 1990s as they had been during the early 1990s, when prices were higher, utility consumers would have saved millions of dollars during the energy crisis because our energy demand would have been lower and the blow would have been softened significantly.

Starting in March 2002 (because of a law CUB took the leadership in pushing), both Portland General Electric and Pacific Power were required to invest at least 3 percent of their overall income in energy efficiency and renewable resource development. These are known as "public purpose funds." This requirement lasts for 10 years, until 2012. This is a better way to invest in efficiency: a consistent amount over a long period of time. Some people ask, "Does it make sense to add 3 percent to the electric bill when rates are high?" The answer is that we are going to be spending that money anyway, and without good energy efficiency programs we would possibly be spending much more. We can either pay for expensive new power plants (that have other costs like pollution), and be at the mercy of the prices on the energy market, as we were during the energy crisis. Or we can pay for energy efficiency to reduce our overall energy usage, which is the cheapest, cleanest way to "buy power."

Even better, CUB worked on shifting the responsibility for promoting energy efficiency out of the hands of the utilities. It made no sense to have a company, whose purpose is to generate and sell electricity, be involved in helping their customers use less of the product they are trying to sell. Rather than having that inherent conflict of interest, which did not benefit consumers, CUB helped to create the Energy Trust of Oregon, a nonprofit organization whose primary mission is to get the biggest bang for the consumer's buck in energy efficiency and renewable energy development. Having the Energy Trust means no conflict of interest and a better deal for the consumer.

The Energy Trust of Oregon (ETO) has been up and running for almost four years. They have been working with all customers - residential, commercial and industrial - to find ways to use energy more efficiently. All customers pay into the public purpose fund and all customers benefit. The ETO has shown itself to be a good steward of ratepayer funds, conducting its business through open, public meetings, with strong accountability to the Oregon Public Utility Commission, and posting everything they do to their website so that customers can keep track of their projects. That's a big change from when the utilities were in charge of making energy efficiency decisions.

You've always heard a lot from CUB about energy efficiency and you'll hear more over the next year. The 2007 legislative session is scheduled to have a review of public purpose funding on its agenda and CUB will be working to make sure that the legislators understand that investment in energy efficiency is just another way for customers to buy necessary power, and it's the cheapest, cleanest way to do it.

CUB will also be raising questions like: Given the rising cost of energy, is 3 percent enough to invest in energy efficiency and renewable energy resources? Can we invest more and still be cost effective? And should we commit to investing in energy efficiency beyond 2012, since it looks like energy prices won't be dropping significantly anytime soon?

So stay tuned, and in the meantime, go over to the Energy Trust website to find out how you can reduce your energy usage and get the cleanest, cheapest kilowatt money can buy. While you're online, you may also want to visit a new website offered by the Oregon Department of Energy, which was recently unveiled by the Governor, and which offers information on heating and weatherization assistance.

Posted by Oregon CUB at 10:10 AM | Comments (0)

November 22, 2005

CUB Files Testimony in MidAmerican Case, Finds No Net Benefit for Customers

Yesterday CUB filed its Opening Testimony in the Merger Application Case of MidAmerican Energy Holding Company's (MEHC) proposed purchase of PacifiCorp, known locally as Pacific Power & Light. CUB's position was that "MEHC's proposed acquisition, as proposed, fails to provide customers with a net benefit."

We came to this conclusion by examining the following factors:

MEHC has offered as the major benefit of this purchase the commitment to invest a large amount of money in PacifiCorp's infrastructure. We are concerned that this "investment exuberance" is not balanced by a concern for the effect on rates; in fact we argue that MEHC has shown in its initial filing an "utter lack of concern either for the operations of PacifiCorp or for the effect of this dynamic on rates." We point out in our testimony that, with 6 of these merger application cases in the past 8 years, we do have a fair amount of experience that would lead us to expect more in the way of concern for the financial impacts on customers.

We also wonder "if PacifiCorp can be adequately protected" without the legal protections of the Public Utility Holding Company Act (PUHCA) which was enacted in 1935 specifically to address the dangers of megacorporate takeovers of utility companies, such as this one. In the early 1930s, many utilities went bankrupt due to complicated corporate structures and carrying debt for riskier businesses. Warren Buffett (the nation's second richest man) owns Berkshire Hathaway which owns MEHC, and was instrumental in repealing PUHCA this year so that he could expand his empire to include utilities. We want to make sure that we really enact the power of the stronger state regulation that was touted as a good reason for doing away with the federal regulatory protections of PUHCA.

Finally, we talk about the fact that "Warren Buffett, Berkshire Hathaway, and MEHC have demonstrated a decided lack of leadership in addressing environmental issues, most notably the looming threat of global warming."

When we crunched the numbers we found that this purchase could lead to a $77 million harm to customers rather than the $200 million benefit that MEHC claims. Interestingly enough, the Public Utility Commission Staff, in their Testimony also found a net financial harm to customers that could result from the purchase rather than the promised net benefit.

The Oregonian published an article today about this filing, "PUC staff recommends against MidAmerican." You can read our Opening Testimony here.

Posted by Oregon CUB at 03:50 PM | Comments (0)

November 10, 2005

Small Cases Can Have Large Consequences

CUB occasionally works on really big cases at the Oregon Public Utility Commission (OPUC), cases that make the front page of local newspapers, cases that affect the region's economy and environment and thousands of people's utility service. And then there are the other cases, cases that will never be front page news, cases that affect a smaller percentage of the population, but which we consider to still be very important because the effects might be substantially greater in those affected people's lives.

Recently we filed testimony in one of those latter types of cases, AR 500. The primary issue is whether to approve a system of advanced metering infrastructure (AMI), a way of connecting the meters at PGE customers' houses to a system that can "read" the electricity usage without the company having to send round an employee to read the meter in person. This primary issue is still being debated, and CUB is reserving judgment, saying in our Comments (filed jointly with the Community Action Directors of Oregon) that the "benefits and cost effectiveness of AMI… will need to be demonstrated in future OPUC dockets."

The secondary issue within this case was whether to allow PGE to disconnect a customer for non-payment, without having spoken to an adult at the residence, but having only left phone messages. A decision on this issue was easier for CUB to reach: "We oppose eliminating the requirement for a site visit in cases of impending disconnection of utility service where the utility has not reached the customer or another adult at the residence by phone… A telephone message will not suffice."

No one should be surprised with a shutoff. We don't feel that it's appropriate for PGE to be able to turn off the electrical power to your house or apartment without making sure someone there knows about it beforehand. Really, our opposition to this request feels like the least we can do, and we feel that a final site visit is the least PGE can do.

Why is this so important?

First, because we know that shutoffs present huge difficulties in terms of instituting new service, and in just getting through the day without power.

Second, because we know that only about two thirds of PGE's machine-operated calls make it through to a person. That leaves one third without phone contact! That number seems high, but the poor among us tend to move more often, may perhaps be working multiple jobs and rarely home, and often live without a phone (a recent survey of Oregon Food Bank basket recipients showed that 21% of those people had no phone service).

Third, because it's the right thing to do. Face-to-face notice of disconnection is not an outrageous thing to ask of a basic utility service provider. To again use the words of our Comments, "[W]e do not find the requirement for a single final site visit in the case of an impending disconnection… to be onerous."

Millions of people in this country are living in poverty. That number has increased in the past year. CUB takes seriously its mission to protect residential customers – all of them; and while, thankfully, most of the people we represent will never face disconnection, we know that for those who will have to deal with a shutoff, it is a major problem. Hopefully, the PUC will agree with our arguments and deny PGE the requested change.

Posted by Oregon CUB at 12:04 PM | Comments (0)

November 02, 2005

Dividing Up the BPA Pie

A series of meetings is underway to decide how the biggest source of low-cost energy in the Pacific Northwest Region will be divided and distributed among consumers. The source of energy is the federal hydropower system, which is administered by the Bonneville Power Administration (BPA), and the ongoing discussion is called the Regional Dialogue. BPA's energy is produced primarily as hydropower generated by dams on the Columbia River System (including those on the Snake River) and also by one still-operational nuclear plant in Washington State. Since Woody Guthrie sang of the Columbia River, "your power is turning our darkness to dawn, so roll on Columbia, roll on," many groups have been jockeying to obtain a share of the Columbia's massive power for themselves.

BPA's current customers, or constituents, include public utilities of the Northwest, large industrial customers, and residential and small farm customers of investor-owned utilities (IOUs) such as Pacific Power and Portland General Electric. Because the federal hydropower system is limited, it is important that this cheap hydropower be allocated fairly among all these constituents. CUB's staff attorney, Jason Eisdorfer, sits on the Principals Management Group and is one of the only consumer group representatives advocating for residential customers at the Regional Dialogue table, where everybody wants to maximize their piece of the pie. Other stakeholders include the Northwest's Indian Tribes, fishermen's associations, and environmental groups. The Regional Dialogue involves a complex set of issues, but one we thought was worth talking about.

Although customers of IOUs receive a fraction of the value of low-cost power that public power customers receive, they have still tended to be perceived as a cost to the federal system by BPA. This is because IOUs receive low-cost power through a program called the Residential Exchange, which was set up in 1980, and involves a shifting of numbers rather than an actual flow of energy. When BPA sells power through the Exchange, it actually writes the utility a check for the difference between the utility's cost of power (purchased or generated from elsewhere by the utility) and the cost of BPA's lower-cost (mostly) hydropower. The amount of this check gets passed through to residential customers as a reduction in rates. The Exchange is important in that it is the mechanism that provides residential customers with their portion of the value of the federal power system.

The public utilities, on the other hand, simply purchase the power they need from BPA, for the inexpensive price of about $.03 per kilowatt hour, a rate called the Priority Firm or PF rate, and very highly valued by those who have it. People in other parts of the country would love to have this rate. And, in fact, CUB and others in the Northwest regularly have to fight back efforts from other parts of the country to try to force BPA into selling its power at market rates, sending the increase in revenue back to Washington, D.C. to pay off the expanding federal deficit. Another concern is the uncertainty in BPA's revenue stream that is created when some of its customers come and go, following the short-term energy market. This has become an increasingly popular and yet dangerous choice in the last decade, as the market has become more volatile.

The proposed solution to these concerns is locking in long-term, 20-year contracts for BPA power. In this way, BPA is freed from the uncertainty of wavering revenues, and the federal government receives a steady stream of income from the BPA system, while at the same time being prevented from tying its customers to the vast fluctuations of market costs. The downside of 20-year contracts is that you lock in agreements based on a set of conditions that are like a snapshot in time, conditions which are bound to change in unexpected ways over the course of two decades. So, for example, some of the issues of long-term contracts that CUB has emphasized -- and stakeholders are discussing -- include:

1) What percentage of the system do residential customers get? (This, of course, is a priority issue for CUB.)

2) How much does BPA commit to spending on renewable energy resources and energy efficiency programs?

3) Does BPA invest in more generating facilities or do individual utilities make those investments? And how do we ensure adequate investments are made, not knowing what energy demands will be in future years?

4) What happens if a new public utility is formed during the 20-year contract (for example, what if PGE were to go public)? Is a new public utility shut out of PF rates?

The decisions made in this Dialogue will affect rates for customers in Oregon for years to come. We are working hard to try to ensure that everybody gets a fair slice of this federal power pie, in particular keeping an eye out for residential customers' access to BPA lower-cost power, since we are one of the only advocates for residential Exchange customers at the table. At the same time we feel it is important to give a fair hearing to other stakeholders who are working to protect our environment, our Native Tribes, or our larger regional economy.

BPA is hoping to bring groups together in consensus and reach a Regional agreement within the next several months.

Posted by Oregon CUB at 09:53 AM | Comments (4)