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July 27, 2006

How Clean Is Nuclear Energy?

A CUB member recently called and left us a phone message with this question: Why wasn't nuclear power included in the recent CUB report (Bear Facts Summer 2006) on the Clean Energy Agenda we are working to put together for the 2007 Legislative Session? This member said he understood that environmentalists had safety concerns about nuclear waste storage, but he cited the following as reason to open the debate again: "The Bush administration will open negotiations with Russia on a long-discussed civilian nuclear agreement that is to pave the way for Russia to become one of the world's largest repositories of spent nuclear fuel." (New York Times, 7/09/06.)

With global warming threatening the future health of the entire planet (seen Inconvenient Truth yet?), a significant group of people believe that nuclear power -- which contributes fewer greenhouse gas emissions -- needs to be part of the energy discussion. According to Environmentalists for Nuclear Energy, "If well managed, nuclear energy is a very clean energy, does not reject polluting gases in the atmosphere, uses very few construction materials (per kWh) compared to solar & wind energy, produces very little waste (almost totally confined), and does not contribute to the greenhouse effect (no carbon dioxide)."

However, concerns about a nuclear waste repository in Russia remain: "The United States has traditionally opposed any such arrangement, in part because of concerns about the safety of Russian nuclear facilities, and because the country has helped Iran build its first major nuclear reactor." (New York Times, 7/09/06.) Columnist Jim Hoagland further discusses the fact that: "[T]he planned Russian nuclear expansion has not been widely publicized by the Kremlin in this 20th-anniversary year of the Chernobyl meltdown. That disaster immediately caused more than 30 deaths, the evacuation of 135,000 people from the region and a global panic about the safety of nuclear reactors. Bush noted May 24 that no new atomic energy plants ... have been approved in the United States since the 1970s." (Washington Post, 07/14/06.)

To a great extent the de facto ban on new nuclear power generation in the U.S. has been fallout (forgive the pun) from the Three Mile Island meltdown in 1979. With that incident, America got a taste of the possibility of nuclear meltdown, but the American experience of meltdown was minor compared to the 1986 catastrophe which occurred at Chernobyl. In addition to the immediate and longer-term deaths due to exposure to radiation from Chernobyl (in parts of Belarus the cancer morbidity rate increased by more than 50%), vast swathes of land became uninhabitable, and people as far away as Scandinavia were told not to drink milk, since the cows who produced it were breathing in contaminated air that had traveled from the scene of the nuclear disaster. Here in Oregon, lawyer Greg Kafoury worked as an activist against PGE's Trojan nuclear power plant for many years, and had this to say about the Oregon nuke's many safety issues: "We were one broken pipe away from Chernobyl." (Willamette Week, 3/09/05.)

Nuclear catastrophe aside, concerns about nuclear power and its accompanying radioactive waste products are more generally articulated in a 2003 report produced by MIT on "The Future of Nuclear Energy." The report states: "[T]he prospects for nuclear energy as an option are limited, the report finds, by four unresolved problems: high relative costs; perceived adverse safety, environmental, and health effects; potential security risks stemming from proliferation; and unresolved challenges in long-term management of nuclear wastes." [Italics in original.]

To call nuclear power "clean" may seem like a stretch when you take into account that it produces a waste product that remains toxic for a very long time. "One of the major problems associated with radioactive waste is the fact that much of it will be radioactive -- and thus will require isolation from the human environment -- for hundreds of thousands, if not millions, of years. Since this is a time period far longer than all of recorded history, the problem of waste disposal presents an enormous challenge." IEER On-Line Classroom. You may recall that Oregon voters passed a law in 1980 prohibiting the construction of more nuclear power plants, until the problem of safe nuclear waste storage had been solved, and even then citizens reserved the right to vote on it. Yucca Mountain in Nevada has become a battleground in the debate, wherein locals and Nevada Congresspeople have fought against a proposed nuclear waste siting, while others in Washington D.C. have promoted it as a fine solution to the problem. Suggesting that Russia play the role of nuclear waste repository does effectively solve the "not in my backyard" problem seemingly inherent in the use of radioactive material, but raises a whole host of other questions about international transport, foreign military usage of nuclear weapons, and the basic issue of whether -- in a global economy and global ecology -- any place on Earth should become a nuclear by-product dumping ground.

Proponents argue that the "new generation" of nuclear power will be safer and cleaner than ever before. But who wants their community to be the test subjects? Oregon has already had a spotty history with nuclear energy. At the time voters passed the "no new nukes" law, Oregon's only nuclear plant, Trojan, was undergoing safety and maintenance problems, and the law stopped construction of Pebble Springs, the next nuclear plant on PGE's agenda. Trojan has since been closed down (and was recently demolished) after serving only half of its expected power-generating life. After the failure of Trojan and Pebble Springs nuclear facilities, and after the Washington Public Power Supply System (WPPSS) went into default on their nuclear program, utilities in the region are not proposing new nuclear plants and might not be able to get financing approved to cover the costs of building them.

We at CUB are advocates of clean, affordable energy, and as such we are willing to look closely at any and all functioning power options. With the Northwest's existing base of hydroelectric plants, and its potential for economic wind power, and with an abundance of solar and geothermal resources, it is doubtful that nuclear power will revive itself in this region. We are skeptical about the so-called "new generation" of nukes, since the fact remains that any nuclear power production will still burden many generations of humans to come with deadly radioactive waste. This is not an energy source with which we feel it is wise (or in Public Utility Commission lingo, "prudent") to be cutting edge. As CUB Executive Director Bob Jenks puts it, "We like sleepy little utilities that make efficient use of proven technologies."

Most importantly, we still have thousands of Average Megawatt Hours (aMWh) of energy efficiency to be achieved, by far the cheapest and cleanest energy gain of all. Where energy efficiency falls short, we believe that wind and other renewable resources can produce additional thousands of aMWh to power our homes and businesses. Many options lie before us, but nuclear is way down at the bottom of our list. We maintain that nuclear energy does not belong in Oregon's Clean Energy Agenda. Free of carbon emissions it may be, but trouble-free it is not. CUB believes that the safety risks, cost risks, and legal obstacles for nuclear power in Oregon outweigh the benefits.

Posted by Oregon CUB at 02:44 PM | Comments (9)

July 20, 2006

Two Big Rate Cases Underway

We've talked to you lately in CUB Online about global warming and the need to purchase renewables, preserving equal access to the internet, and successful reform of utility tax rules. But this week we're back to the basics, the bread and butter of why CUB exists: the utilities want to raise your rates and we're gonna try and stop them.

PGE and PacifiCorp have both filed rate increase requests, both of them highly - shall we say? - optimistic. PacifiCorp wants a 13% increase in rates amounting to about $110 million additional dollars from ratepayers; PGE wants 8.6% or $130 million. Our analysis shows that little or no rate increase should be granted in either case.

Current status is that while we are well underway, we are also far from done in even presenting and hearing arguments in the two rate cases. We have gone through settlement discussions, filed testimony in the general rate case and power cost update rate case for PacifiCorp, and in the power cost update case for PGE. We are working through other intervenors' testimony (such as Industrial Customers of Northwest Utilities) and the testimony of PUC Staff.

One thing we have already deduced, is that if the Commission were to accept all of the proposed adjustments from CUB and from PUC Staff in the PacifiCorp case, the end result would be a rate decrease, rather than any increase at all. We have no reason to think this is going to be the final outcome, but we do think it goes to show how differently the data can be interpreted and how aggressively PacifiCorp uses the data to ask for significant increases.

In the PGE case, other parties have proposed big reductions on power costs, as have we. We proposed 4 adjustments with a minimum reduction of tens of millions of dollars, and we recommended that the PUC seriously consider other parties' adjustments as well. Next, the companies will have the chance to respond to the testimony filed so far.

While it's too early to say that rates won't go up, we do feel that the companies have a ways to go to make a convincing argument that they need higher rates to provide adequate service.

And with temperatures expected to hover around 100 through this weekend, electricity will be at peak demand. In fact, the highest usage of electricity all year could be happening in the next few days, just to keep inside temperatures bearable. All of which helps remind us of why the rates for our electricity need to be kept fair and reasonable.

Posted by Oregon CUB at 11:26 AM | Comments (0)

July 14, 2006

CUB Praises PUC Tax Reform Ruling

The Public Utility Commission today released its Interim Order regarding implementation of the new utility tax law, SB 408. CUB Executive Director Bob Jenks had this to say about the ruling: "The PUC found a simple and elegant compromise to solve a serious problem in ratemaking. We expect that customers will see lower rates as a result."

Although the law has been under discussion in rate cases recently, most notably the Reconsideration of PacifiCorp's last rate case, the Commission has been operating without Permanent Rules on the subject since the law was passed last year. This Order moves the PUC toward Permanent Rules regarding utility taxes, and does so in an effective and fair manner. Though not accepting either the utilities' stand-alone approach to utility taxes (ignoring the income and tax deductions of affiliates in a corporate family), and not embracing CUB's specific approach to determining "properly attributed" taxes, the Commission has proposed a third method of arriving at a fair means of tax attribution.

This method begins with the assumption that customers should not be paying significantly more to utilities than the utility's fair share of the taxes paid to government by the utility's parent company. From the Order: "If amounts collected and amounts paid differ by more than $100,000, SB 408 requires this Commission to direct the public utility to implement a rate schedule ... accounting for the difference."

The question is and has been: When a utility is part of a large conglomerate, how do we "properly attribute" a share of that conglomerate's tax liability to the utility and its customers. The Commission calls this issue "difficult and controversial" and they ain't kidding! For almost a year, CUB, industry groups, the utilities and the Commission themselves have wrangled with the question of how to solve this problem of phantom taxation: taxes paid by customers to a utility, but retained by a consolidated corporate utility due to its tax deductions.

Today's Order solves this issue in a surprisingly simple way. The Commission has decided to treat the taxes as just another expense being incurred at the corporate parent level, and passed on to customers proportionally. As with executive salaries at the parent company (such as when PGE customers were paying part of Ken Lay's salary), the proportional amount paid by Oregon utility customers is figured following a three-factor formula. At the risk of providing too much information, the formula works with factors of the overall corporation's total sales, property, and payroll. The numbers are then divided according to the Oregon utility's portion of the final figure.

It's a less labor-intensive formula than the one CUB had proposed, because it doesn't require as much information from and about the corporation's other affiliates, which makes PUC Staff breathe a sigh of relief. It is a clear rejection of the utility's argument that SB 408 does not require a significant change in the way we charge taxes to customers. Most importantly, it fixes the major problem of customers paying into a tax account, only to see that money diverted to utility shareholders.

We are pleased with the Commission's creativity and diligence in crafting a solution. While we have not seen this methodology until today, and have not fully evaluated it, we do expect that this decision will lead to lower rates because rates will no longer include inflated tax amounts. However, we don't expect the case to be closed on the issue of utility taxes. PacifiCorp, particularly, has shown itself to be tireless in working to undermine tax reform, and we expect them to try to convince the 2007 Legislature to repeal SB 408.

CUB has been a leader in confronting the problem of unfair utility tax practices, and we will continue to work on the issue as it arises, whether at the Public Utility Commission or in the Oregon Legislature. We will also continue to play a role in educating the public and the media about what is often a complicated issue.

If you are pleased to hear about this step forward in the battle for fairer utility bills, please consider making a donation to CUB today. We rely on member support in fighting for lower rates and cleaner energy for Oregon utility customers. We appreciate the feedback from our members, and the financial support that makes our work possible.

Posted by Oregon CUB at 03:09 PM | Comments (2)

July 11, 2006

PUC Upholds Rate Reduction in PacifiCorp Reconsideration

In an important decision today, the Public Utility Commission upheld its earlier decision that SB 408, the utility tax reform law, does change the way that PacifiCorp is allowed to handle inclusion of taxes in customer rates. The law requires that PacifiCorp move away from figuring taxes on a stand-alone basis, pretending as though they were not part of a larger corporate entity. This is exactly the position that CUB has been advocating and we are thrilled with the Commission's ruling.

The Commission first ruled on PacifiCorp's rate increase request last September, when they slashed the rate increase request from 12.5% to 3%. About $26 million of that reduction was due to a tax adjustment proposed by CUB and adopted by the PUC. PacifiCorp filed for Reconsideration of that ruling, which the Commission granted in December 2005. Today's Order is the result of that Reconsideration case. Interestingly enough, the Commission affirmed the principles of SB 408, but stated that the tax adjustment would stand even without SB 408. This is exactly how CUB argued for the tax adjustment last summer, before the bill had even passed the Oregon Legislature.

In the Commission's own words: "In this order, we clarify, but affirm, our application of Senate Bill 408 in this proceeding to reduce the amount of tax expense PacifiCorp may recover in rates ... [W]e adopted an adjustment based on CUB's proposal to reduce PacifiCorp's proposed tax expense by $16.07 million ... this disallowance translates to a $26.6 million revenue requirement decrease." (Public Utility Commission of Oregon Order on Reconsideration of UE 170, 07/10/06.)

CUB formed our argument to reduce tax expense by $16.07 million based upon the "known and measurable" factor of tax deductions that would accrue to PacifiCorp due to a loan made by Scottish Power to PacifiCorp Holdings, Inc. (PHI), PacifiCorp's immediate parent company. The $160 million PHI was paying in interest to pay back the loan was eligible for a tax deduction, and Oregon's share of that deduction came to about $16 million. CUB argued that this tax deduction amount would reduce the taxes that went from PacifiCorp to government, and therefore should not be charged to customers. The Commission agreed with CUB during the first case, and upheld that decision in this Reconsideration, but allowed PacifiCorp to refigure the interest on the loan using changing interest rates. The effect of this refiguring will bring the final tax adjustment savings for Oregon Pacific Power customers to approximately $20 million.

The PUC is expected to issue its decision regarding the Permanent Rules for implementing SB 408 later this week. We believe that this PacifiCorp Reconsideration decision is a good step on the path toward utility tax reform on a long-term basis, and that this is a clear indication that the stand-alone taxation so strongly advocated by utility companies (because they can charge customers for taxes they may or may not wind up paying) is no longer accepted practice for utility companies in Oregon. Good news indeed!

Posted by Oregon CUB at 03:11 PM | Comments (0)