Power Cost Adjustments. PGE asked for several power costs adjustment mechanisms that would raise rates if power costs (fuel and wholesale power) were slightly higher than forecasted. This is a significant shift in risk from shareholders onto customers. CUB argued, "If the Company would like a regulatory framework that eliminates uncertainty and risk, then its return on equity should be adjusted to that of Treasury Bills, about 5%." CUB also proposed our own power cost mechanism which would only increase rates in extraordinary circumstances.

Port Westward. PGE asked for approximately an additional $50 million in rates to cover the operation of their new gas-fired plant, Port Westward. Here's the catch: rates go into effect in January 2007 and the plant isn't even expected to be open before March 2007, at the earliest, but it could conceivably be delayed. CUB raised this timing issue, offering conditions to deal with possible delay. We also addressed the lack of adequate conservation planning in PGE's resource plan: "Oregon has a longstanding policy commitment to pursue all cost-effective electricity savings and avoid unnecessary expenditure on generation and grid additions." We used this case, as we do many, to advocate for keeping our focus on long-term energy stability that is as clean and inexpensive as possible, concluding that "it simply makes little sense to evaluate the prudence of a single, large power plant, without determining whether that investment is part of an overall, least-cost, least-risk portfolio."

Advanced Metering. PGE wants the Commission to approve its latest plan for Advanced Metering Infrastructure (so-called "smart" electronic meters that can be read without meter readers walking door to door), costing an additional $3.7 million now and more than $140 million over the next few years. CUB argues that this technology has not been proved cost-effective, and has not been thoroughly investigated even by PGE itself. CUB is concerned that, once the advanced meters were purchased, the Company would then begin pushing time-of-use pricing (where you pay more depending on the time of day that you use power) in order to justify the huge expense. We recommended a much more thorough investigation before approval, saying that we should figure out what we plan to do with this technology first, and then examine whether it makes sense for Oregon.

Rate Design. PGE wants to get rid of "block rates" that reward conservation of electricity (you pay less per kWh for the first block of usage and more for the second). Can you guess what we thought of that? "The Company's proposal to reduce and then eliminate the block structure of the rate design ... means that customers who use more electricity will receive more of the benefit of the federal hydro system than customers who use less. Not only does this provide a lousy conservation incentive, it is also unfair." We recommended retaining the current block rates.

Our utility analyst, Lowrey Brown, who wrote much of the Testimony, said she felt this morning as if she'd been climbing mountains again (once one of her favorite pastimes). This Testimony did feel big -- maybe not Mt. Hood-sized, but sizable nevertheless. We are glad to have it written and out the door.

PGE will have a chance to respond and we will, too. We look forward to getting into Oral Arguments to debate the issues in the Fall. We think our arguments on behalf of simple ratemaking procedures, fair balancing of risks and profits, resource plans that are timely and presented in full context of all generating resources, and of course conservation wherever possible, form a strong philosophy of reasonable ratemaking.