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June 26, 2008

CUB Protects Basic Local Service in Qwest Settlement

Qwest has been trying to deregulate phone service in Oregon for quite a while. You may recall a bill to that effect in last year's Legislative Session. Then last fall they filed a case with the PUC asking for deregulation and the ability to raise rates. CUB has been working defense on this issue for some years now, working to keep land-line phone service protected for those who rely on it, and we've recently reached a settlement.

Just a little background: Many states in the West have been convinced to go with telecommunications deregulation, including Idaho and California, which are moving toward complete price deregulation; and Washington, which deregulated everything except basic local service, and even that is going up 25%. Legislators and regulators are being persuaded when Qwest and other telephone companies plead for deregulation, due to the fierce competition they're getting from wireless companies (an industry which has never been regulated). In this case, Qwest asked to deregulate most features and raise the rate of basic local service (the first residential line) by $2 (or 15%) during the next 4 years, and even more after the 4 years was up.

We came into our talks with Qwest in the current case at the Oregon Public Utility Commission with a few key goals: 1) protect basic local service; 2) protect unlisted numbers and a handful of other features which could be essential for reasons of safety or financial hardship; and 3) help customers negotiate the maze of telecomm pricing.

Well, we achieved what we set out to do. Basic local service will see no rate increase for at least 5 years. This means that the cost of basic local service will remain where it has been since before 1991, a milestone for CUB Executive Director Bob Jenks, since that is the period of time he's been at CUB, and it means that basic local telephone service has not increased on his watch.

In addition, a key group of features has been capped at current rates, features such as unlisted numbers, call trace (the ability to trace a number which has called harassing a household), toll restriction (the ability to prevent long-distance or toll calls from being made from a phone), extended area service, and switched access (access to the long distance network).

Qwest also agreed that when speaking with a customer, their service representatives will always give the customer information about the lowest cost item or feature to suit their needs.

Finally, Qwest has agreed to fund an independent organization to provide comparative pricing information about telecommunications services (including wireless) to consumers. The details of the organization have yet to be worked out, but the $2 million over 5 years that will make it possible, has been agreed upon.

Deregulation was not to be completely avoided, however; Qwest will be able to raise rates under the settlement for other, non-essential features, which includes caller ID, call waiting, and call forwarding (voice mail was deregulated some time ago); but the PUC would maintain the ability to reregulate these services if the prices were no longer just and reasonable. These features are most often purchased as part of a "bundle," which is not and never has been subject to price regulation; very few Oregonians purchase these features individually anymore, which we hope mitigates the price impact on the majority of customers.

Furthermore, in comparison to the deal many neighboring states are getting, we feel that the deal we negotiated for Oregon was a good one. Most importantly, we were able to protect basic local service, so that the many thousands of low-income people and seniors in Oregon who rely on their one land-line will not be adversely affected by the changes. And we will let our members know when clear information becomes available through the soon-to-be-created independent telecommunications consumer information organization.

We here at CUB are not big fans of the concept of deregulation in general. Deregulation of pricing, or giving a utility company complete pricing freedom, tends to be great for the company and bad for the consumer, who often has little recourse in terms of an option to switch companies. Utilities tend to be monopolies, and that's one of the main reasons we regulate them. While many state regulators are moving ahead with deregulation, we think it is misguided and will do all we can to ensure that Oregon does not deregulate basic local telephone service.

Posted by Oregon CUB at 04:04 PM | Comments (2)

June 18, 2008

Energy Market Sees High Prices Across the Board

It's summer (almost) and the natural gas furnaces around Oregon have been idling (almost) as temperatures reach (almost) 70 degrees on a regular basis. Normally, Oregon's largest natural gas provider, NW Natural, would be purchasing gas to store for the winter. As stated by Bloomberg.com, "Utilities and large industrial consumers typically stockpile gas during the U.S. summer for use during the peak winter demand period." But across the nation, gas utilities are buying and storing less gas than normal, because the cost of natural gas is not at a normal level.

Everyone knows that the price of oil (recently at nearly $140/barrel) and the price of gasoline ($4 and up) have been rising quickly. But a look at the wholesale natural gas market shows how much the price of natural gas has also increased.

One year ago, in June 2007, the price for natural gas was $7.30/mmBtu; today the price for that same volume of natural gas is $12.86. For historical perspective, here's a look at those and other recent years:
* 2008 (June) $12.86
* 2007 (June) $7.30
* 2006 (June) $5.79
* 2002 (June) $3.05
* 2001 (January) $9.61
* 2000 (June) $3.89
* 1999 (June) $2.13

As you can see, the upward pressure on natural gas prices over the last decade has been a clear pattern, increasing 600% since 1999, with an 80% just in the past 12 months. Unusual events provide bumps in the pattern; for example, in January 2001, the West Coast was reeling under the effects of the Western Power Crisis. That we are seeing natural gas prices significantly higher than those we saw at the height of the Power Crisis, that they are instead comparable to the prices we saw in the aftermath of Hurricane Katrina ($11.95 in October 2005), is something to sit up and take notice of.

We see two real issues which make us sit up and take notice: the lack of natural gas storage (down 15% percent from this time last year); and the concurrent rise in wholesale prices. The prices of the wholesale market have not yet made it into retail rates, but customers of NW Natural, Avista, Cascade, and other gas utilities will begin to see those higher fuel costs on their own bills this fall and winter.

Of course, natural gas is also a source for some electricity (four gas combustion plants operate in Oregon), and therefore also affects prices in the electricity wholesale market. So how's electricity doing now? Well, looking at the wholesale "day ahead" market, we see prices quite a bit higher than what we would expect for this time of year. West Coast on-peak price is currently about $135.00/MWh. That is significantly more than we are seeing in our wholesale rates here in the Pacific Northwest, where spring runoff in combination with the hydropower system has kept the price per MWh down to $67.00, but even that is higher than normal for the NW in spring. Our prices will edge upward in July and August as the runoff ends. Again, for a historical comparison, this time with electricity prices (from the Mid-C trading hub):
* 2008 (June) $67.00
* 2007 (June) $55.98
* 2006 (June) $32.30
* 2001 (June) $87.00
* 2001 (May) $450.00

As you can see from the large fluctuations in 2001, the Western Power Crisis caused huge increases and volatility in the electricity wholesale market. For customers in California, who were sold a bill of goods called "deregulation," this meant terrible times in paying those electricity bills. CUB led the fight to keep Enron from deregulating the Oregon market, so we are not in danger of volatility quite that massive.

However... Energy prices are going up. They are going up in a big way and pretty much across the board: crude oil, gasoline, natural gas, and electricity. Customers need to be prepared so that when those increases from the wholesale market start to show up in their retail rates this fall and winter, they are not totally taken by surprise.

One way Oregon residential customers can insulate themselves (pun intended) from the effects of these cost increases is to call the Energy Trust of Oregon and set up an energy audit for their home. Energy audit providers get super-busy when a new rate increase goes into effect, or when it gets cold and their heating bill goes up. Now would be a great time for you to call to set up your audit, and beat the rush. Find out how you could improve your own energy efficiency, and what financial assistance and tax credits might be available to help make it possible.

The real beauty of the Energy Trust energy audits is that for every home or business which is able to improve energy efficiency, the demand on the energy system as a whole goes down, which reduces the price, and the environmental consequences of our energy use, for everyone.

CUB cannot keep energy prices from increasing. We can and will work to demand that utilities be mindful of the effect that these cost increases have on customers, and that utilities keep costs as low as possible by putting off any discretionary spending (such as the 130 new employees listed in PGE's current rate case). Just because utilities are monopolies does not mean they can disregard a basic tenet of good business: that the business owner try to lower some costs when other costs go up.

CUB will minimize the increases to the extent that we can, and we are asking our members to also do what they can to reduce their own energy usage. Energy costs overall are going up regardless. We would do well to make it as easy on ourselves as possible.

Posted by Oregon CUB at 04:16 PM | Comments (0)

June 06, 2008

Lieberman-Warner Climate Bill Fails As Oil Prices Surge to New High

The Lieberman-Warner cap-and-trade bill, seen by some environmental advocates as too weak to make a real difference in capping global warming gas emissions, and by others as a necessary first step on the road to stronger measures, failed to pass the U.S. Senate today. Although the bill had 54 supporters, proponents could not reach the 60 votes needed to reach cloture, shut down debate and bring the bill to a vote.

The dissent was split mainly along party lines, with Senate Democrats supporting the bill and Republicans in opposition, saying they would not support the bill because it would raise energy prices. This occurred on the same day that oil shot up to a record high $138/barrel, adding to the energy sticker shock of consumers already paying an average of $4/gallon for gas across the nation. Many different factors can account for the escalating cost of fossil fuel energy, including a weakening dollar against other currencies such as the euro, and the possibility of a speculative bubble in the stock trading of oil, but to consumers the price of fossil fuel energy is just increasing, period.

CUB would like to note that the current beneficiaries of buying this ever-more-expensive black gold are primarily the oil companies, oil-producing nations, and market speculators. And when we pay the cost of the gas and oil, and burn it, the value has been burned as well; there is no long-term investment in any lasting project or infrastructure. We would argue that it would make more sense to pay more for our energy (since we are going to be paying more anyway), while building equity in a new, self-sustaining energy system that is domestically based and ours for perpetuity.

How do we do this? We pass a carbon emissions reduction mechanism, such as a strong cap-and-trade bill, that redirects a significant amount of our energy dollars into reducing energy demand (through energy efficiency), and developing a clean energy infrastructure, right here at home. This will require involvement of the transportation sector, as well, with one popular vision being the widespread use of plug-in hybrid vehicles, which can be recharged with off-peak electricity coming from reduced-carbon resources. With a clean energy economy that is producing green power for a population learning to reduce our own demand, we can foresee reducing by billions of dollars per year the amount we are giving to the oil companies, the oil-producing nations, and the oil market speculators. In the long-term, our energy costs level out and perhaps even begin to go down, if a large percentage of our energy portfolio is made up of solar, wind, wave and geothermal energy resources, where the only costs are maintenance and the fuel is free!

But in order to get from here to there, we need a major shift in our energy spending, a vast reprioritizing of our energy dollars, and a huge transition in the way we think about our energy consumption. Every item we purchase, every meal we eat, every mile we drive, has a carbon footprint, or unaccounted carbon emissions cost, that is going to need to be considered in the cost of that product or activity. In fact, we would go so far as to say that any carbon emissions cap that is worth its salt (another resource highly valued through the ages), requires a fundamental shift in the way our society values all goods and services.

We have come a long way. This was a big step to have Congress finally seriously debate a cap-and-trade bill, and we will go further still next year. In 2009, with a new president, new possibilities will open up. Both of our presumptive presidential candidate nominees have sponsored cap-and-trade bills (although their positions still have significant differences in the plan details), as opposed to our sitting president who has promised to veto any such legislation.

We should be honest with ourselves about the changes coming our way. Energy costs are rising, and adding a realistic "carbon cost" to our energy (and other products), with an eye to reducing the emissions that are causing global warming, will cause them to rise even more in the short term. But this is an investment that will pay huge dividends almost immediately. We build equity in a clean, sustainable energy infrastructure, we become economically more self-sufficient as a nation, and, oh yeah, we might just save the planet. Now, that's a good deal.

Posted by Oregon CUB at 02:12 PM | Comments (4)