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September 18, 2008

CUB Files New Testimony, Taking PGE to Task for Not Controlling Costs

CUB filed what's called Surrebuttal Testimony (meaning the second round of testimony) in the Portland General Electric rate case before the Public Utility Commission early this week. When PGE originally filed their rate case, they were asking for an increase in residential customers' bills of 9.5%. That has since risen to 13.9%, and while some of their requested increase can legitimately be laid at the door of wholesale market cost increases, a significant portion of it cannot.

In our Opening Testimony, we took PGE to task for not having good cost control. We even suggested at one point, in speaking to PGE senior management, that perhaps the Company was trying to control costs, but not successfully telling that story. Their Rebuttal, however, while claiming that they do manage costs effectively, offered no new evidence of that. In fact, although PGE did accept a few reductions suggested by the Staff of the Public Utility Commission, they accepted none suggested by CUB or other parties, and offered no new reductions themselves. CUB therefore responded on Monday in our Testimony that, "Based on the Company's Rebuttal Testimony, we must conclude that PGE has accurately told its story on cost control, and that the resulting evidence proves that PGE has not made much effort to control its costs. This lack of cost control is a large driver of this rate case."

This is especially problematic in a time of economic turn-down and increasing unemployment, which has risen to 6.5%. PGE made a point of acknowledging this in their Rebuttal Testimony, saying, "We fully appreciate that the current state of the economy and rising costs are major concerns for our customers," but has not followed through with helpful cost control measures. As we stated in our Testimony this week: "PGE fails to identify and quantify a single dollar of savings in the 2009 test year outside of what the Staff identified for them."

CUB proposed a series of adjustments in the increase PGE has requested:

1) Cut 1% from the Company's overall revenue, $18 million out of $1.8 billion total, to send a message to upper management that controlling costs needs to be taken more seriously. This is the largest such recommended cut that we have seen or suggested, and was given full support by PUC Staff.

2) Remove the cost of PGE's newly purchased helicopter, which we don't believe has been proven cost-effective, and won't be "used and useful" in 2009 anyway.

3) Disallow the $1.2 million cost of "Generation Excellence," a program focused on PGE's power plants, and which the Company hasn't been able to justify based on quantified benefit to customers.

4) Disallow the $300,000 cost of the "Customer Focus Initiative," which doesn't focus on serving customers by offering cost-effective measures.

5) Disallow $1 million in costs of the $2.5 million cost of the Boardman Simulator, an on-site training tool at the Boardman power plant.

6) Disallow the money budgeted for open positions we believe might well not be filled, because the money for those positions would come out of customers' pockets anyway, going to shareholders if not filled by the end of the year.

7) Reduce PGE's Research & Development budget to a historically justified amount of $240,000, rather than the $2 million originally requested.

8) Remove the employee discount from customers' rates. We see no good reason for all other customers to be subsidizing a portion of these customers' electricity usage. Especially with rates increasing, and the subsidy therefore increasing, on a regular basis.

9) Remove PGE's proposed $2 million increase in their Uncollectibles Fund. The Oregon Legislature increased low-income bill payment assistance by 50% in 2007, and so any rise in the amount of uncollectibles should be offset to a great extent.

10) Reject PGE's most recent decoupling proposal.

A little explication of the decoupling issue may be in order, for those who have heard positive reports about it, and for those who have never heard of it. Decoupling is one method of attempting to achieve conservation by removing the link between revenue and energy sales, so that the utility company will not have a disincentive for promoting conservation. CUB has supported decoupling in the past, as with Oregon's natural gas companies, when the program was tied to real energy efficiency gains. But the current decoupling proposal in this rate case is for PGE to get decoupling and then we'll check in in five years to see if we got any energy efficiency. In our Testimony this week, CUB executive director Bob Jenks says, "Give PGE decoupling and give them 5 years to increase energy efficiency. This is like telling my daughter that she can have an allowance if she does certain chores around the house, but having the allowance begin today and then, five years from now, she needs to show that she did her chores. A better approach would be to tell the Company that decoupling will be considered when it is tied to additional energy efficiency programs."

If you read our blog regularly, you may already know that this case has caused a certain amount of frustration here at CUB. In fact, Jeff Bissonnette said at a Fair and Clean Energy Coalition meeting on Tuesday, that Bob Jenks was "as exercised about this case as I've ever seen him, and if you know Bob, you know that's saying something." Well, say what you will about Bob, or CUB, but it's pretty rare for PUC Staff to express frustration publicly about a case. However, Staff's testimony was unusually plainspoken in rejecting most of PGE's requests. Staff says, "The burden is on PGE to show the reasonableness of its proposed cost increases. Issue after issue Staff has highlighted PGE's lack of substance to demonstrate a need for the cost increases it has requested."

We couldn't have said it better ourselves.

Posted by Oregon CUB at 03:13 PM | Comments (1)

September 12, 2008

How many anti-government think tanks does it take to screw in a lightbulb?

There's been some controversy lately about a new effort to promote renewable energy resources. Members and supporters of CUB would likely think that anything along this line would be welcomed and for the most part, that's true. But the tone and accuracy of this recent effort concerns us.

FreedomWorks, a national group that promotes "lower taxes, less government, more freedom" and currently chaired by former US House Majority Leader Dick Armey (R-Texas), has recently launched a "campaign for affordable and reliable energy" called Lights on Oregon. We can't argue with the slogan, but a closer look at the details starts to get a little troubling. And those troubling details are now part of a well-funded ad campaign, too.

The trouble starts looking at the website, which opens with: "The US economy runs on fossil fuels. They provide 86 percent of our energy, with renewable fuels and nuclear making up the rest. That mix will surely change, but how? We don't know and neither do our elected officials. The right approach allows the market to change the mix as new technologies alter the relative costs of different sources. Let consumers choose to power their lives with the resources they like best." We're not sure what it means to "let consumers choose to power their lives with resources they like best." It sounds a little like the deregulation line we used to get from Enron. Consumers can't just go to the power store to buy "the resources they like best." They have to influence their utilities through legislative and administrative advocacy to put policies in place that move our energy system toward a cleaner, more sustainable mix of resources. Kind of like CUB does. To advocate for anything else demonstrates a basic (and perhaps willful) misunderstanding of how the electricity system works.

A little farther down on the website, a boldly-fonted question "Why do radical environmentalists oppose these clean sources of energy for Oregon?" stands out over a list of various energy sources, such as wind, natural gas, wave, nuclear, hydroelectric, geothermal and biomass (although the biomass section is still undeveloped). We were surprised by that question about "radical environmentalists" because in our experience as a consumer group working with environmental groups, many - if not most - are strongly in favor of clean and renewable energy resources. In fact, we worked with many environmental organizations to pass the Oregon Renewable Energy Act in 2007, which created Oregon's Renewable Energy Standard, requiring that 25% of the state's energy come from renewable resources by 2025.

Upon reading each section on energy sources, FreedomWorks uses a compare-and-contrast approach saying "on the one hand," some "reasonable" environmental group says generally supportive things about a particular energy source, while "on the other hand," other "radical" or "fringe" environmental groups raise some sort of concern, usually about a specific project or specific aspect of an issue. Here's where we start to have real concerns.

First, several of the groups named as "radical" or "fringe" are anything but. For instance, under the Wind Power section, the NW Energy Coalition (NWEC) is cited as being an anti-wind group because of very specific concerns raised in 2001 about the development of the Stateline Wind Project, concerns that were addressed, and today the project is operating with NWEC's full support. Here is NWEC's position on wind energy from their website: "Wind power is the fastest growing new energy source in the world. Widespread use of wind and other renewable power sources will bring costs down, making clean energy even more attractive than fossil fuels." Does that sound like the statement of a radical, anti-wind energy fringe group? Not to us either. But look over their website and decide for yourself (also note NWEC's membership, which includes a little ol' organization called CUB, and quite a few private and public utilities from around the region). The same tactic is repeated over and over in each of the sections where a group that is clearly on the record as being supportive of clean energy is criticized for being against it.

Second, FreedomWorks' "one-hand-other-hand" comparisons leave out important facts. As an example, in the "Natural Gas" section, they laud the Sierra Club "on the one hand" for being "in favor of natural gas." And they spend the rest of the time "on the other hand" castigating groups who are opposed to liquified natural gas, or LNG. Trouble is, Sierra Club is opposed to LNG as well. Their spin doesn't hold together in an honest way.

Third, throughout each of their energy sections, FreedomWorks favorably highlights positive statements or works by well-known environmental organizations: Sierra Club, Greenpeace, Environmental Defense. However, exploring the links where you can "learn more about energy and the environment" on their website highlights only free-market, right-wing organizations, one of which (the Capitol Research Center and its GreenWatch program) details a "Gang Green" list of the "worst environmental organizations." Who is on that list? Sierra Club, Greenpeace and the Environmental Defense Fund. Hmm. Seems like the "one hand" doesn't know what "the other hand" is doing.

There's a Call to Action section where site visitors are invited to "sign the petition to the state legislature" to "help support the development of clean and affordable sources of energy for Oregon." Good call ... but about a decade into the fight. That's what CUB and our allies have been doing pretty much full-time since at least 1999. And, really, even before that.

Just last year, CUB worked with a broad array of public entities, businesses, faith groups and environmental organizations to accomplish the following: increase investments in energy efficiency (something notably absent from FreedomWorks' website); implement incentives and requirements for solar energy; increase tax credits for renewable energy installations and manufacturing; and achieve the "25 by 25" renewable energy standard mentioned earlier. You'd think that FreedomWorks would be all over that, right?

Well, not only were they MIA last year in the legislature on these issues, they are actually on the record as opposing a national renewable energy standard as recently as a year ago. An examination of FreedomWorks' website and its energy issues section shows a general support for more drilling, more fossil fuels and not much else.

Developing a cleaner, safer, more affordable energy system is not a liberal issue and it's not a conservative issue. If FreedomWorks wants to have a substantive discussion on creating clean energy technologies, they're welcome. But they'll find the discussion slow-going if all they're really trying to do is throw stones instead of finding solutions, and defending fossil fuels rather than finding alternatives. And they are currently spending a lot of money doing just that. Maybe they need to tell us who is funding their ad campaign and we can better understand their goals and motives.

Until then, we'll just keep working for real clean energy achievements, and they can catch up later.

Posted by Oregon CUB at 04:26 PM | Comments (2)

September 05, 2008

Update on Natural Gas Price Increases

If you live in Medford, Klamath Falls, or LaGrande, you're in luck when it comes to the cost of winter heating. Avista Corp., which serves those cities with natural gas service, will be raising their rates only a little to cover changes in the wholesale cost of natural gas. Customers of Cascade Natural Gas in Bend will feel a bit more of the pinch. And if you buy your gas from NW Natural in the Portland Metro area, you are still looking at a solid jump on those heating bills.

The actual increases look like this:

* Avista 2%
* Cascade 11%
* NW Natural 25%

The good news is that these figures are quite a bit smaller than the utilities were forecasting a few months ago (and which we wrote about here). Just as the oil market has dropped, so has the natural gas market. With its unexpected off-season spike somewhat abated, most of us are breathing a sigh of relief - the 40% increase in gas heat some customers had been looking at would have devastated many Oregon households.

In addition to the drop in wholesale natural gas markets, customers of NW Natural will benefit from an additional $10 million reduction that results from depreciation of the value of NW Natural's pipes and other infrastructure, based on a recent analysis of the "useful life" left in the infrastructure. This depreciation reduction was due to go into effect - oh, just sometime later next year. CUB Executive Director Bob Jenks made a strong push for them to move the reduction up to January 1, 2009 to offset the significant increase NW Natural customers are going to be facing, and was successful, so that $10 million reduction will help mitigate whatever the final increase winds up being.

These figures aren't the final word on what we will see on our bills; the utilities will file one more time in October with market updates before the cost of natural gas passes into customer rates November 1st. In any case, those who do have natural gas heat for their homes should be thinking in terms of budgeting more, and perhaps setting up their bills on an Equal Pay program through their utility. Another wise move, which we have mentioned before, would be calling the Energy Trust (503-493-8888) as soon as possible to get a home energy review, so that you can see if your house can be tightened up a bit.

Natural gas isn't available in every Oregon town and city; it depends on the structure of the ground whether it is cost-effective for a gas company to put in the distribution pipes; where a thin layer of topsoil overlays many feet of hard granite or other rock, it is not so feasible. But where available, natural gas remains one of the more energy-efficient options for heat, and generally less expensive than fuel oil.

The huge increases and then decline in the natural gas market, much as with oil, points out some fundamental problems with the marketplace. A lot of people saw the runup as heavily influenced by speculators who bet on the futures market, and weren't even real-time users of natural gas. In addition, much of the gas in the American marketplace is Canadian in origin, so the speculators are hedging not only the future of energy costs, but also the strength of the American dollar in relation to the Canadian currency.

Whatever the combination of causes, the cost of natural gas has provided quite a roller coaster ride for energy analysts, and that show is coming very soon to a gas meter near you. If you're a natural gas customer, you might want to get ready.

Being CUB, we can't help pointing out that these increases just serve to underscore the importance of investing in energy efficiency, because it's true as it ever was, that the cheapest energy is the energy you never have to buy.

Posted by Oregon CUB at 11:40 AM | Comments (0)