Amidst Pressure, Pacific Power Lowers Rate Increase Request for 2025

Posted on August 15, 2024 by Charlotte Shuff
Tags, Energy, General Interest

After months, Pacific Power has reduced its ask to increase customer bills in 2025. In February, Oregon’s second-largest electric utility asked regulators to increase household billing rates by 21.6%. Pacific Power is now trying to raise rates by 14.9% for Oregon households. A typical household could see an average increase of $20.33 each month.

While this reduction is a big win for Oregonians, it is certainly not enough. Since 2021, Pacific Power has raised rates by 35%. Adding an additional nearly 15% increase would mean that a $100 bill from 2021 would total $155.34 in 2025. With many customers struggling to make ends meet, Oregonians, especially low-income households, shouldn’t be subjected to a still staggering bill increase next year.

Pacific Power Cuts Out Over $100 Million from Proposed Increase

In its July update, Pacific Power cut out $101.2 million from its proposed rate increase. The utility removed its controversial Catastrophic Fire Fund ($77.7 million per year removed) and reduced its request to increase profit margins ($23.5 million per year removed). Pacific Power is still asking to increase profit margins by a lower amount.

These two big-ticket items were heavily criticized by advocates, including CUB.

Catastrophic Fire Fund

Pacific Power was attempting to amass between $2-3 billion for wildfire liability costs from the six states it serves. For Oregon, the goal is $77.7 million per year while the fund was being built. These funds would have been a backup in case liability costs exceed the insurance coverage. CUB had some major concerns about this fund.

While shareholders were being asked to pay some amount, customers are primarily responsible. In a best-case scenario, customers would have been responsible for 80% of these costs. Because of the convoluted division of costs, the models show Oregonians could have ended up paying even more.

Pacific Power had not made it clear who would be able to receive these funds and how this money would be collected. After being asked tough questions by CUB and regulators, Pacific Power could not produce answers to this basic question. Instead, it removed the faulty fund from its proposed rate increase entirely.

This may not be the end of the Catastrophic Fire Fund, however. We expect Pacific Power to propose a similar fund in the future. We hope that if the utility comes back on this, it will be with a plan that protects customers and holds shareholders accountable for wildfire liability.

Increasing Profit Margins

Pacific Power originally asked to increase its profit margins significantly in 2025. After a heavy amount of criticism from CUB and other advocates, the utility has reduced its proposal for profit increases.

Currently, Pacific Power can earn a 9.5% profit margin. This amount is approved by regulators and is allowed under Oregon law. Pacific Power originally asked to increase this to 10.3%. It is now asking for a 9.65% return.

While these may seem like small increases, each 0.1% difference means millions of dollars for customers. This reduction means customers will avoid paying an additional $23.5 million per year.

CUB is continuing to push for a reduction in profit margins. As customers face an energy affordability crisis, shareholders should not be allowed to keep greater earnings.

Utility Prices Are Already Too High

We’re seeing a troubling trend in Oregon utilities: companies are asking for more money more often. As utility bills in Oregon continue to rise in 2024, CUB is asking tough questions from state regulators and demanding action on affordability. We’re also calling for a cap on how much utility companies can raise rates each year.

This is the Third Year of Major Increases for Pacific Power

Pacific Power customers saw rates increase by 11% on January 1, 2024. This increase was largely due to an increased price of natural gas (methane) used to generate electricity.

At the beginning of 2023, Pacific Power raised rates by 21%. This increase was primarily due to high natural gas (methane) and wildfire mitigation costs. Although this was a large increase, CUB’s advocacy helped lower the impact on Oregon households.

We Need a Cap on Rate Increases

Over the last four years, we have seen a troubling trend of utilities raising rates more often and in higher amounts. With utilities asking for multiple increases each year, it can be challenging to know how much of an increase customers are facing.

We saw this with PGE’s increase in January 2024. While PGE’s original ask was a rate increase of 14%, multiple requests ended up pushing rates up by 18%. The final numbers were not calculated until mid-December 2023 before showing up on customer bills on January 1, 2024. This trend extends to Pacific Power and other electric customers, as well as gas customers.

To combat this, CUB is proposing a new way of regulating how utilities can increase bills. CUB is proposing that the Oregon Public Utility Commission put a cap on rate increases. We are asking the Commission to limit rate increases to 7% plus inflation or to 10%, whichever is lowest. This cap would apply to the cumulative increase customers see over a year. Any requests over that cap would be pushed into the next year or beyond.

In normal circumstances, it should be rare for utilities to increase rates by more than 10%. Unfortunately, we have seen a growing pattern of Oregon’s for-profit utilities asking for 15-20% increases nearly every year for the last four years. This is a call to Oregon regulators to implement a cap for all for-profit utilities, not just Pacific Power.

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