CUB Accuses NW Natural of Ignoring a Commission Order
Posted on May 18, 2015 by Bob Jenks
Tags, Energy
Today (Tuesday May 19th) CUB asked the Public Utility Commission (PUC) to reject NW Natural’s Compliance Filing in a case involving potentially hundreds of millions of dollars of costs associated with environmental remediation of the Portland Harbor Superfund site. CUB accused NW Natural of directly ignoring the PUC’s Order in the case and filing a Compliance Filing that would overcharge customers.
This may be the first time in its 30-year history that CUB has asked that a compliance filing be rejected. Compliance filings happen at the end of a case after the PUC has issued a final order. The compliance filing is supposed to include new tariffs that are consistent with the order. Normally all that is necessary is a simple review to ensure that the filings don’t contain math errors. But this one was different. In some places NW Natural completely ignored the PUC’s Final Order and did something different. In other examples, the utility deliberately misread the order, manufacturing uncertainty in order to do what they wanted. In a seven-page letter to the PUC, CUB cited several examples.
Interstate Allocation
The case involved both the costs to NW Natural of cleaning up the Portland Harbor Superfund site, and the proceeds it has received from insurance companies to help pay for that clean-up. The PUC ordered NW Natural to allocate 96.68% of the costs and insurance proceeds to its Oregon customers, with the rest being allocated to NW Natural’s Washington customers.
NW Natural ignored this. Instead, the Company proposed to provide Oregon customers with 96.6% of the insurance proceeds but also to charge Oregon customers an even greater share of the costs. But there is no possible way to read the Final Order in this case and conclude that the PUC wanted NW Natural to establish different state allocations for insurance receipts and for clean-up costs.
$12.1 Million Surcharge on Current Customers
The PUC’s Final Order in the docket authorized NW Natural to add a $5 million “tariff rider” to customers’ bills “going forward”. The idea is to embed a $5 million collection in base customer rates that will cover the first $5 million of remediation costs each year. NW Natural did this, but they also tacked on an additional $12.1 million surcharge on current customers in order to collect the tariff rider on base rates that would have been charged in 2013, 2014, and the first five months of 2015. In addition, the utility offered to offset $10 million of this by withholding a $10 million credit that is expected to be passed through to customers on their June bills.
As CUB pointed out in its letter to the PUC, this $10 million credit is customer money. It is compensation to customers for NW Natural’s use of customer-financed assets in its Interstate Storage non-utility businesses. From CUB’s letter to the PUC:
“The credit belongs to current customers, and using it to offset costs from 2013 and 2014 is the same thing as charging those costs to current customers—except customers may not notice they are being charged. A lack of transparency is rarely considered good policy.”
Improper Application of an Earnings Test
CUB also pointed out that NW Natural incorrectly applied an earnings test required in the final order. The purpose of an earnings test is to look at the utility’s earnings in the year a particular cost was incurred to find out if the earnings were high enough to allow full cost recovery without any additional charges to customers.
The PUC’s direction on how to conduct the earnings test was specific, and required the company to absorb $15 million of its historic costs for the Superfund site cleanup. But the company ignored the Order and conducted the earnings test in a different matter.
The PUC ordered this calculation. The math is straightforward:
$94.4 million (starting number)
- 50.2 million (insurance)
= 44.2 million
- 15.0 million (earnings test disallowance)
= $29.2 million charged to customers
The calculation NW Natural proposed:
$94.4 million (starting number)
+ 17.9 million (interest)
= 112.3 million
- 15.0 million (earning test disallowance)
- 48.2 million (insurance)
= $49.1 million charged to customers
NW Natural’s application of the earnings test charges customers for an additional $20 million.
This is unprecedented. In more than 20 years of advocating for customers before the PUC, I have never seen a utility blatantly ignore a Commission Final Order. NW Natural knowingly ignored the instruction of PUC regulators and decided to do what they wanted instead.
CUB is requesting that the PUC reject NW Natural’s Compliance Filing because it is not consistent with the Final Order in the case.
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05/01/17 | 0 Comments | CUB Accuses NW Natural of Ignoring a Commission Order