CUB Argues for Customer Protections in Pacific Power Rate Case Testimony
Posted on June 28, 2022 by Mike Goetz
Tags, Energy
On May 12, 2022 on the CUB blog, we detailed some of the biggest issues in Pacific Power’s general rate case. The company is requesting a 14 percent rate hike ($106 million) and has also requested an ongoing power cost increase of $31 million. If approved by Oregon regulators, this would be Pacific Power’s largest residential increase in 20 years. CUB is pushing back against both the size of the rate request and individual issues that would shift cost and risk from Pacific Power to its customers.
CUB has presented several key arguments on this case to the Public Utility Commission (PUC):
1. The impacts of the general rate case should not be examined in isolation.
If Pacific Power’s proposed increases in these and two other separate proceedings are approved, customers may face a total rate increase of over 20 percent. This is a large enough figure that the PUC should consider the impacts of rate shock to Pacific Power’s customers. Rate shock refers to the outsized difficulty customers face in adjusting their budgets to absorb a sudden, large rate increase.
In this rate case, CUB has asked the PUC to reject any price increases that are not completely necessary for providing service to customers. There are other measures to alleviate rate shock, such as delaying the recovery of some costs and spreading costs over longer time horizons. CUB hopes the PUC will use its authority to minimize rate shock for residential customers.
2. Pacific Power’s profit margin is already too high and should be reduced.
The utility is requesting to raise its profit margin from 9.5 percent to 9.8 percent. CUB and the industrial customer advocate jointly sponsored an expert witness to push back on this point. Our expert concluded that Pacific Power’s request was inappropriate. He also found that Pacific Power’s current profit margin is too high and out of line with current market conditions. The expert recommended that Pacific Power’s profit margin be reduced to 9.25 percent.
CUB’s expert is a nationwide leader in utility financial regulation. We are grateful for the technical expertise provided on this issue. And we are hopeful that the PUC will adopt our expert’s arguments, which would result in substantial annual savings for customers.
3. Pacific Power should not be allowed to change how it forecasts and recovers power costs.
The changes sought by Pacific Power in these processes would shift both cost and risk onto its customers. The utility forecasts expected power costs annually for the following year, and that forecast becomes part of customer rates. If the actual power costs in the following year differ from the forecast, Pacific Power may only recover the difference (or refund the difference to customers) in unusual circumstances.
Pacific Power has proposed changes to both the way it forecasts power costs and the mechanism that compares its forecasted power costs to actuals. All the proposed changes would benefit shareholders to the detriment of customers. CUB has argued to the PUC that there is no compelling reason to change the current mechanism.
4. Pacific Power’s inequitable proposal to adopt seasonal rates should be rejected.
CUB takes issue with several of the utility’s proposals to alter its rate design for residential customers. Namely, Pacific Power is proposing moving to seasonal rates. This would make rates cheaper in the winter and more expensive in the summer. Pacific Power also asserts that seasonal rates will encourage energy efficiency.
However, CUB’s analysis shows that customers living in hotter regions of Pacific Power’s Oregon service territory would effectively be penalized by this approach. Pacific Power’s proposal is inequitable and would arbitrarily benefit some customers while harming others.
From an equity perspective, we already recognize that incomes tend to be lower in eastern Oregon, and energy bills tend to be higher. A move to seasonal rates will add to the energy burden that households in eastern Oregon are struggling with. Some customers may experience a higher energy burden than initially expected and may be less able to afford utility bills based on their climate.
5. An increase in Pacific Power’s fixed charge would be harmful to customers and should be rejected.
CUB also took issue with Pacific Power’s proposal to increase the single family residential fixed charge from $9.50 to $12. The fixed charge is a portion of a utility customer’s bill that remains constant no matter how much energy the customer uses.
By increasing the fixed charge, Pacific Power would lower its cost recovery risk. However, this change would make bills less affordable for residential customers and would give customers less control over their overall bill. Increasing the fixed charge has also been shown to decrease customer incentive to invest in energy efficiency. CUB is determined to push back against this request.
General rate cases are long proceedings with many issues at stake. This is only a subset of the issues that CUB addressed in testimony. CUB will continue to engage with Pacific Power and others involved in this rate case to achieve the best possible outcome for residential customers.
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06/28/22 | 0 Comments | CUB Argues for Customer Protections in Pacific Power Rate Case Testimony