Pacific Power Seeks Largest Residential Rate Increase in 20 Years

Editor’s Note: CUB will be advocating for Oregon households throughout this case. We will be fighting back against shifting risk to customers and unfair bill increases. But we need your help. You can speak up at a virtual public hearing at 6:00pm on May 24. Sign up for information on how to get involved!

This year, Pacific Power wants to raise bills for Oregon households by 14%, or $106 million. For an average customer, this would be an additional $13.35 for their monthly bill. This proposed increase would be even worse on summer cooling bills, especially in Southern and Eastern Oregon.

These increases are coming from two requests: a general rate case and a power cost update. The general rate case seeks to add $75 million to residential customers’ bills. The power cost update asks to raise residential rates by $31 million. Combined, this is the largest residential increase for Pacific Power in 20 years.

Pacific Power’s big bill increase request could break customers’ budgets.
Now is not the time for a large bill increase for Pacific Power customers. In a year with historic rates of inflation, increasing bills at this level is cause for concern. Oregon households are already struggling to make ends meet. Higher bills could force many to choose between electricity and necessary costs like food or healthcare.

What is included in the rate increase request?

• Wildfire preparedness (repairs and upgrades to Pacific Power’s system)
• Increasing profit margins
• Seasonal residential rates
• Increasing the single-family base charge
• Inflation
• Oregon Commercial Activities Tax

In addition to these requests, Pacific Power wants to change how it handles forecasted power costs. These rule changes would shift risk to customers to protect its profits. This change would undermine the hard work CUB has historically done to protect customers. And it could leave Oregon households on the hook for millions of dollars a year.

Pacific Power is seeking millions in wildfire prevention costs.
Pacific Power plans to invest about $35 million in capital costs. These investments will go toward improving the distribution system in Oregon. This is the system that moves electricity from big interstate transmission lines to customers within the state. Pacific Power plans to spend $19.6 million on wildfire mitigation for its Oregon system in 2022. The utility also plans to spend an additional $20 million on vegetation management.

Wildfire management is necessary for keeping Oregon safe as the climate changes. Reasonably, the capital costs will be recovered over decades, not a large increase over one year. However, customers must only pay for reasonable costs. CUB will be looking into these requests to make sure they are reasonable.

Customers shouldn’t pay to increase profit margins for wealthy shareholders.
Pacific Power is asking customers to pay approximately $8 million more annually just to increase its profits. This increase would only benefit wealthy shareholders. Pacific Power is owned by Berkshire Hathaway, the investment firm of one of the richest men in the world, Warren Buffett. Berkshire Hathaway’s utility investments had record profits last year. Oregon customers should not foot the bill for making the wealthy even wealthier.

Seasonal Rates: Southern and Eastern Oregon shouldn’t pay higher rates for summer bills.
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. CUB is wary of the utility’s claims. After record heatwaves across the state in 2021, CUB is concerned about making this change as Oregon’s summer energy needs rise. We will be investigating alternatives to Pacific Power’s proposal.

For customers in warmer climates, like Southern and Eastern Oregon, this could have serious consequences. These areas have higher energy use during summer peaks. By switching to seasonal rates, customers in areas like Umatilla and Jackson County would see much greater impacts on their bills.

These customers already have a higher energy burden and fewer resources. Although moving to seasonal rates would benefit households in the winter, CUB is looking into methods to lower this disparity.

Increasing the Base Charge for Single-Family Homes
Currently, single-family homes pay $9.50 each month as a base charge. Pacific Power is requesting to increase that amount to $12 a month. A 26% increase in the fixed charge means that these customers have less control over their bills. This change is another move by the utility to shift economic risk onto customers and stabilize risk for shareholders.

Inflation is driving this rate increase
$8.4 million of the cost increase of the general rate case is due to inflation. Pacific Power’s costs have increased, which it is passing along to customers. This includes basic operating costs like electrical equipment, office services and supplies, and employee benefits. Inflationary pressures are partially driving this general rate case increase.

Pacific Power Asks to Include Oregon Corporate Activities Tax in Permanent Rates
The rate increase also includes $8 million from a state tax increase. The Oregon Corporate Activity Tax was a 2019 tax passed by the Oregon Legislature to fund Oregon K-12 education. This tax includes a 0.57% tax on the sales of goods and services. The law applies to companies that do more than $1 million per year in commercial activity in Oregon. Pacific Power is moving to include this tax permanently in customer prices, which is allowed under Oregon law.

Changing Forecasting Rules: Customers shouldn’t shoulder risk to benefit shareholders.
Right now, Pacific Power forecasts many costs that go into rates. This includes items like fuel and energy costs, which vary throughout the year. This forecasting never completely accurately predicts the future. But it does become part of customers’ bills.

Under the current structure, Pacific Power is only allowed to charge customers for the difference between the projection and actual costs. This charge only occurs in the rare case that the projection is off by a significant amount. This year, Pacific Power wants to change the rules.

In this proposal, customers would be on the hook to make up some of the difference from forecasting power costs. This ensures stable profits for Pacific Power. Pacific Power’s proposal could result in millions being added to customer bills in future years. These increases would come in addition to regular requests to increase rates.

CUB’s analysts are hard at work reviewing the utility’s requests. We will continue to fight for policies that protect customers’ wallets and the environment. Stay tuned for updates as this case progresses.

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