PGE Asks for Even More Rate Increases
Posted on March 5, 2024 by Charlotte Shuff
Tags, Energy, General Interest
Despite an 18% increase in January, skyrocketing bills, and heavy outcry from customers, Portland General Electric is asking for another rate increase. PGE is requesting an increase of $202 million or 7.2% for residential customers on January 1, 2025.
The utility company said in a statement to the press that it wants to “raise customers’ rates so that it can make investments in battery storage and other infrastructure improvements.” CUB’s review has found that the increase is unnecessary and PGE’s claims about it are misleading.
Thousands of PGE customers are still reeling from the rate increase and ice storm bills this January. PGE’s rates for Oregon households have already gone up by 30% from December 2022 to January 2024. Now is not the time to request even more from Oregon households.
Enough is enough.
$202 Million is Just the Starting Point
PGE has requested $202 million under the guise of needing more money for battery storage projects. This is not a forecast of 2025 prices – the January 1, 2025 price increase could be much greater.
This case does not include wildfire mitigation costs or costs associated with the Colstrip coal plant. CUB expects the utility to ask for both in additional filings later in the year. It also does not account for planned updates to wholesale power and fuel prices, which will be added in the fall.
These nickel and dime increases are an ongoing problem for customers of Oregon’s largest electric utility. We need regulators to step up and stop endless bill increases. (Read More: Is Oregon Utility Regulation Part of the Problem?)
Battery Storage is the Excuse, Not the Cause of this Increase
PGE cites new battery storage investments as the primary cause of this filing. But CUB’s review of the case found that battery storage will have little effect on January 1, 2025 rates. The filing includes the new Constable Battery Storage project, but the cost associated with that is $17.3 million (8.5% of the $202 million increase).
This project is currently projected to come online on December 31, 2024. This means that any delays will mean that it could easily not be serving customers when rates go up. PGE could be asking customers to pay more for batteries that aren’t even turned on.
While battery storage is the talking point, the case is much more of a wish list by management:
- Higher profit margins
- Making it easier to raise prices every winter
- Shifting financial risk to customers
Higher Profit Margins
In 2023, PGE asked to increase its profit margin but failed to achieve that increase. Even though that decision is only weeks old, PGE is back asking for an increase in shareholder profits.
Portland General Electric currently receives a 9.5% profit margin. They want to increase to 9.75%, which is slightly below the 9.8% that they requested that regulators rejected in December 2023. This would add over ten million dollars to customer bills each year.
Making it Easier to Raise Prices Every Winter
PGE rates have increased by 30% since December 2022. Many customers have struggled to pay the huge bills associated with the cold January weather. But somehow the utility thinks that the problem with utility regulation is that it is too hard to raise rates. So they are proposing making it easier.
“It looks PGE’s diagnosis is that it’s too hard to raise rates and customers’ bills aren’t going up enough. They are looking at bills from the ice storms in January and seem to be asking, ‘How can we do more of this?’” - Bob Jenks, CUB Executive Director
PGE has proposed a new policy that will allow them to add billions of dollars in new investment to customers’ bills in rate changes every January. All without having to go through the work of a traditional regulatory process.
Guaranteed Increases Every January: PGE wants to guarantee new investments go into effect on January bills. This is when customer usage is the highest and the company will get the most immediate revenue.
Incentive to Overspend, Increase Profits: PGE is projecting half a billion dollars could be passed to customers each of the next two years under the new system. However, this new policy would only raise the incentive for the utility to overspend because it is easier to charge customers. These investments would be functionally unrestricted, as long as they are justifiable. Some costs could include vital infrastructure updates (new transmission, safety upgrades, etc.). CUB is unsure of what kinds of investment would be excluded from this mechanism.
Shorter Timelines for Advocate Review: PGE wants to shorten the time that CUB and other stakeholders are allowed to review their requests. This time is vital to dig into investments to make sure they are reasonable and useful for customers. Currently, advocates and regulators have about nine months to review a request. PGE is looking to shorten that to just three months.
Open the Door to Excess Profits. Under PGE’s proposal, new capital investments would be added to rates each year without accounting for the fact that customers are paying off existing investments. Imagine you finish paying off your car payments and then buy a new car. Then the car dealer charges you car payments for the new car but keeps charging you for the car you paid off. This will similarly allow PGE to earn excess profits.
No Shareholder Accountability: PGE wants to prevent CUB from examining its earnings to identify these excess profits and ask that shareholders contribute to the new investments. The mechanism gives the company profits above the level set by regulators and then hides these excess profits from scrutiny.
This proposal suggests that decision-makers at PGE are completely out of touch with their customers. Customers have struggled with the January rate increase combined with the arctic weather.
Social media has been filled with stories of bills that $100 to $200 more than normal. (The author of this blog paid $250 to PGE for heating their 700-square-foot apartment this January.) We know from history that many people struggle with the big increases. And thousands of customers are struggling to pay off those big January bills. Many customers unable to pay these bills will face shut-offs.
Yet, somehow, PGE’s response is to declare that they want to ensure big January increases happen every year.
Shifting financial risk to customers
PGE will also be re-proposing to leave customers on the hook for fluctuating fuel costs. It would also reduce financial responsibility for shareholders. Regulators rejected this proposal in December 2023.
Under Oregon rules, utilities are allowed to update the forecasted cost of fuel for electricity generation each year. The cost of electricity, natural gas, and coal has increased power costs for PGE customers. Globally, the cost of energy has increased due to global supply interruptions from recent geopolitical conflicts.
PGE wants to change how they adjust customer bills for power costs each year. Under the new policy it is seeking, the costs would be subject to an annual “true-up.” Each year, the utility estimates costs for fuels. In the new system, customers would cover 95% of the difference between what the utility spent and what was predicted.
This goes against existing standard business practices for Oregon utilities.
This Rate Increase Did Not Need to be Filed
Simply put: This rate increase did not need to be filed at this time.
Much of what PGE is asking for are things that they did not get last year. And the thing that they point to as the need for the case, battery storage investments, may not even be online by January.
If battery storage is the cause for PGE to file a rate case, then this is premature. It would have made much more sense for PGE to make its investments in battery storage first. Then, when those investments were providing customer benefits, filed for a rate increase.
But what is clear is that this case, filed now, was unnecessary.
CUB sees little to like in this new filing and will vigorously oppose it. Customers cannot afford it.
Enough is enough.
08/22/24 | 10 Comments | PGE Asks for Even More Rate Increases