PGE Wants to Raise Rates in 2016
Posted on April 2, 2015 by Bob Jenks
Tags, Energy
PGE recently filed a general rate case which proposes to raise rates in January 2016 and later in the second quarter of 2016. The first increase is 2.6% on residential customers and the second is 4.3%. The reason for the second increase is that it corresponds with the date when PGE’s new power plant comes on-line. PGE proposed to partially offset this increase by paying a refund to customers over one year rather than two years. In addition, because the BPA’s residential exchange credit (the mechanism that shares benefits of the federal hydro system with customers of investor owned utilities) is increasing, residential customers will receive an additional offset. The net effect is that rates would go down by 1.2% in January, before they go up by 4.3% in the second quarter of the year.
CUB is just beginning its review of the filing. Our initial review has identified several things:
- The 2.6% rate hike on January 1 is not justified by the filing. PGE’s filing demonstrates that rates are reasonable until the new Carty generating plant comes on-line later in the year. Unfortunately, this has become standard practice for PGE. By filing a rate case early, so the rates will go into effect several months before the generating asset comes on-line, PGE guarantees that it can roll the new plant into rates the very first day it comes on-line so there is no regulatory lag between using the plant and charging customers for it. In addition, by making CUB and other parties review the costs of the plant when it is still months away from completion, the company guarantees that our review will be limited to forecasts of construction costs rather than actual costs.
- Even though PGE rates were established last year, PGE is asking for an increase in its allowed Return on Equity (profit margin). There have been no changes in interest rates or other market mechanisms in the last year that justify increasing PGE’s profit margin so soon after the last increase.
- This filing shows that PGE has been crying wolf about its pension liability in recent years. In 2013, PGE was forecasting that shareholders were going to have to pay $180 million over the next 10 years to support its underfunded pension liability. In 2013, PGE claimed to have a prepaid pension asset that was $90.9 million which its shareholders had financed. The company asserted that it needed to earn a rate of return on this amount because it was such a burden to shareholders. But the current filing does not reflect such dire circumstances. PGE’s current filing shows that shareholders have not made contributions since 2011 and the Company is forecasting no contributions in 2015 or 2016. And that burdensome prepaid pension asset has declined to $18 million.
- Finally, we note that PGE made some changes to how it allocates costs, shifting costs to residential customers, while at the same time the Company has not proposed to take any steps to remove the subsidy that residential customers pay to industrial customers by funding most of the energy efficiency resource that is purchased by the utility.
We will keep you informed of this case in the coming months, so stay tuned!
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04/28/17 | 2 Comments | PGE Wants to Raise Rates in 2016