Portland General Electric Denied Storm Cost Recovery
Posted on August 21, 2019 by Will Gehrke
Tags, Energy
The Oregon Public Utility Commission (PUC) has denied Portland General Electric (PGE)’s application to recover storm costs from 2017. Large storms can result in power outages for customers, and there is considerable cost associated with restoring the distribution system afterward. Costs during a storm recovery include the unplanned overtime pay of lineman workers and the replacement of damaged or destroyed distribution lines. PGE wanted ratepayers to pay for storm restoration costs incurred by the company in 2017, which was an unusually bad year for storms in the Portland Metro Area. If PGE’s application had been approved, residential customers would have experienced a rate increase of approximately 1 percent.
When the distribution system is damaged in a storm, the utility has an obligation to restore service to its customers. Utility rates are established on a forecast basis and major storm costs are difficult to predict. In some years, Portland does not experience any storms. In others, multiple storms roll through the city. Storm costs are not the only unpredictable variable in utility costs, however. There are a variety of costs that are forecasted, yet vary widely from year to year. Hydro conditions are one example; another is major outages at generating plants. The PUC has established ratemaking mechanisms to handle these types of variability.
To deal with the cost of major storms, the PUC has allowed PGE to establish a special account. The average of storm costs from the prior decade is used to estimate future storm costs and this estimated cost is then factored into the forecasted rates that customers pay. In fairer weather years, the funds collected from customers for major storms are placed into a reserve account to be used in future years when storm costs are above average. In 2017, PGE incurred $10.6 million in storm costs, but the company’s storm reserve account was depleted, so it did not have a way to cover the outsized storm recovery costs. PGE’s effort to recover these costs from ratepayers came as little surprise to CUB.
CUB argued that the overall dollar impact associated with the 2017 storms was not significant enough to approve the out of cycle rate change. To put this application into context, PGE was seeking an $8 million cost recovery. That figure seems large, until you realize that the company recovers nearly $2 billion from ratepayers each year. The PUC ultimately agreed with CUB, finding that 2017 storm costs were small enough for PGE to absorb. CUB is pleased with the outcome from this case. Stay tuned to our blog and website for future regulatory updates!
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08/21/19 | 0 Comments | Portland General Electric Denied Storm Cost Recovery