Why Are PGE Bills Increasing in 2024?
Posted on January 11, 2024 by Charlotte Shuff
Tags, Oregon Utilities 101, Energy, General Interest
Customers of Portland General Electric (PGE) saw billing rates increase on January 1, 2024. This 18% increase is the largest in more than 20 years. An average household can expect an average of $22 per month more on their PGE bill. This is on top of a rate increase on January 1, 2023. Combined the two increases mean bills in January 2024 are 30% higher than bills 13 months ago, in December 2022.
Now, many customers are asking questions. Why is PGE increasing bills in 2024? Can we expect more in the future? Let’s look at some of the specific reasons for this increase and then address why the regulatory process has failed to keep these increases at an affordable level.
CUB is Working Against Rising Utility Bills
Rising utility bills have been the trend over the past few years. From high fuel costs to expensive new infrastructure projects, households are feeling the burden. CUB pushed back on the request from the state’s largest electric utility throughout 2023. While we can always expect for-profit companies to ask for more money, CUB works to protect customers.
In this case, we were part of an agreement to cut $34 million from PGE’s rate increase. In addition, there is a cut to investments that will reduce rates for the next 16 years. A PGE priority was to increase its shareholder profits and CUB successfully rejected this increase.
But knowing that bills are lower than they could have been offers little comfort to families that are struggling to pay the bill.
Enough is Enough. PGE’s rates have increased by 30% in the last 13 months. But regulators have not reviewed the overall rate level and asked the question: Are rates fair and reasonable?
Why Are PGE Bills Increasing?
This year, regulators approved an 18% increase in rates that will drive up customer bills by an average of $22 per month. The reasons for this bill increase include higher power costs (fuel prices, sales and purchases on the energy market), capital investments, and rising operational costs like staffing.
Changes in Power Costs
In this case, the increase in power costs is $216 million. The combination of fuel costs (natural gas and coal), power sales and purchases on the market is commonly referred to as power costs. Almost half of this is the cost of natural gas (methane).
Natural Gas is Driving Up Bills
Because the increase in power costs represents more than half the overall increase, the cost of natural gas is approximately 25% of the total increase. For an average customer seeing an additional $22 per month, about $5.50 comes from natural gas cost increases.
The increased power costs are largely from a volatile electricity and gas market. The cost of electricity, natural gas, and coal has increased power costs for PGE customers. Globally, the cost of fossil fuel energy has increased. This is due to supply issues, mainly from recent geopolitical conflicts. Fuel costs are hard to predict but investments in renewables reduce the need for coal and natural gas.
Renewables are Offsetting These Costs
Clearwater Wind, PGE’s newest renewable investment, is beginning to produce power. This Montana wind facility does not require fuel so it offsets power costs. It reduces the need to purchase gas and generate power from gas plants and it decreases the need to buy power from the wholesale market. It is also eligible for enhanced tax credits from the Inflation Reduction Act and overall will reduce rates by about $20 million.
Utility Infrastructure Investments & Employee Costs
Non-power costs increased by $175 million, including investments in PGE’s system and inflation-related staffing costs.
This year, PGE asked for more money to cover multiple new and existing investments to serve customers. New capital investments are also how utilities are allowed to make a profit according to Oregon law. Utilities need to update their system to safely provide electricity to customers. They have to invest in new wires and poles where the system is growing. They need to update equipment that is near the end of its useful life.
Consumer advocates, including CUB, were able to push down costs by $34 million for investments at the Biglow wind farm and Faraday hydro facility, among other projects.
Investment in Generating Electricity
PGE is asking to spend money on two existing wind facilities, Biglow and Tuccanon, to improve the performance of the facilities. PGE also planned on spending funds to reduce emissions at one of its natural gas power plants in Columbia County, Oregon
Faraday Hydroelectricity Facility: In 2018, PGE planned on spending $84 million rebuilding the Faraday facility on the Clackamas River (near Estacada). The project has been delayed by 4 years and has ballooned in cost. In this case, PGE revealed that it actually spent $190 million on Faraday.
Biglow Wind Facility: CUB expressed great concern with PGE asking customers to pay for maintenance issues at Biglow. In 2022, a wind turbine blade fell, marking a significant safety issue. CUB asked regulators to reject a $1 million capital investment from PGE’s rate increase related to issues at Oregon’s largest wind facility. The amount approved for rates was kept confidential but PGE did agree to not include a chunk of costs based on CUB’s advocacy.
Inflation in Employee Costs
PGE has 2,873 employees. With inflation running well above recent levels, PGE costs of staffing were an additional increase in costs. Salaries increased and health insurance and other benefits increased. This increase did not include bonuses for PGE executives, an issue CUB has fought over the years.
Can We Expect More Bill Increases?
Short Term: Small Increase Expected Spring 2024
In the short term, customers can expect a small increase in their PGE bills this spring. CUB is anticipating an additional 2% increase around April related to wildfire mitigation costs.
CUB applauded regulators the Public Utility Commission for limiting customer impact this winter. We had major concerns that households would be unable to afford their energy bills when new rates went into effect on January 1st. To temporarily mitigate customer bills, the Commission asked PGE to delay some costs to April 2024. By spreading out the rate increase, families can avoid some of the bite of higher bills during this winter heating season.
Long Term: Uncertainty and Flawed Regulation
In the long term, it is hard to say what customers can expect to happen on their PGE bills. This year’s increase exposes flaws in Oregon’s system of regulation.
This large increase in monthly bills shows real and significant flaws in Oregon’s system of regulating utilities. Our current structure leads regulation to focus on each individual cost, but not on the overall affordability of rates.
What we’re up against:
- Utilities have an incentive to spend money
- Regulation looks at individual costs, not the overall impact to customers
- Utilities hide the impacts of their spending by filing dozens of requests per year
- Utilities use confidential filings to keep information secret
In our next blog, we will go through these issues in more depth. Stay tuned and follow CUB on social media for the latest information!
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02/12/24 | 4 Comments | Why Are PGE Bills Increasing in 2024?