Commission Rejects NW Natural’s Environmental Remediation Stipulations

Our regular readers will remember that last year NW Natural filed for a General Rate Case (UG 221) which included the costs associated with NW Natural’s Portland Harbor Superfund clean-up. Decades ago, gas was manufactured from coal at a site along the Willamette River; and today, NW Natural is beginning what could be a long and expensive program to clean up the site. Last year, CUB argued that the costs of the clean-up were unrelated to current gas service, since no current customers purchased manufactured gas from NW Natural. The utility’s shareholders should, therefore, have to pay for half of all of the clean-up costs – a sharing mechanism. The Oregon Public Utility Commission (OPUC) rejected CUB’s recommendation for a sharing mechanism and asked the parties to develop new proposals, in a new docket, based on the “use of an earnings test.” Thus was born this year’s UM 1635 proceeding.

Over the course of this year, CUB submitted testimony to the OPUC; but ultimately CUB and the other intervenors were able to reach agreement with the utility and the OPUC Staff on a mechanism that would ensure that NW Natural contributed to the clean-up costs with the amount varying each year, depending on the utility’s profits. But the OPUC – two Commissioners writing for the majority – decided to reject both of the hard fought, and then hard negotiated, environmental remediation stipulations. The reason? Commissioners Bloom and Savage concluded that:

[T]he parties’ proposed stipulations do not fairly and prudently resolve whether and how NW Natural’s environmental remediation costs should be shared with its customers.”

In particular, the OPUC seemed to believe that the settlement did not make Northwest Natural pay enough of the clean-up costs that have already been incurred. But the Stipulated Agreement was negotiated and written with a trade-off in mind so that the utility would pay less of what had already been incurred but would pay more of what will be incurred in the future. CUB thought this was a good trade-off because only $98 million had been incurred to date; whereas the future cleanup costs are likely to be in the hundreds of millions of dollars.

So here we are today, with the latest order on the subject having rejected the Stipulated Agreement—and once again floating the idea of “sharing”. And the only direction provided in the latest order is that $7 million for past costs is not enough, and:

Further, the environmental remediation costs at issue raise significant public policy considerations about how the Commission should address the sharing of costs, earnings reviews, deadbands, and other proposals made by the parties to apportion costs fairly. We believe that these issues should not be resolved through a stipulation, but rather through a more thorough examination of the facts and policy stand points.”

A conference has been scheduled with the Administrative Law Judge that works on these matters. CUB is pondering what to do—and to expect—next. One thing is, however, clear -  the environmental remediation issue which we began working on in 2012 will now be with us as we enter 2014. We will keep you advised!

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