CUB Files New Testimony, Taking PGE to Task for Not Controlling Costs

CUB filed what’s called Surrebuttal Testimony (meaning the second round of testimony) in the Portland General Electric rate case before the Public Utility Commission early this week. When PGE originally filed their rate case, they were asking for an increase in residential customers’ bills of 9.5%. That has since risen to 13.9%, and while some of their requested increase can legitimately be laid at the door of wholesale market cost increases, a significant portion of it cannot.

In our Opening Testimony, we took PGE to task for not having good cost control. We even suggested at one point, in speaking to PGE senior management, that perhaps the Company was trying to control costs, but not successfully telling that story. Their Rebuttal, however, while claiming that they do manage costs effectively, offered no new evidence of that. In fact, although PGE did accept a few reductions suggested by the Staff of the Public Utility Commission, they accepted none suggested by CUB or other parties, and offered no new reductions themselves. CUB therefore responded on Monday in our Testimony that, “Based on the Company’s Rebuttal Testimony, we must conclude that PGE has accurately told its story on cost control, and that the resulting evidence proves that PGE has not made much effort to control its costs. This lack of cost control is a large driver of this rate case.”

This is especially problematic in a time of economic turn-down and increasing unemployment, which has risen to 6.5%. PGE made a point of acknowledging this in their Rebuttal Testimony, saying, “We fully appreciate that the current state of the economy and rising costs are major concerns for our customers,” but has not followed through with helpful cost control measures. As we stated in our Testimony this week: “PGE fails to identify and quantify a single dollar of savings in the 2009 test year outside of what the Staff identified for them.”

CUB proposed a series of adjustments in the increase PGE has requested:

1) Cut 1% from the Company’s overall revenue, $18 million out of $1.8 billion total, to send a message to upper management that controlling costs needs to be taken more seriously. This is the largest such recommended cut that we have seen or suggested, and was given full support by PUC Staff.

2) Remove the cost of PGE’s newly purchased helicopter, which we don’t believe has been proven cost-effective, and won’t be “used and useful” in 2009 anyway.

3) Disallow the $1.2 million cost of “Generation Excellence,” a program focused on PGE’s power plants, and which the Company hasn’t been able to justify based on quantified benefit to customers.

4) Disallow the $300,000 cost of the “Customer Focus Initiative,” which doesn’t focus on serving customers by offering cost-effective measures.

5) Disallow $1 million in costs of the $2.5 million cost of the Boardman Simulator, an on-site training tool at the Boardman power plant.

6) Disallow the money budgeted for open positions we believe might well not be filled, because the money for those positions would come out of customers’ pockets anyway, going to shareholders if not filled by the end of the year.

7) Reduce PGE’s Research & Development budget to a historically justified amount of $240,000, rather than the $2 million originally requested.

8) Remove the employee discount from customers’ rates. We see no good reason for all other customers to be subsidizing a portion of these customers’ electricity usage. Especially with rates increasing, and the subsidy therefore increasing, on a regular basis.

9) Remove PGE’s proposed $2 million increase in their Uncollectibles Fund. The Oregon Legislature increased low-income bill payment assistance by 50% in 2007, and so any rise in the amount of uncollectibles should be offset to a great extent.

10) Reject PGE’s most recent decoupling proposal.

A little explication of the decoupling issue may be in order, for those who have heard positive reports about it, and for those who have never heard of it. Decoupling is one method of attempting to achieve conservation by removing the link between revenue and energy sales, so that the utility company will not have a disincentive for promoting conservation. CUB has supported decoupling in the past, as with Oregon’s natural gas companies, when the program was tied to real energy efficiency gains. But the current decoupling proposal in this rate case is for PGE to get decoupling and then we’ll check in in five years to see if we got any energy efficiency. In our Testimony this week, CUB executive director Bob Jenks says, “Give PGE decoupling and give them 5 years to increase energy efficiency.  This is like telling my daughter that she can have an allowance if she does certain chores around the house, but having the allowance begin today and then, five years from now, she needs to show that she did her chores. A better approach would be to tell the Company that decoupling will be considered when it is tied to additional energy efficiency programs.”

If you read our blog regularly, you may already know that this case has caused a certain amount of frustration here at CUB. In fact, Jeff Bissonnette said at a Fair and Clean Energy Coalition meeting on Tuesday, that Bob Jenks was “as exercised about this case as I’ve ever seen him, and if you know Bob, you know that’s saying something.” Well, say what you will about Bob, or CUB, but it’s pretty rare for PUC Staff to express frustration publicly about a case. However, Staff’s testimony was unusually plainspoken in rejecting most of PGE’s requests. Staff says, “The burden is on PGE to show the reasonableness of its proposed cost increases. Issue after issue Staff has highlighted PGE’s lack of substance to demonstrate a need for the cost increases it has requested.”

We couldn’t have said it better ourselves.

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