May Goes Out Like a Bear
Posted on June 8, 2009 by oregoncub
Tags, Utility Regulation
In the last week of May, CUB won a couple of important victories that should save customers of PGE and NW Natural tens of millions of dollars. Both of these came in dockets that dealt with incentives for utilities and demonstrate how pretty obscure technical issues can shift millions of dollars in costs to customers.
We know the current recession has harmed customers. Many customers have lost their jobs. Many have seen their retirement savings reduced. Many are struggling just to pay their bills. Under these circumstances, every dollar that stays a consumer’s wallet makes a real difference.
PGE
For PGE customers, CUB was successful in getting the PUC to place a cap on the amount of “decoupling” adjustments that can be charged to customers.
We wrote about decoupling a few weeks ago. The idea of decoupling is to “decouple,” or unhook, utility profits from the volume of energy that is sold. Having a utility’s profits tied to the amount of energy sold creates a disincentive for that utility to invest in energy efficiency programs to help customers reduce their usage. The PUC granted PGE a decoupling mechanism in January.
The problem with the decoupling mechanism is that it makes up PGE’s lost profits due to decreased energy demand regardless of whether the reduction in demand comes from energy efficiency or from economic conditions. In a recession, like we’re experiencing now, the demand for energy goes down significantly more than any energy efficiency program has ever accomplished. CUB was concerned that applying the decoupling mechanism during the current recession would cost customers more than $50 million without any additional investment in energy efficiency necessarily being made.
When the PUC adopted PGE’s decoupling mechanism, they limited it to two years and placed annual caps on the amount of money that PGE could charge customers for its lost profits. During any one year customers could not be charged more than a 2% surcharge. If the decoupling adjustment was greater than 2%, the amount above the 2% would be “rolled over” and charged to customers the following year. CUB provided an analysis to the Commission which showed that the current economic recession, which is believed to be the worst in several decades, would lead to us paying for these decoupling adjustments for the next 5 years, beyond the two-years of the decoupling trial phase.
The Commission agreed with CUB and eliminated the roll-over provision. If the decoupling adjustment was greater than 2%, the company has to absorb any charges above 2%. CUB estimates that this will save PGE customers tens of millions of dollars. Now we push to make sure PGE invests more in energy efficiency.
NW Natural
NW Natural was asking the PUC to exempt earnings from natural gas purchasing from its earning sharing mechanism. The earning sharing mechanism is designed to give gas companies an incentive to manage natural gas costs. As part of the mechanism, NW Natural is required to share profits with customers that are in excess of its allowed rate of return (or profit margin). Last fall, the PUC agreed with CUB and adopted a mechanism which included profits from gas purchasing in the earning sharing component.
NW Natural recently went to the Commission and asked them to change that mechanism allowing gas costs to be removed from the earnings sharing mechanism. Natural gas prices, like gasoline prices, have fallen a great deal in the last year. When gas costs were forecast for the 2008-09 winter, it was expected that they would be much higher than what actually happened.
NW Natural’s actual gas costs have been well below what was forecast, increasing their profits by tens of millions of dollars. If the PUC accepted their proposal, these profits would have been exempt from sharing and the company would have retained them and not have had to share them with customers. CUB went to the PUC and argued in support of requiring the company to continue to share these excess profits, and the PUC sided with CUB and ordered NW Natural to share. And as most of us learned when we were kids: it’s good to share. And we think that’s especially true when consumers benefit.
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03/16/17 | 0 Comments | May Goes Out Like a Bear