PUC Raises Idaho Power rates 26%, Rejects Even Higher Summer Rates

In its original filing, the company asked for a residential rate increase of more 37%, including a huge increase in the company’s profit margin. CUB, the PUC staff and other parties were able to challenge millions in costs and reduce the increase to 26%. However, the PUC staff and Idaho Power argued that a 26% increase was not a large enough price signal to discourage summer air conditioning use, and pushed for a seasonal rate structure (June, July and August) that would increase rates for summer air conditioning by approximately 35%.

They argued that such an increase reflected the company’s cost of serving summer air conditioning load and a big summer increase would help reduce summer air conditioning.

CUB opposed the big seasonal increase. We pointed out that the household income in Ontario is significantly below the rest of Oregon, and were concerned about the affect it would have on customers who are struggling to pay bills. A 26% increase is unfortunate and will produce enough of a rate shock for customers. Rate increases above this have the potential to seriously harm customers who are already dealing with a terrible economy.

CUB also pointed out that residential customers of Idaho Power are winter peaking, meaning they use more power in the winter than in the summer. The summer peak is caused primarily by irrigation customers. The PUC staff and Idaho Power proposed that other customers subsidize irrigation customers, because making them pay their actual cost of service would push their rate increase above 30%. CUB could not understand the contradictions in the proposals for residential and irrigation customers. It makes little sense to subsidize summer peaking customers to keep their increases below 30%, while at the same time increasing summer rates by more than 35% for residential customers using air conditioning—particularly when residential customer usage peaks in the winter, not the summer.

While power costs are higher for Idaho Power in the summer, the summer rates being proposed by Idaho Power and the PUC staff did not actually reflect Idaho Power’s summer cost of service. By implementing summer rates in June, when Idaho Power costs are low due to snowpack run-off for hydroelectric production, Idaho Power would be charging rates well above their June cost-of-service.

This issue is not going away. PUC staff is interested in moving towards price signals as a way to encourage customers to reduce their usage. From an economist’s standpoint, behavior can be influenced by moving towards seasonal rates to discourage summer air conditioning, time-of-use rates (rates that vary between on-peak and off-peak periods each day) to discourage usage during the peak hours each day, and critical-peak pricing (where rates go up five or sixfold during the hottest and coldest days of the year) to discourage usage on the days with the greatest electric demand.

CUB tends to view these proposals skeptically—unless they are proposed as optional pricing plans that customers can consider, but are not required to use. Electricity is an essential service. Many folks do not have time, education, or technology to move their usage from one part of the day to another. When electric prices change daily or hourly, it creates a huge burden on customers. The end result is often sending customers a bill they cannot pay.

A better way to promote energy efficiency is through programs that help customers reduce their usage. Oregon has been a national leader in investing in efficiency, and we have seen average usage per customer go down significantly. In this Idaho Power case, CUB argued that Idaho Power should first expand participation in its energy efficiency programs.

The battle of variable rates versus energy efficiency is ongoing. As utilities invest in smart meters, they will gain the ability to change prices as often as regulators will let them. We will see utilities presenting rate increases as an attempt to send better price signals. But pilot programs in California and other states show that nearly all saving associated with customers responding to price signals comes from customers with college degrees and higher than average incomes. These are the people who can purchase programmable thermostats, energy efficient appliances and invest in weatherization. In Oregon, we must remember that not all of our citizens have access to such technology, and that utilities, the PUC, and CUB serve them as well.

***

One quick note from CUB—we welcome Kevin Parks to our staff. Kevin, although a licensed attorney, is a participant in CUB’s Law Clerkship Program. Kevin was born and raised in Kansas City, and went to the University of Kansas before moving west to Oregon to study public interest environmental law. During law school in Eugene, Kevin was an editor on the Oregon Review of International Law and served as Chief Justice of the University of Oregon Constitution Court. He also worked as a clinical attorney for the Lane County Public Defenders, Lane County Legal Aid and Advocacy Center, the Western Environmental Law Center, and worked as a law clerk in the Law Offices of Marianne Dugan. Kevin also spent a summer of law school working with the Wildlife Conservation Society in Kabul, Afghanistan. Having graduated from the University of Oregon’s School of Law in May 2009, Kevin immediately took and passed the bar. Kevin is thrilled to be practicing in Portland, and CUB (especially Catriona, our Staff Attorney) is very pleased to have Kevin to help lighten the load!

To keep up with CUB, like us on Facebook and follow us on Twitter!

• Share this post on Facebook.
• Share this post on LinkedIn.
• Share this post with email.

« Back