Who’s really writing the credit reports?
Posted on December 6, 2006 by oregoncub
Tags, Utility Regulation
Well, the cat is out of the bag now. PGE’s credit bag, that is. Apparently there was more going on than met the eye with a recent credit report written by Standard & Poor’s about PGE’s credit-worthiness. PGE cited the report’s rating of “negative,” and has been using the report as ammunition to fight for its requested 8.9 percent rate increase, and also for a power cost adjustment (PCA).
The PCA, about which we’ve written before, is an extremely important issue in the current rate case, and in other cases in which it’s been an issue for the past 5 years. PCAs have the effect of shifting the primary burden of risk in power cost changes off of shareholders and onto customers. This is totally inappropriate, since the utility is being paid a rate of return to manage that risk.
Now it surfaces that PGE might have been able to exercise influence over S&P’s credit report by editing the report so that it called for the PUC to implement a PCA, even though the draft report said nothing about a PCA. They then used that report as independent evidence in a rate case asking for a PCA. This not only calls into question the basic integrity of credit reports such as this one, but also makes us wonder if these reports should be included in rate cases at all.
PGE employees apparently had a hand in editing the supposedly independent report, and it appears that the amount of influence exercised by PGE over the final version of the report went beyond the expected level of fact-checking. (Our thanks to Industrial Customers of Northwest Utilities, the party who uncovered the history of the report.) This question of company influence on the report is extremely problematic: third-party reports should not be used to manipulate regulatory outcomes.
Both Willamette Week and the Oregonian made the issue a top story today. On the one hand, we know it’s really easy to beat up on PGE in the press. On the other hand, actions like this one make it impossible not to criticize them.
It remains unknown whether this particular irregularity was the result of merely one analyst’s poor judgment or whether the problem is more widespread and systemic. Utilities cite credit agency reports in rate cases all the time. PGE says there is nothing wrong with what they did, that it is just business as usual. If that is true—if collusion is the norm—then these reports have no value to regulators. Enron is gone, but Wall Street continues to be the center of ethical controversies.
We meet today with a representative of a project to chronicle Oregon ballot measures for the Oregon Historical Society. We will be handing over some materials from the 1984 ballot measure that created CUB. In digging out those materials we came across this ghoulish graphic, used in the Halloween time period of the campaign.
Okay, it’s rough and it’s dated, but it’s still a valid critique (and don’t ya love the nose on that guy?). So we’ll keep fighting “to protect and defend the regulated arena” as Fred Heutte, a CUB board member, put it. Somebody’s got to be a voice for residential ratepayers, particularly in light of questionable credit reports and other tricks of the trade.
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03/10/17 | 0 Comments | Who’s really writing the credit reports?