WUTC: Commission approves lower-than-requested rate hike for Pacific Power customers

Commission approves lower-than-requested rate hike for Pacific Power customers

Docket Number UE-061546 & UE-060817
June 21, 2007

OLYMPIA, Wash. – Pacific Power & Light’s electric customers in Washington will see a lower rate hike than the company originally sought after state regulators today approved a portion of the utility’s increase request. New rates are expected to take effect next week.
The Washington Utilities and Transportation Commission (UTC) approved a 6.5 percent increase in monthly residential electricity rates, raising the average residential customer’s monthly bill by $5.20. Pacific Power had originally requested an increase of $8.51 a month. The average residential customer currently pays $79.64 a month.
By approving a portion of the company’s request, the UTC granted a $14.2 million increase in Pacific Power’s annual electric revenues, down from the $23.2 million the company originally requested last October and subsequently reduced to $18.6 million.
The UTC disallowed recovery of $3.4 million for severance-pay packages for executives who left after MidAmerican Energy Holdings Company (MEHC) purchased the company from United Kingdom-based Scottish Power last year. MEHC is owned by Omaha-based Berkshire-Hathaway, Inc., and its principals, Warren E. Buffett and Charles Munger.
“In recent years, we have witnessed increasing attention to, and criticism of excessive levels of executive compensation and bloated severance packages,” said the commissioners in their written order. In disallowing a portion of these costs, the UTC found a “mismatch” between the expense of the executive severance compensation and the benefits to ratepayers from their departure.
The commission also agreed to boost the company’s low-income energy assistance program by $418,000. Pacific Power currently operates the program with about $589,000.
The commission accepted the company’s formula to resolve a long-standing dispute over how to allocate costs in the utility’s six-state territory, which is divided into eastern and western service areas. At issue was how to ensure Washington’s Pacific Power ratepayers pay only for power costs incurred to serve the state and not costs that should be paid by customers in the company’s eastern service region. The new formula will be in place for a five-year trial period and will be reviewed by an oversight committee that could develop suggestions for future improvements.
The commission authorized a return on equity of 10.2 percent. The return on equity is a measure of the profit the company may earn.
Portland, Ore.–based PacifiCorp operates in six western states -- Utah, Oregon, Idaho, Wyoming, California and Washington – and serves 1.6 million customers. It does business in Oregon, Washington and California as Pacific Power & Light.
During the case, the commission received 81 public comments, all but two opposing the proposed rate hike. PacifiCorp’s retail customers in Washington account for about 8 percent of the company’s total customers in a six-state territory.
The UTC is the state agency in charge of regulating private, investor-owned electric utilities in Washington. The commission’s responsibility is to ensure regulated companies provide safe and reliable service to customers at reasonable rates, while allowing the utilities the opportunity to earn a fair profit.
In Washington, PacifiCorp has 124,000 electric customers in five counties: Columbia, Garfield, Kittitas, Walla Walla and Yakima. The utility serves the cities of Sunnyside, Selah, Pomeroy, Yakima, Toppenish, Walla Walla and Dayton.

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Editor’s note: A copy of the commission’s order is available at the UTC’s website: www.wutc.wa.gov/061546


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