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Commission denies Pacific Power request to increase electric rates
The commission has denied a request by Pacific Power to raise electric rates by nearly 18 percent, saying the company failed to show the extent to which the company’s out-of-state facilities benefited Washington ratepayers.
The three-member Washington Utilities and Transportation Commission (UTC) said the company did not show that its allocation of power-supply costs among the six states it serves was fair to Washington ratepayers who would be forced to pick up those costs. (Docket No. 050684. For more information, see "Documents" link below or our April 17, 2006 press release.)
“When a company files a request to increase rates or charges, it bears the burden of proof to show the increase is fair, just and reasonable,” the commission said in a written decision. Washington customers should not bear the costs of out-of-state power facilities, mainly in Utah, when “the company has not sufficiently demonstrated either the direct or indirect benefits to Washington state of its systemwide resources.”
The company has 10 calendar days to seek reconsideration of the commission's decision or appeal the ruling to any superior court within its five-county service territory in Washington.
The UTC held additional hearings Feb. 2 and 3, 2006, to consider the effect of a potential sale of PacifiCorp on the company's need for a general rate increase. The UTC's energy staff, acting as an independent party, had filed testimony recommending that the commission deny the rate increase for Pacific Power and Light's 120,000 Washington electricity customers.
Under PacifiCorp's proposed general rate increase, a residential customer using 500 kilowatt-hours per month would see an increase of $5 in their monthly bill. The overall change in revenues would be $39.2 million, a 17.9% increase. Pacific Power customers shared their views on the proposed rate increase at a public hearing on Dec. 1 at the Yakima County Courthouse.
According to the company, the increase is driven by higher power costs and investments to meet growing demand and assure reliability. The rate case also includes proposals for:
- A new way of allocating PacifiCorp's costs among the six states in which it operates.
- A power cost adjustment mechanism, which would allow the company to recover power costs from customers in between general rate cases, and
- A "decoupling" proposal, which would allow the company to invest in energy conservation without risking lower revenue. If customers use less energy (e.g. through energy conservation or more efficient appliances), utilities may be at risk of not recovering their cost of doing business. Proposals such as PacifiCorp's are intended to "decouple" company revenues from electricity sales.
The case involves a long-standing dispute over how to allocate costs in the utility’s six-state territory. The 1988 merger of Pacific Power & Light with Utah Power & Light combined two distinct service territories – the eastern region in Utah, Wyoming and Idaho served primarily by higher-cost coal and natural gas, and the western region in Washington, Oregon, and California served primarily by less-expensive hydropower – into a single utility called PacifiCorp, based in Portland, Oregon.
Because of the disparity in power costs between the two regions, state commissions since 1988 have struggled to find a uniform method to apportion system-wide costs. “As states in the eastern area, particularly Utah, have experienced greater load growth than states in the western area, the Pacific Power states are concerned that the costs to serve the load growth in Utah would be unfairly shifted to the western area,” the commissioners said in their order.
To date, only Idaho, Oregon, Utah and Wyoming have endorsed a common formula – known as the “Revised Protocol” – and most of their endorsements have come with conditions designed to protect ratepayers in each state.
In rejecting the allocation formula, the UTC found that the company “failed to carry the burden it alone bears to prove that resources in its eastern service territories, remote from Washington, provide tangible and quantifiable benefits to customers in this state.”
In its order, the commission said that while it would support a well-designed decoupling program, it could not approve a proposal for PacifiCorp until it determined the proper allocation of the utility’s costs to Washington.
Staff contact: Tom Schooley, (360) 664-1307
Posted/updated: 04/17/2006
Document list:
050684 Documents Schedule Orders All
