April 16, 2001
Of pocketbooks and power bills
by Jeanette Knutson
The Washington Utilities and Transportation Commission (WUTC) devoted its April 11 public hearing to Puget Sound Energy's (PSE) restructured rate proposal and request for immediate implementation. Commissioners agreed they liked the concept of the proposal but delayed any action on it based on several areas of concern that required further clarification.
Dorothy Bracken, spokesperson for PSE said of the delay, "[PSE] is disappointed that the commission did not take immediate action particularly since [PSE's] proposal is designed in response to the critical energy issues surrounding the region. However, we will work on and respond to the specific points outlined by the commission with the objective of reaching a positive regulatory outcome at the next hearing on April 25."
Simply stated, PSE's proposed rate plan sought to charge customers based on how much electricity they used and when they used it. The plan divided the day into four segments ‹ morning, 6-10 a.m.; midday, 10 a.m.-5 p.m.; evening, 5-9 p.m.; and off-peak, 9 p.m.-6 a.m. and all day Sundays and holidays. Each segment had a different rate and the rates changed depending on if it was summer or winter. According to the plan, only customers who had special meters that can track power-use by time of day would pay the varied rates.
Other customers would continue to pay the current flat rate. In addition, a surcharge was to be levied on to all customers ‹ regardless of meter type ‹ and a bonus of 5 cents for every kilowatt hour saved if customers reduced their monthly bills by more than 10 percent from the same billing period the year previous was offered as an incentive program.
Besides the twenty or so people who spoke at the hearing, the commission received 250 e-mails, faxes and letters against the proposal and 34 messages in favor.
Public comments, as supplied by Marilyn Meehan, spokeswoman for the WUTC, included some of the following:
€ concern that only 420,000 customers qualified for the program (because they had the special meters) and that a half-million customers could not partake, yet all would be assessed a surcharge
€ concern that the proposal was merely load-shifting, not energy saving, causing people simply to shift what they do to different times of the day
€ desire to see the program voluntary instead of mandatory
€ need for proof that Puget incurs higher costs in the morning and evening time slots, and that higher customer charges are really warranted then
€ need for more proposals since businesses such as restaurants who serve breakfast at a certain time, for instance, cannot shift meals to obtain the greater savings
€ questions about why summer midday hours were more expensive than winter midday hours
€ questions whether customers' behavior will actually change through this time-of-use rate mechanism
€ desire to see Puget refer to the 1999 bills for their bonus program since many customers have curtailed power use drastically since then and won't be eligible for bonus money because they can't cut back any more than they already have
€ dissatisfaction that when PSE realizes a savings of 100-200 megawatts from customer power curtailment, the agency will sell the excess power to benefit shareholders, not customers
€ concern that if power becomes cheaper at 9:01 p.m., what will that do to the system
€ support for the concept but confusion amongst customers about the details because the proposal is so complex
€ concern for low-income, fixed-income and retired customers who are least able to afford higher rates from 10 a.m. to 5 p.m.
€ dissatisfaction that the spread in rates from high to low was as much as 25 percent; a 10 to 15 percent spread would be better
€ approval of the bonus incentive.
Business associations said that they needed more options. They wanted to do something but couldn't adjust their business schedules to suit the four time segments in the plan.
Meehan said counsel representing the public in utility matters pointed out that if the utility sells excess power at the going rate of $350 to $500 per megawatt, they will see huge profits and that the 5 cent per kilowatt hour bonus plan was not at all equitable for the customers. Since customers' conserving 10 percent of their energy use represents a real sacrifice ‹ a real inconvenience ‹ the bonus plan must be more equitable for them. Counsel also referred to the energy crunch as a supply problem and the proposed rate change doesn't fix the problem. Furthermore counsel questioned if the rate change were consistent with the 1996 PSE merger, when Puget Power merged with Washington Natural Gas. In the merger agreement, rates were supposed to be set for five years; changing them now is inconsistent with that merger document.
WUTC Chairwoman Marilyn Showalter recommended 10 elements to "hem in" the proposal. Her suggestions, per Meehan, are as follows:
1. The differential between peak and nonpeak hours should be a modest 10 to 15 percent.
2. The summer/winter rates should be the same.
3. The 10 a.m. to 5 p.m. rate should be the same or lower than the 6 to 10 a.m. rate.
4. The program should be limited to residential customers and only to those who have the special meters.
5. The program should have a six-month termination day, May 1 to Oct. 1. Then The commission can review and revise the program.
6. All sales revenue from excess power sold should go to shareholders and company, but there should be no blanket surcharge.
7. PSE should keep detailed cost records and sales of excess power into the wholesale market, so that the commission can see if the program is beneficial.
8. Accurate information about the program should be given to all customers so that they are not confused.
9. PSE should be relieved from service quality standards whilst the program gets underway.
10. The rate changes should become affective May 1.
WUTC Commissioner Dick Hemstad, on the other hand, was not prepared to support the rate proposal. He called it a "misalignment of risks and rewards" that he found troubling.
Hemstad said that if PSE sold 100 to 200 megawatts on the open market at a very modest $100 per megawatt (the going rate today is between $350 and $500), the company would net $88 million.
"Where I come from that's a lot of money," he said. "The company ends up with very substantial economic benefits with the costs being imposed on the ratepayers. In a gross generalization, I don't think that's fair."
Hemstad's concerns about the PSE rate proposal, according to Meehan, were as follows:
1. A price had to be paid for all the inconvenience.
2. Net sales benefits should be shared with the ratepayers and the shareholders.
3. He questioned whether the rate change violated the PSE merger agreement.
4. There was no urgency, no need to proceed in haste, since two weeks ago PSE told the commission they would do fine this summer; they had excess power to sell.
5. He wanted to see a benefit to the state and region.
6. He wanted to see the program be voluntary.
7. There was no cost data to support whether high prices were warranted because of PSE's costs.
8. There was not enough information to promulgate the "radical rate changes." [Showalter did not see the changes as radical.]
Hemstad did support the buy-back (bonus) plan and suggested the utility split their proposal in two and go forward with the incentive program immediately.
Gary Swoffard, PSE vice president and chief operating officer, declined to split the proposal and the commission decided to revisit the entire PSE rate plan proposal in two weeks.