August 27, 2001
PSE asks for rate increase
by Jeanette Knutson
Last week Puget Sound Energy (PSE) filed a proposal with the Washington Utilities and Transportation Commission (WUTC) that, Puget says, "is designed to address a turbulent energy marketplace and record low hydro conditions." The company is asking for an interim rate increase which amounts to approximately $11.07 per customer per month. The increase, says PSE, is needed to recover some $84 million in projected losses incurred in supplying electricity to customers in today's volatile energy market.
Washington utilities currently have in place a mechanism whereby natural gas costs are passed on to the customers. PSE is seeking approval for electricity costs to get passed through to the customers as well.
"Going into the crisis," explained Grant Ringel, PSE spokesman, "PSE was in the position of relative resource balance. We had the power available that the customers needed and power to sell to take revenue [from] to offset other costs that it took to provide power to our customers.
"The federal government's price controls set in June have caused the wholesale market to collapse," said Ringel, referring to wholesale-energy price caps set by the Federal Energy Regulatory Commission.
As a result, now when PSE has extra power to sell, it's getting a lot less money for it, though earlier this year it did make significant revenue selling extra power.
"This means less money available to offset the cost of acquiring the power our customers need," said Ringel.
Simon ffitch, public counsel representing consumers in utility matters before the WUTC, said the company earns and loses money on any number of transactions. The financial health of PSE cannot be determined by a single sale (or series of sales) of surplus power bought at very high rates under contracts already entered into, then sold at the $92 wholesale cap price. That's why it is best to take into consideration the overall health of the company, ffitch said.
Tim Sweeney, public information officer for the WUTC, said, "The nature of the request was, 'We have an urgent need to raise rates.'"
Said Sweeney, it is the commission's job to examine the nature of the urgency to see if a rate increase would remedy the problem, to see if a rate increase is appropriate. ffitch said he expects the commission will be holding a public hearing on the request for a rate increase.
"We'll certainly be asking for one," said ffitch.
"We are concerned, said ffitch, that PSE is about to set up a mechanism where the company passes through the cost of electricity on to the ratepayers. We're not sure consumers like how that played out with natural gas. It is undesireable if that kind of automatic cost adjustment mechanism is passed on to customers. Our concern is that there is a shift of risk in power cost to the customers. [Furthermore,] there is no incentive to get the best deal for power.
"... All of this needs reviewing. These are technical issues that require evidence. ... We will be scrutinizing this," said ffitch.
"PSE," said spokesman Ringel, "is working to try to correct the problem with the federal price caps. We think the plan proposed will result in long-term stable prices and continued reliable service."
If approved, the rate increase would take effect Nov. 1 and continue until a broader revision of the company's rates is completed in over a year from now.