December 3, 2001
PSE requests electricity, natural gas rate increase
Utility proposes new billing structure, as well
by Jeanette Knutson
Last week Puget Sound Energy (PSE) filed a rate-increase request with the Washington Utilities and Transportation Commission (UTC). Pending a final order in the 11-month rate case process, the company said it would seek prompt interim electric-rate relief to deal with what the company calls an "under-recovery" of electric power costs averaging $625,000 per day. At the time this paper went to press, the interim rate relief request had not been filed.
"PSE has not had to ask for a general electricity rate increase since 1993 and a general natural gas increase since 1995," said Gary Swofford, chief operating officer for delivery.
"Puget Sound Energy," said company spokesman Grant Ringel, "has aggressively managed its costs since the last electric and gas rate cases. And that is the primary reason we can ask the commission for a significantly smaller rate increase than other (regional) utilities have had to request."
PSE said the requested rate increases amount to 16.5 percent for electricity (adding about $8.99 to the average monthly bill) and 14.5 percent for natural gas (adding approximately $2 to the average monthly bill).
But a rate increase - interim or otherwise - is not all PSE is asking for. It is proposing "new pricing options to reduce bills, promote efficient energy use and protect consumers from market volatility," company literature says.
For starters, the company is requesting that all residential customers, all 930,000 of them, pay for power according to the time of day they use the electricity. Roughly a third of Puget customers are using this time-of-day pricing option now, on a trial basis. The plan is designed to encourage customers to shift their discretionary electricity use to off-peak hours (middle of the day, late evening, early morning) when the cost of providing power is less.
Under the proposed plan, customers could chose to have 10 percent of their power bill tied to the daily wholesale price of power, hence giving them a variable power rate. Such a rate would allow consumers to check wholesale prices via the newspaper or Internet before undertaking tasks that require heavy power use. The thought is that perhaps consumers would postpone such tasks until an off-peak hour when power prices were cheaper.
Customers who do not want the variable-rate option can choose a yearly fixed power rate ... that would be more expensive.
Said Ringel, "Our plan provides new options and tools to enable customers to manage their energy consumption. They could select a fixed (power) rate or a variable (power) rate, much like a home mortgage. This is the first time in the United States customers will be given this choice and opportunity to manage their bill and energy consumption in this fashion."
Simon ffitch, an assistant state attorney general who represents consumers before the UTC, does not hold such a sanguine opinion of Puget's recently filed rate proposal.
For one thing, he questions the $625,000 "under recovery" PSE claims. What, he asked, is an "under-recovery?" Is it a "loss"? Can Puget really sustain over $1 million in losses every two days? Are there other offsetting areas within the company that might mitigate the "under recovery?" he asked.
"The company has every right under state law to file a general rate case. If they can prove that what they want is necessary, the commission, upon review, will give it to them. But first the commission will look at the company's books," said ffitch. "It will evaluate the company's claims, the company's requests. ... It will examine the 'under recovery.' It will call for evidence, hold public meetings, solicit public opinion. It is their (Puget's) burden to prove need.
"The company has had healthy earnings the last few years. Even though interest rates are down now and wholesale costs of power are down since the debacle last year, the company has maintained dividends to its customers."
The time-of-day pricing scheme does little more than shift the risk of managing power resources onto the customers, said ffitch.
"Listen, it's a utility's job to acquire resources, to manage risk. They earn a profit based on the risks they take. Now the company wants to shift the risk onto the customer while increasing its own profits."
ffitch said PSE is asking to increase its profit rate to 14 percent, up from 10.5 percent.
The bottom line, he said, is that "people don't want to monitor power costs on a daily basis. Asking them to do so exposes them to risks and takes away a kind of stability people want from their power company.
"Shifting the risk to the customer and still getting a profit ... that seems like an abdication of a utility's obligation to me," said ffitch.
"All people want to do is pay a reasonable rate (for power) and receive reliable service. They want the light to go on when they flick the switch, the dishwasher to work when then turn it on, the washing machine to do the same. They don't want to monitor power costs on a daily basis. How realistic is it to expect customers to play the wholesale electric market?" he said.
PSE asked the UTC for an emergency rate increase in August.
That request was denied on the basis that the company failed to demonstrate its financial condition warranted emergency action.
In October PSE filed a petition asking the commission to reconsider the utility's request for an emergency rate increase.
The second request was also denied.