Northwest NEWS

February 11, 2002

Front Page

Parties file testimony in PSE rate-relief case

by Jeanette Knutson
   Staff Writer
   On Dec. 3, Puget Sound Energy (PSE) asked state regulators for a 21.6 percent interim rate increase, $170 million in additional revenues to cover excess power-supply costs the company projects between Jan. 1 and Oct. 31.
   Puget asked that the increase go into effect March 1 through Oct. 31, pending the outcome of a general rate proceeding.
   In the general rate case request, PSE is asking for a permanent 16.5 percent raise in electricity rates and a 14.5 percent hike in natural-gas rates. The outcome of the general rate proceeding will not be known until later this year. Hence, Puget filed a request for interim rate relief, saying, in essence, we need money now.
   WUTC Staff Recommendation
   In testimony filed with the Washington Utilities and Transportation Commission (WUTC), staff members of the commission recommended PSE be granted a 6.3 percent or $42 million interim electric-rate increase.
   Bear in mind, the WUTC staff operates independently of the three-member commission, who make the final decision about the interim rate increase. In fact, the commission staff recommendation is only one of 17 parties in the rate-relief case. Environmental, and low-income groups, large industrial users, the Public Counsel division of the Attorney General's Office, King County, and other affected businesses will file testimony on the interim rate-increase request.
   Understand, the staff's recommendation is not necessarily a bellwether for the final outcome of the case.
   "The commission can be tougher or more lenient," said WUTC staff energy analyst Mert Lott. "The commission can do all kinds of things. It can come in any place between zero and $170 million."
   In defense of its 6.3 percent rate-hike proposal, staff said the rate hike should provide PSE with sufficient revenues to serve its customers, pay dividends and allow a cushion for the utility to meet any unexpected events.
   "A grant of cash relief is appropriate in view of the serious concerns regarding energy markets," said Lisa Steel, assistant director for staff's energy division. "Most importantly, the company is not financially prepared for another crisis. Other factors, such as the chilling effect of Enron's collapse on some credit markets, a recessionary economic climate and (how failure to grant such relief might affect the company's overall rating by companies such as Standard & Poor's or Moody's Investors Service) also support a grant of relief."
   Though utilities staff agreed that Puget should receive a $42 million interim-rate hike, they also had suggestions for the company to help relieve its deteriorating financial condition. Some recommendations are to issue new common stock, to defer capital expenditures or to reduce its dividend. Again, PSE requested $170 million to recover all excess power-supply costs for the first 10 months of this year. WUTC staff's recommendation looked at the overall financial condition of the company, not just power-supply costs.
   "PSE's proposal is 'single-issue' ratemaking," said staff energy analyst Lott. "It has identified one cost that the company claims is not being fully recovered in today's rates while ignoring that other costs have declined. The determination of any need for interim rate relief should not be directly tied to any one specific cost occurrence ... ."
   According to a WUTC staff press release, if the commission approves the staff's position, PSE residential customers would see a rise of approximately $3 a month in their electricity bills. Puget's 100,000 or so business customers would see a hike of $8.60 a month if the staff's proposal were adopted.
   The new rates would take effect shortly after the commission makes its final decision and would be in effect through Oct. 31.
   Attorney General's Office Recommendation
   The state Attorney General's Public Counsel division, however, has recommended the WUTC reject PSE's request for an interim rate increase.
   In testimony filed with the commission, the Attorney General's office said that based on standards expressed in past WUTC cases, PSE does not merit an increase before the company's books are reviewed as part of its permanent rate-increase request. However, Public Counsel's witness indicated that if the WUTC deemed some interim increased revenue were necessary to preserve the financial health of the company, it should approve increased revenues of no more than $29.3 million.
   In its filing, the Attorney General's office contends PSE paid shareholders dividends that are more than double the industry average. At the same time, the company built up debt from which it now seeks relief.
   The Attorney General's office told the commission PSE should reduce its dividends to a level comparable to the rest of the industry, and use the remaining money to pay down excess debt.
   The filing also notes that PSE's parent company, Puget Energy, recently invested millions of dollars to buy unregulated subsidiaries, while at the same time seeking major rate increases in its regulated operations.
   "Rate payers shouldn't be asked to shoulder the burden for above-average dividends and the company expansion into unregulated, unrelated industries," said Attorney General Christine Gregoire.
   Any decision on an interim rate increase should await the full review scheduled for PSE's general rate case, said Simon ffitch, head of the Public Counsel division.
   A public hearing regarding the proposed interim rate increase will be held to take customer comments at 6:30 p.m. Thursday, Feb. 21, in the second-floor hearing room of the WUTC's headquarters, 1300 S. Evergreen Park Drive S.W., Olympia. PSE customers who are unable to attend the meeting are encouraged send written comments to the above address or to the following e-mail address: comments@wutc.wa.gov.
   And "Yes, it matters that people comment," said Tim Sweeney, spokesman for the commission.
   He said as of Friday, Feb. 8, the commission had received 543 comments from PSE stockholders and customers with 226 opposed and 317 in favor of the rate-increase proposal.
   "Almost assuredly all of those supporting the increase are PSE shareholders," Sweeney said.
   The commission is beginning receive a steady stream of comments from PSE customers, he said. Apparently it will be another week and a half before all customers have received the company's official notice concerning the rate-increase request.
  
   Box, if needed
   A public hearing regarding the proposed PSE interim rate increase will be held to take customer comments at 6:30 p.m. Thursday, Feb. 21, in the second-floor hearing room of the WUTC's headquarters, 1300 S. Evergreen Park Drive S.W., Olympia. PSE customers who are unable to attend the meeting are encouraged send written comments to the above address or to the following e-mail address: comments@wutc.wa.gov.