Pacific Power customers face 8.4% spike in rate for 2011

PORTLAND — Pacific Power customers face an 8.4 percent rate increase in January under a settlement the utility finalized this week with regulatory staff and ratepayer advocacy groups.

The lion's share of the general rate increase is related to investments in new generation and transmission. It also comes on top of another 5.9 percent increase that will take effect in January to cover increased power costs, bringing the total hike to more than 14 percent.

Actual rate increases vary by customer class. If the three-member Oregon Public Utility Commission approves the settlement between its staff and the other parties in the case, the average residential customer using 900 kilowatt hours of electricity per month would see their monthly bill increase by $8.30 to $89.26 effective Jan. 1, 2011, the company said. High-use residential customers, commercial customers and industrial customers will see larger increases.

About 94 percent of the general rate increase is driven by capital projects that are all coming on line at the same time. They include a project to bulk up the utility's east-west transmission backbone, investments in wind, hydroelectric and gas plants, as well as pollution controls at a coal plant.

The smaller increase is tied to the expiration of long-term contracts for cheap hydropower and natural gas being replaced at market prices today. The final number, estimated now at 5.9 percent, will be adjusted to reflect market costs before it goes into rates in January.

Ratepayer advocates had little argument with the company's capital investments per se, but said it was unfortunate — and potentially a failure of the planning or regulatory process — that all of them ended up pancaking into rates at once.

"This will hit in January and it will hit hard, said Melinda Davison, a lawyer for the Industrial Customers of Northwest Utilities. "It's a big number for industrial, residential and commercial customers. We think anything over 10 percent is rate shock."

Pacific Power spokesman Paul Vogel agreed that "the timing feels bad, and is bad. But there's no choice on the timing. These are investments that have been made already."

The utility did settle for less than its original request for a 13.1 percent general rate increase. The company agreed to stick with its existing rate of return rather than the increase it sought and saw its request for an increase in salaries, benefits and pension costs turned back.

Bob Jenks, executive director of the Citizen's Utility Board of Oregon, said the company's request to raise its rate of return in the middle of recession was out of line. While the timing of this set of projects was lumpy, he said Pacific Power should now be set for a few years — until, that is, environmental regulators release new regulations on coal plants.

"This could be small potatoes compared to retrofitting all those old coal plants, and the EPA rules could make that a very lumpy investment about five years from now," Jenks said.

Pacific Power is Oregon's second largest investor-owned utility. Its 553,000 Oregon customers are spread in pockets throughout the state, from the coast to Portland, and from Enterprise and Bend to Klamath Falls and Medford. Its territory includes some of the areas in Oregon hardest hit by the recession.

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