PacifiCorp’s Proposal for Higher Rates

            PacifiCorp is once again proposing significant electricity rate increases for its Oregon customers. In total, the two rate cases would add about $113 million in added annual costs for PacifiCorp’s more than 550,000 ratepayers. The proposed rate increases would average about eight-and-one-half percent for its Oregon residential customers, about sixteen-and-one-half percent for its industrial customers, and more than twenty percent for its irrigation customers. These proposed increases are in addition to renewable energy adjustments already implemented.

            PacifiCorp claims that its operation and maintenance costs are stable, and that its administrative and general costs have actually declined. However, the utility company states that the primary reason for the rate increase is the cost of acquiring over 1200 Mega Watts of new generation capacity.  It claims that the higher costs of capitalization of these new resources as well as the company’s need for more return on investment are significant cost drivers. It also states that the increase in new power costs is due in part to lower output from it hydroelectric resources and higher integration costs of wind generation.

            We will concede that environmental regulations that restrict hydropower generation, and mandates requiring the expansion of non-hydro renewable power, are cost drivers imposed on PacifiCorp that it cannot control. However, the company is asking for higher percentage returns on equity and capitol investments at a time when interest rates are near all time lows. In my opinion, for a utility to request draconian rate increases to achieve greater returns on investment during this time of economic upheaval is unconscionable.

            Inexplicably, PacifiCorp is allocating a significantly larger percentage share of the proposed cost increase to industries and irrigators even though the demand for electricity from these two sectors has diminished. We might question the reason why these sectors are being targeted when their demand for electricity is not increasing and is not driving the company’s need for new generation.

            While it may be politically correct to reduce proposed rate increases for residential users at the expense of the business ratepayers, it is neither fair nor does it represent good economic policy. Our business sector is already under great duress and is shedding jobs at an unprecedented rate. The rate increases proposed for industries and irrigators will result in even more economic stress that will certainly result in even more job losses. In fact, these proposed substantial rate increases may be expected to result in closure of some businesses that will cause total elimination of their employee base.

            All rate cases involving investor owned utilities are decided by the Oregon Public Utility Commission in a process that includes public hearings. We encourage you to take advantage of these opportunities to participate in the ratemaking process.

            Political policy decisions are often the cause of a request for a needed rate increase. Oregon’s adoption of the Renewable Portfolio Standard (RPS) in 2007 requires electric utilities to purchase increasing quantities of non-hydro renewable power. It also requires the Oregon Public Utility Commission to allow the utilities to recover all costs associated with their implementation of the RPS. We encourage you to take any opportunity available to discuss the costs of these renewable energy mandates with your legislators.

House Concurrent Resolution 5: Honoring Danny Miles

            Representative Bill Garrard and I co-sponsored HCR 5 to honor the incredible success of OIT men’s head basketball coach Danny Miles. I testified in committee on the necessity for his recognition:

            Danny Miles is an icon at OIT, in Klamath Falls, and among all collegiate coaches. As Head Coach of the OIT men’s basketball team, his teams have won more than seven out of every ten games played for nearly four decades. This record has been compiled while playing in one of the toughest, most competitive leagues in the nation. In addition, Coach Miles schedules his teams to play against the best non-league competition that is available to play. Everyone wants the opportunity to beat his “Hustlin’ Owls.” Few are up to the task.

            As a coach, he ranks number six in all time victories in the history of men’s collegiate basketball at all levels. He will undoubtedly be ranked no worse than number four after next season. It is also possible that Coach Miles has coached more collegiate academic All Americans than any other coach in history. Unfortunately, to my knowledge, no records are kept on that accomplishment. However, it is no accident that Coach Miles recruits good athletes with good academic records. From the first day of practice Coach Miles makes it clear to his players that the reason that they are attending OIT is to acquire an education. If his players do not perform in the classroom they are not allowed to perform on the court.

            Young men come to OIT from all across the globe to play basketball at OIT. They do not come for the night life in Klamath Falls. They do come to play for one of the best basketball coaches that ever lived.

            Coach Miles has been recruited to serve as head coach at universities all across the nation. He has been offered multiples of what he is paid to coach his Hustlin’ Owls. Fortunately for OIT, Coach Miles is not for sale. He has remained at OIT because the Oregon Institute of Technology is HIS University and Klamath Falls is HIS home town.

            I have never met a finer coach, a better developer of athletic and academic talent, and certainly have never met an all around better man than Danny Miles.

            HCR 5 passed out of committee with unanimous support. It is currently being printed for consideration by the full House of Representatives.
 

Ways & Means Update: 2009-11 Agency-Proposed 30 Percent Reduction Lists
 

            The deficit for the next budget cycle is estimated to be about $4.4 billion. What that means is that projections indicate we will have $4.4 billion less than is needed to maintain current state services using standard rates of inflation in government costs. The Legislature has several funding mechanisms to help reduce that budget shortfall. The Rainy Day Fund, the Education Stability Fund, and the federal stimulus money available for the 2009-11 budget cycle add up to about $2 billion. If the Legislature chooses to use all of the available reserves the budget deficit is reduced to around $2.5 billion.

            Today, the Co-chairs of Ways and Means released a list of potential 30 percent reductions in the budgets of every state agency. These projections were prepared by the agencies. They have not been adopted by the Legislature. The reductions represent a starting point for the Legislature to begin deliberations on prioritization of reductions.

            In a press release yesterday, Speaker of the House Dave Hunt (D-Clackamas County) stated: “State reserve funds and federal stimulus dollars won’t fill the entire hole. So we’re going to need a combination of budget cuts and targeted, fair revenue increases to balance the budget in these difficult economic times.” His House Democrat colleagues have already introduced more than 60 bills to either raise current taxes or create new taxes. About an equal number of bills have been introduced to either raise existing fees or create new fees.

            Speaker Hunt also said that the budget process will be a fair and transparent procedure with multiple opportunities for citizens to weigh in. The entire Joint Ways and Means Committee will be on the road for six public hearing on the budget starting April 20.

Monday, April 20 – Lincoln City
Tuesday, April 21 – Portland
Wednesday, April 23 – Capitol Building with video links to several communities
Wednesday, April 29 – Bend
Thursday, April 30 – Ashland
Friday, May 1 – Eugene

            Specific venues and times are still being determined and will be announced next week. Updated information will be available on the Legislative Fiscal Office website.

            For more information on our state's current budget situation, I would encourage you to read a very well written newsletter from Representative Dennis Richardson (R-Central Point) that accurately describes the reality we are facing.

            And lastly, please do not forget to attend the “Tax Day Tea Party” in your local area on April 15. If you don't stand up for rural Oregon, no one will!

Best regards,

Doug

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