The Oregon Public Utility Commission (“the Commission”) is charged with the responsibility of regulating Oregon’s investor owned utilities. The State regulates the utilities, because they are functional monopolies, i.e., customer ratepayers generally have only a single choice of utilities to serve their energy needs.
The Commission’s oversight is designed to ensure that the utilities provide consistent reliable service to the ratepayers living in the area they serve and that they treat their customers fairly.
Oregon law gives the Commission authority to govern the rates that investor-owned utilities are allowed to charge their customers. The Commission generally permits the utilities to charge their customers rates that allow the companies to recover their prudently incurred costs and to make a fair profit on their investments and operating costs.
The Commission holds public hearings to allow ratepayer input each time the utilities seek to change their rate schedules.
Compliance with state and federal laws is almost always considered prudently incurred expenses by the Commission. For instance, compliance with Oregon’s Renewable Portfolio Standard -- wherein the utilities are required to deliver an ever-increasing percentage of renewable power generation to their customers -- is a prudently incurred expense, no matter if the cost of the renewable power is several times greater than hydroelectric or natural gas thermal generation.
The costs of compliance with environmental laws, rules and regulations are routinely passed on to the utility ratepayers, because these costs are also considered to be prudently incurred expenses.
In fact, the Commission’s regulatory paradigm may create an incentive to increase costs -- because an investor-owned utility’s allowable profit appears to be based on total revenues. For instance, an 8 percent profit on $200 million in total revenues is $16 million -- while the same 8 percent profit on $400 million in total revenues is $32 million.
PacifiCorp is an investor-owned utility which provides electricity services to more than 550,000 Oregon ratepayers, including much of south-central Oregon. Last January I asked the Commission to provide my Senate office with a ten-year history of the rates PacifiCorp has charged its ratepayers -- including residential, commercial, industrial and standard irrigation schedules, as well as total average rates charged. The information the Commission provided in the table titled "Pacific Power Net average Rates per Kilowatt-hour" is both interesting and instructive.
Between 2001 and 2005 PacifiCorp’s total average rates actually decreased -- from 5.64 cents per kilowatt-hour to 5.51 cents per kilowatt-hour. Their commercial schedule was the only one that experienced an increase -- and that was only .05 cents per kilowatt hour.
However, that rate stability changed after PacifiCorp was acquired in 2006 by MidAmerican Energy Holdings Co., a subsidiary of Warren Buffett’s Berkshire Hathaway investment firm.
Since that time, the utility has aggressively pursued rate increases. According to the Commission’s table, the result has been a 56.4 percent increase in total average rates -- from 5.51 cents per kilowatt-hour to 8.62 cents per kilowatt-hour.
Those rate increases are consistent across the rate schedules -- except that the commercial rate has only increased 48 percent.
The company’s financial report states that PacifiCorp has increased its retail rates by more than $880 million since 2006
In fact, PacifiCorp’s total average rates have increased by an average of 9.4 percent -- per year -- during the six years since its acquisition by MidAmerican Energy Holdings Co. according to my calculations, based on the table provided by the Commission.
I understand that the company is seeking additional Oregon rate hikes of 4.3 percent this year.
These rapidly escalating PacifiCorp electricity rates come at the same time that the wholesale price of power has fallen due to reduced demand and increased wind power generation.
PacifiCorp’s financial report demonstrates that PacifiCorp saw $555 million in net income in 2011 on total revenues of $4.6 billion. According to the report, that calculates to a profit margin of 12 percent.
PacifiCorp’s director of regulatory affairs has said that the company’s generous profit margin is necessary to get funding from shareholders and bondholders.
Please remember, if we do not stand up for rural Oregon, no one will.
