Utility watchdog asks state to intervene on proposed double-digit electricity rate hikes

BY: ALEX BAUMHARDT – AUGUST 6, 2024  || OREGON CAPITAL CHRONICLE

If the state’s two largest electric utilities get what they’ve asked for, their 1.5 million customers in Oregon could pay 40% more for electricity next year than they did just three years ago.

Those utilities – Portland General Electric, or PGE, and Pacific Power – say their latest proposed increases are due to the rising cost of insurance and needed investments to expand electrical grids and make them resilient to extreme weather. But Oregon’s Citizens’ Utility Board, a watchdog group established by voters in 1984 to represent the interests of consumers, says the companies are using rate hikes to make massive investments in infrastructure in too short a period, as well as creating slush funds for potential wildfire payouts in the future.

PGE wants to raise residential rates by 11% next year while Pacific Power asked for a 15% residential rate increase. But the board asked the state’s Public Utility Commission to cap them at 7% plus the rate of inflation, or 10% annually, whichever is lowest. A rate increase to cover costs that go over that would need to be pushed to the next year or beyond.

The board asked the commission, which is charged with regulating the rates of privately owned utilities, to apply this cap to natural gas companies as well.

“In normal circumstances, it should be rare for utilities to increase rates by more than 10%, the Citizens’ Utility Board said in a news release. “Unfortunately, we have seen a growing pattern of Oregon’s for-profit utilities asking for 15-20% increases nearly every year for the last four years. This is a call to Oregon regulators to implement a cap for all for-profit utilities.”

The latest rate requests from the two utilities are not driven by the costs of producing electricity, but by factors such as capital investments, insurance, profit margins and employee pay. In November, when the electric utilities will incorporate the costs of energy production into the rate proposals, they could ask for higher rates again.

The Public Utility Commission will make a decision in December, and the rates will go into effect in January.

The commission declined to comment on the specific proposals. Kandi Young, an agency spokesperson, said it can’t discuss active rate reviews.

PGE

Portland General Electric’s request for an 11% residential hike comes on top of an 18% increase in January and a 15% increase in 2023.

PGEs rates have gone up more than 30% since 2022, according to the Citizens’ Utility Board.

The company said in its rate proposal that the increases were due to needed investments in grid resilience, energy storage and renewable energy.

But Bob Jenks, executive director of the Citizens’ Utility Board, said PGE is making massive and long overdue investments all at once on the ratepayers’ dime. He said big capital projects are appealing to investors who get a financial return on the money they lend to the company, but not to the ratepayers who have to pay those investors back.

“At some point, you’ve got to say you can’t do this all in a three- or four-year period of time. You’ve got to set priorities,” Jenks said. “If the customers can’t afford it, and if the company’s not going to try to manage this situation and set priorities and keep rates affordable, then the Public Utility Commission regulators are going to have to crack down and create restraints on the company.”

In April, three months after a cold snap in January, PGE shut off power to a record number of households – 4,700 in one month alone – due to nonpayment. Citizens’ Utility Board officials said this is clear evidence Oregonians are struggling to pay.

“Because utilities disconnect for nonpayment after 90 days, it is clear that the combination of rising rates and extreme temperatures has pushed customers into debt to PGE,” the board said in a news release.

Pacific Power

If Pacific Power gets its 15% increase in 2025, customers would face electric bills more than 40% higher next year than they were just two years ago. Pacific Power raised rates by 11% at the beginning of 2024 and 21% in 2023.

The company said that would translate to $21.50 more per month for an average consumer.

The company said in its proposal that about half of the 15% increase would cover infrastructure upgrades, including grid and clean energy expansion and weatherization. The other half would help pay for wildfire mitigation as well as insurance and liability coverage.

For both Pacific Power and PGE, corporate liability insurance has gone up rapidly.

Pacific Power, owned by the company PacifiCorp, settled in June with more than 400 Oregon victims of the 2020 Labor Day Fires, paying out nearly $180 million after a judge found the company was negligent and responsible.

Though Pacific Corp can’t raise rates to cover payouts from previous fires, it can start creating a slush fund for future payouts, Jenks said.

“There’s a point at which it’s better for them to just put together a pot of money and call it self insurance that they could use in these cases,” he said. “But it means customers have to fund it up front and build that pot of money up.”

Both PGE and Pacific Power have also asked for some of the rate increases to cover higher staff wages and company profit margins.

Beyond asking for rate caps, the Citizens’ Utility Board asked that the electric utilities stop raising rates in the middle of winter. Bills are significantly higher during the winter because heating homes takes more energy than cooling them, and heat is often left on at night while air conditioning is not. For companies hoping to show big revenues for the first quarter, boosting rates in the lead-up to January when energy demand is high can be lucrative. But, Jenks said, it’s taking advantage of the utilities’ poorest customers.

Alex Baumhardt covers education and the environment for the Oregon Capital Chronicle. Before coming to Oregon, she was a national radio producer and reporter covering education for American Public Media’s documentaries and investigations unit, APM Reports. She earned a master’s degree in digital and visual media as a U.S. Fulbright scholar in Spain, and has reported from the Arctic to the Antarctic for national and international media and from Minnesota and Oregon for The Washington Post.

Oregon Capital Chronicle is part of States Newsroom, the nation’s largest state-focused nonprofit news organization.