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News Release
 
Commission Denies Request to Reconsider PGE Rate Increase
 
November 21, 2001 (2001 - 040) (UE 115)
 
Contacts:  Roy Hemmingway, Chairman, 503 378-6611; Joan H. Smith, Commissioner, 503 378-6611; Lee Beyer, Commissioner, 503 378-6611; Bob Valdez, Public Information Officer, 503 378-8962
 
Salem, OR – While sharing concerns that significant increases in Portland General Electric's (PGE's) rates will have a severe impact on customers and the local economy, the Oregon Public Utility Commission today denied a request to reconsider PGE's recent rate hike order, which became effective October 1, 2001.
 
While it was a difficult decision, the Commission concluded the petitioning parties failed to establish sufficient grounds for reconsideration, such as new evidence or any error in law, that justifies the Commission reconsidering its August 31, 2001, decision in docket UE-115.
 
"We wish that the increases were not necessary," Commission Chairman Roy Hemmingway said. "We sympathize with the hardship these increases may cause. However, this rate increase was the result of the incredible rise in purchased power and fuel costs incurred by PGE. There is nothing we can do about those costs until PGE’s energy purchase contracts begin to expire towards the end of next year."
 
The Commission’s initial rate decision came after a nearly yearlong examination of PGE's rate request in which the Commission sought to minimize the size of the rate increase.
 
The approved rate increases were primarily due to the increased cost of power in the marketplace, as well as the increased cost of fuel to run PGE's generation, both of which are beyond the control of PGE.
 
The law requires the Commission to allow utilities to recover prudently incurred costs. Unlike California, the Commission will not force Oregon’s investor-owned utilities into bankruptcy.
 
"We know customers large and small throughout the region are confronted with one of the most significant electric rates changes in recent memory. We will continue to work on reducing utility costs as we make what I hope is a short-term adjustment," said Commissioner Joan Smith.
 
"We would have done anything within the law to lower these rates," Commissioner Lee Beyer said. Unfortunately, the harder we looked, the more clear it became that the rates were not of PGE’s making but rather reflected what unregulated sellers of power were forcing on them."
 
Aside from power costs, the authorized increase is almost $50 million less than PGE requested, a reduction resulting from settlements among the parties, which were adopted by the Commission, and decisions by the Commission on contested issues such as cost of capital and operation and management expenses.
 
The Industrial Customers of Northwest Utilities (ICNU), the Citizens’ Utility Board (CUB), and Associated Oregon Industries (AOI) filed the reconsideration motion September 24, 2001.
 
The Commission weighed the following key issues in reaching its decision to deny the reconsideration request.
 
New Evidence
 
The Joint Parties contend there is new evidence about the deteriorating state of Oregon's economy that was unavailable when the Commission made its decision. However, the parties fail to show that the changes in economic indicators are significant enough to change the outcome of the docket. The reported economic indicators are not substantially different than those that existed at the time the Commission issued its August 31, 2001 order.
 
Error of Law
 
The Joint Parties also allege the order contains an error of law because the Commission failed to acknowledge or take appropriate action to eliminate or mitigate the rate shock caused by PGE's rates. The Commission noted that the fact it did not use the term "rate shock" does not mean it failed to consider the effect new rates would have on customers. Moreover, the Joint Parties rate shock argument has no basis in law. The Joint Parties cite no Commission order or Oregon case to support their argument that rate shock provides a legal basis to reduce PGE's revenue requirement.
 
Good Cause for Further Consideration
 
The Joint Parties propose that the Commission limit the total rate impact on customers by a variety of means. Unfortunately, the Joint Parties did not offer a specific phase-in proposal, and did not explain how such a phase-in would make PGE whole. Even if the Commission had the authority to order a phase-in of PGE's rates, such a remedy would raise a number of problems. In addition, the proposed deferral would simply prolong the rate increase over a longer period of time, and might require the charging of higher rates. Rate shock is a relevant factor in the rate design stage of the case. However, it plays no role in determining a utility's revenue requirement.
PGE is not alone. Many other Northwest utilities have also significantly raised their rates in the past year. (see attached sheet)
 
 
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