The Portland Tribune, July 26, 2002

Pulling the plug on OPUC
Disgusted consumer groups want to revamp the energy rate-setter

BY KRISTINA BRENNEMAN
The Tribune

Furious at the perceived failure of Oregon’s appointed state regulators to defend electricity consumers against outsized rate increases by the state’s biggest utility companies, major watchdog groups want to strip the governor of his power to appoint the regulators and let voters elect them directly.

Last week’s rate decision by the Oregon Public Utility Commission allowing PacifiCorp to charge its customers to recover $131 million in costs racked up during the 2000-2001 power crisis was the final straw for the Citizens Utility Board of Oregon and Industrial Customers of Northwest Utilities.

Industrial customers have seen enough of an anti-consumer shift to prompt them to pursue a ballot measure that would reorganize the OPUC and place the initiative on the 2004 general election ballot, said Ken Canon, executive director of the industrial customers’ group. He represents Intel Corp. and the state’s other major utility users.

“The job of the commission is to protect ratepayers, not the utility,” said Bob Jenks, executive director of CUB. “Things have gotten worse than I thought they could get. The solution is to take the governor out of the process and elect them. We’re going to look at reforming the commission.”

OPUC Chairman Roy Hemmingway defended the three-member commission’s action, saying it merely followed the law in making its recent rate decision. PacifiCorp’s reimbursement claim, which the company is pursuing in other states as well, boosted its parent company ScottishPower’s stock to $20.75 a share Friday, up from $19.

“My job is to look at these cases without biases, and I tried my best to do it in this case,” he said. “They (the consumer groups) evidently feel they put on a good case in this case and should have won.”

Hemmingway was appointed chairman in the spring of 2001 after longtime Chairman Ron Eachus, a feisty consumer advocate, was unceremoniously dumped by Gov. John Kitzhaber. Hemmingway did consulting work for Portland General Electric in the early 1990s when the utility was fighting efforts to close its Trojan nuclear plant.

Kitzhaber’s office, accused of stacking the board with utility industry apologists, took a nonchalant attitude toward the apparent consumer revolt. Kitzhaber’s term expires in January.

“Go ahead. Get the signatures, put it on the ballot,” said Kitzhaber spokesman Tom Towslee. “There’s nothing so radically wrong with the system. There’s nothing the governor can do.”

It’s the first time since the 1980s that voters have sought to overhaul the OPUC, and it’s hardly surprising, given the energy industry’s tumultuous past six months. Enron Corp.’s fall into bankruptcy in November 2001 led to a nationwide investigation of corrupt power rates involving every utility, including PGE and PacifiCorp.

The two utilities admitted unwitting complicity in Enron’s price manipulation and have submitted documents in the Federal Energy Regulatory Commission’s ongoing investigation.

Even though wholesale energy prices have dipped to $7 per megawatt hour recently, compared with $125 to $225 during the height of the energy crisis in the winter of 2000-2001, electricity users are paying anywhere from 6 percent to 53 percent more than they did before the crisis began.

OPUC would lose its rate-making authority over PGE completely if Oregon’s largest utility, an Enron subsidiary, is acquired by the proposed Willamette Valley Power under the auspices of a six-county public utility district or is taken over by a public body in a state condemnation proceeding as some have proposed.

Making the commission directly answerable to the voters would not mend the industry’s troubles, said Hemmingway, OPUC’s chairman.

“I don’t know what their motives are,” he said of the consumer groups. “I think they have to look at what happened in other states when you elect commissions, and the quality varies. ”

Consumer groups say the commission’s shift dates back to Kitzhaber’s dumping of Eachus, whose outspokenness rankled many. Eachus was particularly tough on Enron Corp. during its acquisition of PGE four years ago.

Kitzhaber appointed two members at that time to four-year terms, Hemmingway and Lee Beyer, both of whom voted for the PacifiCorp rate increase.

Towslee said it’s “absurd” to think that the governor would appoint people who would indulge the utilities.

“The governor appoints the best people,” he said. “Hemmingway and Beyer are not tools of anybody. People are going to perceive what they are going to perceive. This was not an attempt to tilt the PUC. It was to have people who understood public energy policy.”

Eachus agreed with the criticism of OPUC.

“They’ve gone from a consumer-oriented commission to an anti-consumer commission in little over a year, and you can lay that right in the lap of Governor Kitzhaber,” he said. “It’s very difficult once a commission loses credibility with consumers to get it back.”

Going too far

What pushed the watchdog groups over the edge was the commission’s unanimous decision last week to open ratepayers’ pocketbooks to cover PacifiCorp’s estimated $131 million in costs dating to the Western energy crisis. Hemmingway says OPUC sliced PacifiCorp’s original request in half, balancing its corporate losses with customers’ checkbooks.

PacifiCorp, known to its customers as Pacific Power, “took an extraordinary hit during the California power crisis, and evidence showed they weren’t mismanaging,” he said. “These are extraordinary circumstances. I think an action that splits these excess power costs is a fair result.”

Although PacifiCorp has asked for a 6 percent rate increase, customers may be more likely to see a 3 percent rate increase, depending on what the commission decides next month. It would be the second rate increase this year for Pacific Power customers.

Industrial customers have seen their rates rise from $4.20 a kilowatt hour to $4.67, while companies in neighboring states saw only minor bumps in price.

By comparison, PGE raised rates by 53 percent for commercial and industrial customers this year and by 31 percent for residential users.

Poor judgment claimed

The citizens board and the industrial consumers group asserted that PacifiCorp doesn’t deserve the reimbursement because much of its loss resulted from bad decision-making. One of its facilities, the 430-watt Hunter 1 generating plant in Utah, broke down in the midst of the industry upheaval, and the watchdogs blamed it on poor maintenance. The company also oversold its system generation, leaving it short of power, CUB asserts.

“The commission determined the costs prudently occurred,” said PacifiCorp spokeswoman Shannon Shoul. “It wasn’t a clean win for us. We’re making back 50 cents on the dollar and that doesn’t provide full recovery. The job of the regulatory body is to balance the needs of the utility and serve customers.”

The citizens utility board had recommended that PacifiCorp be allowed to recover $37 million for poor hydro conditions at the time; the industrial consumers group suggested $88.8 million.

The commission disagreed with the recommendations — and granted the rate request. It also had approved a PacifiCorp rate increase to cover the $1.2 million cost for its West Valley Generation Facilities Lease in Utah.

PacifiCorp, which generates up to 80 percent of its own power, “knew they didn’t need it all,” Jenks said of the $131 million for its losses. “(OPUC’s decision) sent a message that the bank is open.”

He says the citizens utility board will seek a review of the commission’s decision by courts or the Legislature.

Contact Kristina Brenneman at kbrenneman@portlandtribune.com

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