Puget Sound Energy acquisition and rate cases detailed talking points

Acquisition case comments

1. Energy efficiency
In recent years, PSE has been a Northwest leader in helping its customers save energy and lower their electric and gas bills through conservation. The investor consortium pledges to preserve PSE’s energy efficiency goals and to continue the utility’s ongoing efforts to improve them.

While the investor consortium has issued a general statement supporting increased energy efficiency savings each year, the WUTC should require more detailed, measurable and accountable commitments.
PSE’s energy efficiency investments must at least be maintained and ideally should be increased.

The WUTC must require continued, aggressive energy efficiency efforts because conservation:

Is our cheapest energy resource. No energy is cheaper than the energy we don’t use. Right off the bat, reduced usage lowers bills.
Puts money in the pockets of local business and consumers, lowers businesses’ production and operating costs, and reduces the power-bill burden on struggling low-income households.
Avoids costly construction of new power plants and transmission lines. Plus, energy efficiency makes our electric grid more reliable by reducing the stress on overloaded power lines.
Is the first and most critical step in reducing greenhouse gas emissions contributing to climate change. Reducing our energy use is the surest, cheapest and most pain-free way to slash our global-warming pollution. Efficiency measures cut power use today and for years to come and – unlike ANY new power generating facilities – more than pay for themselves in a relatively short period of time.

2. New renewable energy

In recent years, PSE has become a Northwest leader in developing renewable energy resources. The investor consortium should commit to expanding and enhancing that role, which would include aggressive, near-term pursuit of new renewable resources.

PSE should go beyond the legal minimum in providing new renewable energy to its customers. The investor consortium proposes meeting Initiative 937’s renewable energy standard and, “from time to time,” considering additional renewables investments. At the very least, the WUTC should require the investor consortium to affirm and continue PSE’s internal target of serving 10% of its load with new renewable resources by 2013.
A commitment to acquiring low-cost and low-risk resources has led to important PSE investments in new renewable energy. The WUTC should require the potential buyers to acknowledge the centrality of those principles to the utility’s integrated resource planning so renewable energy investments continue at their current level or higher.

Renewable energy investments are crucial because:

Rapidly increasing development of large- and small-scale renewable energy resources is absolutely essential to meeting our climate change challenge. The Northwest’s energy future – indeed our very quality of life – depends on dramatically reducing our greenhouse gas emissions.
Renewable energy investments help protect against future price shocks. Generation from renewables is immune to the chronic price spikes and periodic supply problems that plague fossil fuel-based power. Unlike fossil-fueled generation, long-term purchases of renewables (particularly wind and solar) are not affected by fluctuating fuel costs. Renewable generation creates little or no climate pollution, thus insulating the utility, its shareholders and consumers against looming penalties or limits on carbon dioxide emissions.

Studies show that increased use of renewables and efficiency pushes down natural gas prices. Not only is this good news for homes and businesses that heat with gas, it’s good for all energy consumers because the price of natural gas sets the marginal or market price of electricity.

3. Low-income energy services (bill assistance and energy efficiency)

PSE’s low- and fixed-income customers have a tremendous and growing need for both bill assistance and energy efficiency services. The investor consortium has committed to maintaining existing low-income programs and continuing to work with low-income agencies to address issues of low-income customers.

As a condition of acquisition, PSE and the investor consortium should request and the WUTC should approve increased funding of PSE’s low-income bill assistance and energy efficiency programs.
The investor consortium also must commit to drawing more households into the programs, so that more PSE customers qualifying for the federal low-income home energy assistance program (LIHEAP) and weatherization assistance program (WAP) are served.

Increased funding and participation levels are crucial because:

Low-income residential customers spend a higher-than-average percentage of their income on energy costs and are already trying to cope with dramatically rising costs for food, housing, medicine and other necessities.
PSE has not increased low-income energy efficiency services funding for more than five years. With labor and equipment costs escalating, that means serving fewer households and conserving less energy per dollar each year.
PSE’s bill assistance program (“HELP”) served about 13,000 electric and 5,100 gas households in 2007. Many more desperately need this service, but increasing bill assistance funding commensurate with rate increases – as PSE has done – merely maintains existing participation levels. Though rate-related funding increases are commendable, the result is that no additional households are reached.

Rate case comments

1. Fixed charge hike

PSE has proposed significant hikes in residential electric and gas customers’ base (minimum) monthly charges -- 50% ($3 additional per month) for electricity and 125% ($10 additional per month) for gas. Those increases will erode customer interest in conserving energy and disproportionately harm lower use customers.

The WUTC should reject these substantial increases in monthly fixed charges because:

Such a significant increase lessens the cost incentive for customers to cut their power use – and thus lower their bills -- through participation in conservation programs or by other means.
A high fixed charge gives customers less control over the size of their bills, making them less motivated to reduce consumption and improve efficiency.
A high customer charge undermines PSE’s own programs aimed at saving energy in customers’ homes and businesses. Customers see less reward for participating in the programs, making the jobs of the energy efficiency staff that much harder.
Increasing the monthly fixed charge and reducing the amount of the bill based on actual use can disproportionately harm lower-use customers.

2. Impact on low-income households

PSE proposes to increase funding for its low-income bill assistance program for electric and gas customers commensurate with any rate increase in this case. That is commendable, but not sufficient. Serving additional households requires ramping up program funding even more.

PSE should increase funding for its low-income bill assistance program and draw more households into the program, and the WUTC should approve such an increase.

In exchange for approval of a higher fixed charge, PSE has offered to provide additional assistance to low-income gas customers, who would be particularly harmed by the change. While this proposal sounds reasonable and the intent is good, the increase would help only a small portion of PSE’s low-income households. Most low-income households in PSE’s service territory would take an unacceptable financial hit.

Because PSE’s mitigation proposal does not adequately compensate low-income households and undermines conservation efforts, the WUTC should reject the fixed charge increase.

For a general overview of the rate and acquisition cases, go here.
For answers to frequently asked questions.

For further information, contact Danielle Dixon at danielle@nwenergy.org or (206) 621-0094

NW Energy Coalition
May 9, 2008