rp_0006_4.html
Divide in Utilities' Outlook on Oregon Restructuring Doesn't Stop Agreement
The Oregon Public Utility Commission (OPUC) will issue orders next month on implementation of the state's 1999 utility restructuring law (SB 1149 ). Initiated in late 1999, the rulemaking process spawned intense negotiations involving consumer and environmental advocates, OPUC staff, commercial and industrial trade associations, power marketers, and Oregon's two investor-owned utilities (IOUs) PacifiCorp and Portland General Electric (PGE) . Hundreds of hours of meetings, now drawing to a close, tell a fascinating tale of how the two utilities are responding to the challenge of restructuring.
Under the leadership of Vice President Pamela Lesh , PGE has approached the rule-making process as a chance to redefine itself. The company views restructuring as an opportunity to move away from the static regulatory structure which provides IOUs with a modest, but stable, rate of return and rewards them based on the volume of electricity they sell. PGE sees the competitive market as more risky but potentially more profitable and less wasteful.
Lesh's vision for PGE would commit the utility to a contract with each of its customers through the OPUC. Customer contracts would contain rate caps to encourage energy efficiency and service standards (e.g., an acceptable number and length of outages, the speed at which service calls are made, etc.) which the utility would have to meet or face penalties. PGE could meet these standards in any innovative way it saw fit, and generate increased profits by doing so at the least cost. An important environmental benefit would result by separating profits from electricity use, thus ending the incentive for IOUs to sell more power.
PGE has approached restructuring with excitement and optimism for the future, exhibiting a genuine desire to negotiate positive outcomes with customer groups, the OPUC and environmental and consumer advocates. It wants the new law to succeed.
PacifiCorp has approached restructuring differently. The utility has stated frankly that it views restructuring as a threat, not an opportunity. Up until the final two weeks of negotiations, the company failed to offer solutions to its unique problems most notably that it operates as a multi-state utility subject to five different state regulators and did not take part in meaningful negotiations with customers or Commission staff.
PacifiCorp's desire to avoid restructuring is not without justification. The utility was recently purchased by ScottishPower for a huge premium and is now preoccupied with rate increase requests in all the states to recoup that premium. Many observers characterize PacifiCorp's new management as lacking a vision of where the company should go as the industry moves forward.
Despite the company's initial recalcitrance, when all the other stakeholders reached an agreement in a May 15 joint filing PacifiCorp started to negotiate in earnest. Two weeks later, the parties emerged from negotiations with successful agreements on all major issues. The key sticking point rests on how other state utility commissions might react to Oregon's restructuring, and if not favorable, how the utility's shareholders would be affected. The negotiated agreements give PacifiCorp an additional 15 months to work it out with the other states, but also leave shareholders holding the bag if the utility is not successful in that effort.
The rules expected from OPUC next month will describe how statewide investments in energy conservation, low income weatherization, and new renewable resources will be collected and spent under the System Benefits Charge ; how information on customer bills will be presented, including environmental disclosure; what the portfolio of choices for residential customers of the state's investor-owned utilities will be; stranded costs or benefits; and how each utility will participate in the competitive market.
Steven Weiss