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FOR IMMEDIATE RELEASE
August 22, 2008
Power of compromise: Attorney General’s Public Counsel and others negotiate smaller rate increases for Puget Sound Energy customers

SEATTLE – A proposed pact would mean smaller electric and gas rate increases for Puget Sound Energy customers than those originally requested by the company.

The Attorney General’s Public Counsel Section, which protested PSE’s push to add millions in additional revenues, said parties have reached an agreement that is better for consumers.

“This is a reasonable compromise that will soften the impact to family budgets,” said Public Counsel Section Chief Simon ffitch.

The agreement isn’t final until approved by the state Utilities and Transportation Commission, but all parties are on board including Public Counsel, UTC staff, large industrial and commercial customers, federal agencies and The Energy Project, which advocates for low-income residents.

PSE filed its rate case with the Utilities and Transportation Commission in December 2007. It tweaked the request in April to ask for more money – nearly $180 million per year in new electric revenues and $58 million from its gas customers. Public Counsel fought back, saying a reasonable increase would be much less. Faced with opposition, PSE revised its request again in April, asking for $165.2 million a year on the electric side and $55.5 million from gas.

Today’s agreement further trims the amount PSE will be able to charge customers. If approved, new rates will go into effect Nov. 1. The agreement results in an 8.4 percent increase in residential electric rates and a 4.7 percent increase residential natural gas rates.

ffitch acknowledged that the deal doesn’t cut away as much as Public Counsel initially proposed, but said it contains several other important consumer benefits. The agreement whittles down the request as follows:

  • Less additional revenue. PSE’s annual electric revenue increase will be limited to $130.2 million (7.09 percent) and gas will rise by $49 million (4.6 percent) per year.
  • Smaller increase in the basic monthly charge. All PSE customers pay a basic monthly charge for service, regardless of how much electricity or gas they use. PSE wanted to increase the electric charge from $6.02 to $9, and the gas charge from $8.25 to $18. But under the agreement, the electric charge will only go up by 98 cents for a new total of $7. The gas charge will go up $1.75 to $10.

Other consumer benefits included in the settlement:

  • More money for programs that assist low-income residents. Annual funding for programs that provide rate assistance and offset the costs of weatherizing homes and making them more energy efficient will increase from $10 million to $15 million.
  • Reimbursements for power outages: Customers who report power outages of more than 120 consecutive hours will be entitled to a $50 bill credit.
  • Customer service reporting changes and penalties for poor service:
    • The agreement raises the threshold level for penalties that the UTC can impose on PSE for failure to meet its service quality benchmarks from a maximum of $10 million to $15 million in any given year. PSE must pay those penalties as refunds on customer bills if the annual total is large enough to provide an average of $12 per customer. Smaller penalty levels will be used to defray the cost of the company’s low-income assistance program.
    • PSE agreed to make changes to the process used to track the number of dropped and busy calls to its customer service center, circuit reliability, penalties imposed on outside contractors and response time to gas safety issues.
  • Narrower shareholder profit margin. PSE’s shareholder profit margin was reduced to 10.15 percent from its current level of 10.4 percent, instead of the 10.8 percent increase the company requested.
  • PSE will not to file a new general rate case before April 2009.

One issue that remains to be resolved is whether PSE should lose the ability to file power-cost-only rate cases, special fast-tracked proceedings that give the company permission to change rates between general rate cases in order to offset additional claimed power expenses.

“These types of cases are part of the reason why customers feel like there is a never-ending cycle of PSE rate hikes,” ffitch said.

Public Counsel and PSE industrial customers have recommended eliminating power-cost-only rate cases and instead considering such requests as part of general rate cases, when they can look at the whole financial picture. ffitch said PSE already has a power-cost adjustment to track expenditures and can file a general rate case when needed to cover additional expenses from large plant investments.

The settlement will be presented to the UTC for review in early September. Commissioners are expected to consider the power-cost-only rate case around the same time. The UTC staff recommendation is not binding on the commission.
 
Additionally, the commission will begin separate hearings next week to consider a proposed settlement that would approve the sale of PSE and its parent company, Puget Energy, to a consortium of private equity investors led by the Macquarie Group, an international banking and investment firm. Public Counsel will be presenting testimony to oppose that agreement. (See Aug. 5 news release, Proposed settlement in Puget Sound Energy sale is “inferior choice,” says Public Counsel.)

Members of the public can comment on the proposed sale agreement at a public hearing 6:30 – 8 p.m. on Tuesday, Aug. 26, at the Utilities and Transportation Commission, Richard Hemstad Building - Room 206, 1300 S. Evergreen Park Dr. S.W., Olympia.


The Attorney General’s Public Counsel Section advocates for the interests of consumers on major rate cases, mergers and other rulemakings before the UTC. Public Counsel also advocates for consumers in court appeals, through technical study groups and before the Legislature and other policy makers. The office maintains contact with the public through a citizen advisory committee, community organizations, public hearings and personal contact with consumers in major cases. More information about Public Counsel’s work is available online here.

Media Contacts: Simon ffitch, Public Counsel Section Chief, (206) 389-2055
Kristin Alexander, Media Relations Manager - Seattle, (206) 464-6432

Editor’s Note: The spelling of Simon ffitch is correct – the surname begins with two lowercase f’s.

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