PacifiCorp customers in Oregon would see electricity rates increase by as much as 5 percent in January under a proposed settlement of the utility's pending general rate case.
If approved by the Oregon Public Utility Commission, rate increases would range from 4.8 percent for residential customers to 5.4 percent for some classes of commercial and industrial users. Average residential customers using 1,000 kilowatts of power would see their monthly bills go from $67 to about $70.
PacifiCorp, which serves 535,000 ratepayers around the state, originally filed with the PUC in February, seeking a rate increase of $112 million, or 13.2 percent. It subsequently updated its request to reflect increases in power costs, which increased the request to $118.7 million.
The proposed settlement, which the commission is expected to approve, comes after a series of meetings this summer among the utility, customer groups and PUC analysts. The actual increase would depend on a final analysis of power costs this fall, but it is capped at $43 million, about 64 percent short of what PacifiCorp requested.
PacifiCorp said the original request was filed before -- only a day or two before -- MidAmerican Energy Holdings Co. acquired PacifiCorp, and the rates contemplated in the settlement represent a satisfactory level of cost recovery.
"With this plan in place, we'll now go about managing the business so we're as close to earning our authorized rate of return as possible," said Andrea Kelly, PacifiCorp's vice president of regulation.
Ratepayer groups also said they were satisfied with the settlement.
"From where we stand, we think it's a little rich, but we can live with it," said Melinda Davison, attorney for the Industrial Customers of Northwest Utilities.
The general procedure for a rate case is for a utility to pick a test year -- in this case, the year ending Dec. 31, 2007 -- and forecast all of its costs, including power, operating, maintenance, general and administrative as well as debt service. Then it tacks on its allowed return on equity for shareholders.
PacifiCorp has complained for years that regulators have shortchanged the company's cost recovery and left it unable to deliver adequate returns to shareholders. In this rate case, the company requested that regulators increase its return on equity -- the amount paid to stockholders for their investment and risk -- from 10 percent to 11.5 percent.
The proposed settlement would leave the company's return on equity at 10 percent, which accounts for the biggest part of the difference between the settlement amount and PacifiCorp's original request. Other big differences were an $11.7 million reduction in the company's forecast of operational and maintenance expenses, and a $7.5 million cut in its forecast of administative and general expenses.
PacifiCorp's Kelly said the company had no immediate plans to cut costs or jobs to boost earnings after the settlement was approved.
The settlement specifically avoided the issue of taxes, a contentious one for the past year as regulators have struggled to interpret a new tax law, Senate Bill 408. The law requires regulators to reconcile the taxes collected from utilities' customers as part of rates with what the utilities ultimately pay to government authorities -- and refund the difference to ratepayers.
Last month, the PUC adopted a new methodology to calculate Oregon utilities' tax liabilities that would allow ratepayers to capture a share of the tax benefits generated by their holding companies.
The result, customer groups say, is likely to be a significant adjustment to rates next year when the PUC trues up taxes collected and taxes paid by utilities.
"We expect there to be an additonal reduction in this rate period from the 408 true-up," said Bob Jenks, executive directors of the Industrial Customers of Northwest Utilities. "I think it will be more than $10 million, possibly more than $20 million, but that's a very back-of-the-envelope number."
As part of the settlement, PacifiCorp would not file another rate case until at least Sept. 1, 2007, which probably would preclude any general rate increase until at least July 2008.
Ted Sickinger: 503-221-8505; tedsickinger@news.oregonian.com