McKenna's office calls for rejection of Wash. utility's rate increase

Nick Rees Nov. 18, 2009, 1:00pm


SEATTLE (Legal Newsline) - Proposed electric and gas rate increases by Puget Sound Energy have been challenged by the Public Counsel Section of the Washington Attorney General Rob McKenna, who calls for the utility to tighten its belt instead.

The state's oldest and largest energy utility services more than one million electric customers and 725,000 gas customers in Western Washington. This is PSE's first general rate case since being acquired by Macquarie Group, Ltd., and Canadian investors last year.

"This is PSE's tenth request since 2002 to increase electric rates," Simon Fitch said, chief of the Public Counsel Section, said. "In this economy, PSE could be doing a better job of finding a way to live within its means, just like families and small businesses are doing, and hold the line on these constant increases."

If PSE's request is granted in full, it would generate an additional $183 million in revenues, a request that the Public Counsel Section, which represents residential and small business customers in utility rate cases, called excessive and unsupported.

Public Counsel, in calling for PSE's rate increase to be rejected, has concluded that the company can reduce its revenues from their current levels while still maintaining operations.

In expert testimony analyzing numerous elements of PSE's proposal filed by Public Counsel, Public Counsel has recommended, instead of a rate increase, that ratepayers be credited with $51 million revenues from PSE's sale of wind power credits to California.

Public Counsel has also recommended that PSE decrease the company's shareholder profit margin from 10.15 percent to 9.5 percent. PSE had asked for an increase to 10.8 percent. The potential decrease will remove approximately $53 million from PSE's request.

Almost $50 million in expenses should also be removed for the Mint Farm gas-fired power plant in Longview, Washington, a plant that PSE has not shown it needs or that is cost-effective, the office says.

Public Counsel also requests that PSE correct significant understatements of revenue the company expects to receive from selling power in the wholesale market. A proposal for a "Conservation adjustment" that would increase revenues, reducing the rate request by another $5 million, is also part of Public Counsel's recommendations.

Corporate perks are also part of Public Counsel's list of cuts to be made, including the $540,000 in expenses for PSE's corporate owned airplane and the cost of the supplemental retirement plan for PSE's highest paid officers and executives. Public Counsel also called for company shareholders to pay half the costs of liability insurance to cover PSE directors and officers, which shareholders benefit from but don't currently help pay for.

Finally, Public Counsel has recommended that PSE's request to increase its monthly customer charge for gas and electric service be rejected.

If all of the recommendations made by Public Counsel were accepted, PSE would receive $43 million less from electric rates and $330,000 less from natural gas rates. PSE currently has an annual operating revenue of more than $2 billion.

A decision on PSE's rate increase will be issued by the Utility and Transportation Commission in April 2010.

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