On June 28, 2024, Klamath Water Users Association (KWUA) will file expert testimony with the Oregon Public Utility Commission (OPUC) contesting PacifiCorp’s proposed 22.4 percent increase in electrical power rates for its irrigation pumping customers in Oregon. Although KWUA is still investigating the reasons for the proposed increase, it believes the request is not justified.
What Going On?
Investor-owned utilities do not set their own rates. OPUC’s charge is to ensure that rates are justified and reasonable. Proposed rate changes are considered in formal proceedings known as rate cases, where OPUC staff and parties who intervene in the rate case have the opportunity to present evidence. Costs approved in a “general rate case” (GRC), known as the base rates, are the main component of net power rates, although types of rate cases can adjust rates on an annual basis or for a fixed time period.
On February 14, 2024, PacifiCorp filed its 2025 GRC. The 2025 GRC will establish a new set of Base Rates and associated adjustment (a/k/a “rider”) schedules that will be incorporated into the irrigation rate tariff. PacifiCorp has requested that the rates proposed in its initial 2025 GRC filing go into effect on January 1, 2025. The base rates established in the 2025 GRC will then remain in effect until such time in the future when PacifiCorp files another GRC.
The percentage rate increases proposed in the GRC are not uniform for all classes of PacifiCorp customers. Overall, the proposed increase averages 17.9 percent for all customer classes (residential, commercial, irrigation, etc.) But the proposed increase for irrigation, 22.4 percent is the highest for any customer class.
What’s Behind the Proposed Rate Increases?
PacifiCorp’s primary motivations for filing its 2025 GRC are: 1) to allow it to place into Rate Base several new capital including major transmission line additions and two new wind plants, 2) to recover in rates significantly increased wildfire-related liability insurance premium costs, 3) to recover in rates increased costs associated with the company’s latest Wildfire Mitigation Plan and 4) to modify the Company’s capital structure, which includes a proposed increase in its authorized return on equity (basically, dividends paid to shareholders) from 9.5% to 10.3%.
What Happens in the Rate Case?
Once a rate case is filed, interested parties can seek to become parties in the case through intervention. Intervenors are allowed to file written testimony and can appear at the ultimate evidentiary hearing to present and cross-examine witnesses. After the hearing and receipt of argument, the OPUC issues a ruling on the proposed change.
Rate cases are frequently resolved by settlement, which is informed by the exchange of written testimony well in advance of any ultimate hearing in the case.
Where Do Things Stand in This GRC?
KWUA is the only irrigation-focused organization that has intervened in the GRC. It is believed that approximately fifty percent of PacifiCorp’s irrigation customers in Oregon are in Klamath County, which means KWUA is serving the interest of many irrigators outside the Klamath Project, but KWUA has in recent years found it beneficial and cost-effective to participate in rate cases of consequences.
Written testimony of KWUA and other intervenors will focus on whether the total increase in annual revenues identified by PacifiCorp ($157.7 million per year through base rates, plus an additional $164.6 million to be recovered through multiple adjustment schedules, resulting in an overall net rate increase of $322.3 million per year) are reasonable and justified.
In addition, KWUA will focus on the proposed, disproportionately high allocation of the overall increase to irrigators. A detailed review of PacifiCorp’s evidence is in progress, but KWUA currently believes that there are good reasons to reduce the relative burden on irrigation of any overall increase in customers’ payments.
KWUA will publish a summary of its written testimony once it has been filed.
Other Issues
PacifiCorp has also requested OPUC approval of changes in its current Time of Use (“TOU”) rate schedule where customers who can shift some or all of their pump/drainage loads off of certain pre-defined On-Peak hours may experience lower electricity bills relative to receiving service under Schedule 41, the standard irrigation tariff.
This proposal would increase the current discount that irrigation customers can receive if they restrict their pumping to defined off-peak periods. Irrigators’ ability to take advantage of this type of program depends on a number of regional factors and the function of irrigation districts’ water delivery systems.
____________________________________________________________________________________________________
Article by Paul Simmons, KWUA Executive Director for Basin Ag News, June 2024.
Cover Photo by evening_tao on Freepik