Closed Door Deals Are Not the Oregon Way

Doug Whitsett

The Oregon Public Utility Commission (PUC) was created by the Legislative Assembly to ensure that “safe and reliable utility services are provided to customers at just and reasonable rates, while fostering the use of competitive markets to achieve these objectives.” That body is charged with regulating only the investor-owned utilities (IOUs) that are owned by private companies such as PacifiCorp and Portland General Electric (PGE).

IOUs are given monopolies within their utility service areas. These monopolies are approved and regulated by the state. The PUC is charged with ensuring that the more than 1.5 million PacifiCorp and PGE customers in Oregon are treated fairly by those two companies.

The PUC held an informational hearing in Salem last Friday regarding House Bill 4036. The new law proposed by PacifiCorp and PGE is being called the “Clean Electricity and Coal Transition” bill.

HB 4036 would functionally double the amount of renewable power required to meet the Oregon Renewable Portfolio Standard (RPS). It would also eliminate both the coal-fired generation of electricity in Oregon and the importation of electricity generated by coal-fired plants located outside of the state.

The proposed law was negotiated by a selected group of participants. The list includes environmental advocacy organizations, renewable energy producers, organizations that advocate for renewable energy, PacifiCorp and PGE. Their bargain was reached behind closed doors in confidential settings.

Incredibly, the PUC and its members were not allowed to participate in the closed door meetings. All but one organization that advocates for ratepayers also appear to have been barred from the discussions.

The only exception was the Citizens' Utility Board (CUB). CUB was formed in 1984 by initiative petition to advocate for residential ratepayers. In my experience, CUB has consistently and unabashedly advocated for the production of renewable power.

The current chair of the CUB Board of Governors is the Director of Meteorology at Iberdrola Renewables, which is the new name for PPM Energy, Inc. That company was previously the energy acquisition unit for PacifiCorp. It is now owned by the Spanish-based utility Iberdrola.

Governor Brown has expressed her tacit support for the proposal and had her office suggest that the PUC members refrain from comment.

She has also delayed consideration of the reappointment of two of the commissioners until after the Legislative Assembly has completed consideration of HB 4036.

Unfortunately, the development of new laws in closed negotiations among special interest groups appears to be the “New Oregon Way.”

The IOUs claim the proposed changes are affordable, workable and are better for their customers than the provisions of Initiative Petition 63.

That proposed ballot measure is currently being advanced by many of the same advocacy organizations who participated in the closed door negotiations.

Not surprisingly, those who were not at the table were on the menu. The list of significant losers appear to include the IOUs’ ratepayers, the consumer owned utilities that compete with the IOUs, and the PUC itself.

Several points were made abundantly clear during Friday’s PUC hearing.

The claim by IOUs that the PUC’s informational hearing was “unprecedented” was first laid to rest by the Commission Chair. She emphatically cited other examples of similar hearings. The Chair also made clear that she and her fellow commissioners are not pleased that the IOUs failed to consult with them regarding the negotiations. Nor are they pleased with the product of the discussions, which is HB 4036.

The PUC members pointed out that HB 4036 would reverse no less than four of that body’s previous decisions.

One example is in regard to the energy production tax credit (PTC). The most common federal PTC is two cents per kilowatt hour, and expires after ten years. HB 4036 appears to authorize the IOUs to shift the cost of the expired tax credit to their ratepayers without even consulting the PUC.

Another reflects the PUC’s concern regarding the reliability of the power grid when much higher percentages of intermittent wind and solar resources are required.  The Commissioners assert that HB 4036 eliminates the PUC’s ability to maintain control of reliability issues.

The PUC members openly questioned the appropriateness of the IOUs’ participation in the confidential negotiations.  The IOUs, whom the PUC is charged with regulating, appear to have rewritten their own preferred outcomes to PUC orders. They further charged that HB 4036 raises other issues that were previously decided by the PUC through its extensive public processes.

Members of the PUC pointed out that HB 4036 will result in little, if any, overall reduction in greenhouse gas (GHG) emissions. The IOU representatives were not able to refute that assertion.

The only coal-fired plant in Oregon, located in Boardman, is already scheduled to be closed. Coal-fired plants located in other states that are currently supplying electricity to Oregon will continue to operate into the foreseeable future. Those plants will not cease to operate, will not stop using coal and will not reduce their GHG emissions.

Although the scheme will serve to help meet Oregon’s GHG reduction goals, neither regional nor global GHG emissions will be measurably reduced. It is worth noting that Oregon currently produces about 0.04 percent of global GHG emissions. That is four ten-thousandths of the total global GHG emission, or one part in 2,500! The simple, undeniable fact is that even the complete depopulation of Oregon would not result in a measurable change in global GHG emission.

"Prudently incurred costs" can generally be recovered from an IOU’s ratepayers. Those companies are generally allowed to make about a ten percent profit on virtually all of their prudently incurred costs. The PUC members questioned the IOU representatives regarding the many ways they wrote HB 4036 to redefine most of the cost of the new law’s implementation to be costs that are “prudently incurred.”

PUC members further declared during the hearing that HB 4036 does create significant incentives to build solar and wind powered generation capacity. However, they then asserted that the text of the bill throws out the requirement for the new construction to be effective and prudent. It appears to remove oversight by both the public and the PUC. The result is authorization for the IOUs to charge the costs of new renewable generation facilities to their ratepayers, as well as taking their designated profits on those charges.

Most of the cost of siting and constructing of wind and solar generation facilities is currently being paid by taxpayers. These facilities are currently being subsidized with refundable tax credits, production tax credits, accelerated depreciation and loan guarantees.

Many facilities receive well more than 80 percent of their funding through these tax giveaways. The fact of the matter is that most of the cost of complying with Oregon’s RPS is currently being paid by the taxpayers, rather than the IOUs’ customers.

PUC members pointed out how HB 4036 could allow the IOUs to transfer much of these costs to their customers with reduced or delayed regulatory oversight.

The Commissioners questioned the purpose of two specific sections of HB 4036 that appear to further enhance the IOU service area monopoly. Those sections appear to make any encroachment on their monopoly protected territory and customers prohibitively expensive.

The bill would force consumer owned utilities, like public utility districts and municipal utility districts, to pay enormous new costs in the event that they took a single ratepayer from the IOU monopoly protected service area. HB 4036 would essentially prohibit IOU ratepayers from escaping their monopoly rates, other than by moving out of their protected service area.

PacifiCorp has already increased its rates by more than 80 percent since 2005. I believe HB 4036 has the potential to cost their ratepayers billions of additional dollars over the next two decades. Obviously, nearly ten percent of their new prudently incurred costs may be retained as profit for their investors.

PUC members asked repeated questions regarding the potential cost increase for IOU customers. The queries were generally deflected as being either a work in progress or as currently being modelled.

The Commission, one and a half million Oregon IOU customers and many members of the Legislative Assembly would like to know what those costs will be before a vote is recorded on HB 4036.

The bill was scheduled for two hearings in the House Energy and Environment Committee this week. One was held today, and the other is set for Thursday. That committee is chaired by a former political chair for the Sierra Club.

HB 4036’s  subsequent referral to Ways and Means will likely prevent it from having even a single public hearing in a Senate policy committee.

The passage of HB 4036 will result in certain and enormous shifts of wealth. IOU customers will pay while utility investors and the purveyors of renewable energy will receive.

This is not the Oregon Way. This is crony capitalism in its most blatant form.


Please remember--if we do not stand up for rural Oregon, no one will.

Best Regards,

Senate District 28


Email: I Phone: 503-986-1728
Address: 900 Court St NE, S-311, Salem, OR 97301


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