Ratepayer Protections

Dennis Linthicum

Ratepayer Protections

One of my bills, the Ratepayer Protection Act (SB 1552) will be heard on Wednesday, Feb. 14th. This bill has several sections designed to cap costs for Oregon energy users. The bill proposal would help establish strong, consistent policies aligned with keeping electric rates as low as possible.

Specifically, one piece of the legislation would prohibit a public utility from exceeding a 4.5 percent rate of return. Utility Companies can freely ask the Public Utility Commission (PUC) for rate increases. These increased payments come from the customers, who are businesses, households, commercial and industrial users. These ratepayers are the same ones trying to living within their means with little room to spare.

Rising Electric Rates

The Public Utility Commission exits, first, to “protect the customers from unjust and unreasonable extractions by establishing fair and reasonable rates.” (cf. ORS 756). This standard is established by definition, “Rates are fair and reasonable for the purposes of this subsection if the rates provide adequate revenue both for operating expenses of the public utility or telecommunications utility and for capital costs of the utility, with a return to the equity holder.”

Here is the rub. A small team of political appointees make up the commission and must exhibit what I call an “unattainable degree of neutrality.”  The problem is in the presumption that the central planners know or can determine what is “fair and reasonable.”

In free, open and voluntary market economies consumers determine what are “reasonable and just” value assessments because each individual makes their own choices about what to buy, or not. There is no requirement for a neutral party or government entity to “decide” what would be appropriate because each shopper can buy what they think is appropriate. This is why gasoline prices are writ large at every service station. People can make their own choices.

This self-interested, market-driven mechanism is far more efficient for determining value and setting prices. In actuality, people set prices not companies. People willingly part with their own money based on their own understanding of value. Therefore, any accepted price will necessarily be reasonable because people are buying and selling freely, without any government or corporate coercion. Agricultural products, our daily bread, meat, dairy, fruits and vegetables provides the easiest illustration.

We all eat food. The modern grocery store is a testament to American diversity and ingenuity. Various stores cater to various tastes, ethnicities and preferences. Each store makes their best effort to service their customers.

Some individuals prefer organic. Some avoid sugar, peanuts, or dairy while others can eat anything. It is easy to see that farms fill these stores by providing a blend of products to service the consumer. Farming occupies a unique place of importance in all of our lives and the free-market allows for the diversity and specialization that has fed the world.

The single-supplier electric generation and transmission franchise necessitates the requirement for a Commission. Once the boundary and service area (franchise area) are mapped out, no single user can purchase from any other supplier. Consumers are essentially trapped within the monopoly boundary and need someone to represent them. The franchisee is in a similar boat. They too, need to justify their investment matrix, re-capitalization requirements and cost of service parameters.

SB 1522 does not deny any of the complexities of the large-scale electric generating enterprise, it simply binds the public utility to “reasonable” returns.

The bill also prohibits a utility’s Public Purpose Charge from exceeding 1.5 percent of utility customers’ costs and prohibits the gross collections, from Public Purpose Charges, from exceeding the 2016 total. It also limits salaries for Energy Trust of Oregon employees, essentially keeping them from being greater than the Governor’s salary.

The final section of the bill would stop the collection of the Klamath Dam removal surcharge from ratepayers’ utility bills. The devil is always in the details, so here is some background information.

For nearly two decades, disparate factions struggled to implement their respective irrigation, power and water-related interests with regard to the Klamath River Basin. Their efforts resulted in the Klamath Basin Restoration Agreement (KBRA) and the Klamath Hydroelectric Settlement Agreement (KHSA). These agreements were part of a major push to remove the four PacifiCorp dams on the Klamath River.

The stage was first set via a 2008, Agreement in Principle, which compelled the Federal Government to assess the costs and benefits of dam removal and either designate a non-federal dam removal entity (DRE) to remove the dams, or “decline to remove the dams at which point PacifiCorp will return to the Federal Energy Regulatory Commission (FERC) for relicensing.”

Although a DRE has been designated, Klamath River Renewal Corp. (KRRC), the KBRA and KHSA agreements have long expired due to congressional inaction. A third agreement, the Upper Klamath Basin Comprehensive Agreement (UKBCA) has also been terminated by the DOI.

The time has come for Oregon’s legislature to call the dam removal effort, whether good or bad, a failure. The agreements have little chance of being resurrected and it is time to exercise the last clause (above) where PacifiCorp declines dam removal and returns to FERC for relicensing.  

SB 1552 would require PacificCorp to discontinue the assessment of dam removal surcharges that appear on ratepayers’ electric bills.  Specifically, if the Klamath Dam removal has not started by Jan. 1, 2019, the dam removal surcharge will be discontinued, and funds collected by PacifiCorp would be returned pro-rata to ratepayers with a 4 percent interest on the monies which have been held in trust.

Additionally, I also have an amendment where the monies could be used for fish ladders or fish passage alternatives. This would aid in mitigating PacifiCorp’s main problem with FERC re-licensing requirements.

Alan Mikkelsen, deputy commissioner for the U.S. Bureau of Reclamation has said BOR will not interfere with the FERC process and believes the dams will be removed. However, there are still plenty of environmental, legal and financial hurdles to deal with.

First, is the long-term liability for unknown and known problems, such as dealing with the 20 million cubic yards of accumulated sediment that will pollute the river after the dams are removed. Turbidity, water quality, and long-term fish habitat are all big environmental issues at stake.

Lastly, a host of legal problems associated with the tentative dam removal agreement between Oregon and California will become tangled in strategies to find non-federal funding sources. Prior dam removal cost estimates, for the four dams, range upwards from $950 million and possible funding streams have not yet been identified.


It’s time to stop the never-ending appearances from our dueling pair of “good cop/bad cop” protagonists with their endless questioning, changing, redefining and reinterpreting important issues. The opposing sides are arguing about what the definition of “is” is, and it should be as plain as the nose on Pinocchio’s face.

Here’s the straight scoop: Oregon’s hydro-electric power generation facilities are the most cost-effective base-load power sources for our state’s growing electric needs. Wisdom demands that we get back to using real-world economics, science and common-sense to steer Oregon’s natural resource policies in the right direction.

If we don’t stand for rural Oregon values and common-sense  – No one will!

Best Regards,

Senator Dennis Linthicum signature

Dennis Linthicum
Oregon State Senate 28

Capitol Phone: 503-986-1728
Capitol Address: 900 Court St. NE, S-305, Salem, Oregon 97301
Email: sen.DennisLinthicum@oregonlegislature.gov
Website: http://www.oregonlegislature.gov/linthicum