PGE revises Ore. electric rate request to include Mont. wind project

In its pending electric rate case, Portland General Electric Co. filed a revised rate hike request and is seeking an additional $68 million (2.3%) base rate increase to include the revenue requirement associated with the Clearwater Wind Project in Montana (Docket No. UE 435).

The utility (PGE) disclosed the revised rate request in surrebuttal testimony submitted Oct. 1 with the Oregon Public Utility Commission, bringing the company's overall base rate increase request to $257.8 million (8.6%). PGE previously sought a $190.5 million base rate increase following rebuttal testimony filed in September.

➤ PGE previously anticipated recovering Clearwater's costs through its renewable automatic adjustment clause (RAAC), for which PGE is seeking approval in Docket UE 427 and had hoped to put into effect as of June 1, 2024, prior to the Jan. 1, 2025, effective date of new base rates. Due to a commission order suspending the procedural schedule in UE 427, PGE now expects to begin recovering Clearwater costs through the RAAC on March 1, 2025, at which point base rates will decrease by a commensurate amount.

➤ Together with other updates in surrebuttal testimony totaling an additional $0.7 million decrease, PGE's revised base rate increase request is $257.8 million (8.6%), which includes the $17.3 million revenue requirement for the planned Constable battery project.

➤ PGE continues to seek a rate rider for the Seaside battery project to collect the facility's estimated $49 million revenue requirement when it comes online in June 2025, representing an additional 1.3% increase. PGE is also seeking a rate increase to recover forecast test year power costs in Docket UE 436, which is pending approval of a settlement agreement and currently reflects an additional 0.3% rate increase.

➤ Regulatory Research Associates views Oregon regulation as relatively balanced from an investor perspective. While the majority of recent rate cases were resolved through settlement negotiations, equity returns established in those proceedings were mixed compared to industry averages when established. On a constructive note, the commission uses forward-looking test years for most companies, which can reduce regulatory lag.

A final order in the proceeding is due Dec. 20. PGE serves 920,000 electric customers in northwestern Oregon.

Rate case update

PGE's $257.8 million rate increase request remains premised on a 9.65% return on equity (50% of capital) and a 7.15% return on a year-end rate base. The company lowered its return on equity (ROE) request in reply testimony filed in May, and it continues to seek a Jan. 1, 2025, effective date for new rates. The utility notes that the investments for which it seeks cost recovery were not included in its last rate case and were predominantly aimed at addressing regulatory and statutory requirements, repairing or replacing aging or damaged assets, and accommodating customer growth.

According to RRA, the average ROE authorized for electric utilities was 9.68% for rate cases decided in the first half of 2024, above the 9.60% average observed in full year 2023. For the 12 months ended June 30, 2024, the average ROE authorized in all electric utility rate cases was 9.63%. For further information regarding energy utility rate-of-return trends, refer to RRA's latest "Major Rate Case Decisions Quarterly Update."

During the proceeding, PGE has withdrawn a proposed investment recovery mechanism (IRM) surcharge and a proposal to recover stand-alone battery storage costs through the RAAC. The utility continues seeking PUC approval for proposed tracking mechanisms for the Constable and Seaside Battery Storage Project facilities, which are expected to be online in the coming months.

Intervenors, including the Alliance of Western Energy Consumers and the Oregon Citizens' Utility Board, are opposed to the trackers, though the staff conditionally supports the proposed Constable tracker. During the proceeding, the staff and intervenors raised concerns regarding PGE's cost recovery proposals, which the company says are intended to reduce regulatory lag.

In its reply testimony, PGE signaled it may file for a multiyear rate case in the future in lieu of proposals like its now-withdrawn investment recovery mechanism to pay for safety, reliability and resilience-related investments between rate cases.

The utility later added in its surrebuttal testimony that there is a "need for innovative rate design that explores rate structures that reflect true costs while considering affordability impacts and make sure that the right customer classes are contributing to the appropriate portion of the utility's revenue need."

This case was initiated in February when PGE filed for a $202 million electric base rate increase to recover costs associated with new wind and battery energy storage projects and incremental grid investments. In May, the utility filed a revised revenue requirement to reflect updates to rate base, which indicated an approximate increase of $23 million in gross plant inclusive of the Constable battery project.

The proposed rate increase was initially premised upon a 9.75% return on equity (50% of capital) and a 7.19% return on a year-end rate base valued at $7.517 billion for a calendar 2025 test year. The request was driven by the need to address new wind and battery energy storage projects, upgraded transmission and distribution infrastructure, and other capital investments totaling $878 million, but it excluded the load-adjusted impact of net variable power costs ($37 million).

In July, the PUC staff and intervenors filed testimony expressing concerns over the impact on ratepayers of the frequency and magnitude of rate cases in the state. The intervenors also supported reductions to PGE's rate request and ROE.

The following month, PGE tendered a revised $190.5 million rate increase request addressing the staff's and intervenor's concerns and lowered its requested ROE to 9.65% from 9.75%. The staff and intervenors filed rebuttal testimony in September, asserting that PGE has insufficiently justified its request for the modified $190.5 million electric rate increase.

RRA evaluation of Ore. regulation

RRA views Oregon regulation as relatively balanced from an investor perspective. While the majority of recent rate cases were resolved through settlement negotiations, equity returns established in those proceedings have been mixed when compared with prevailing industry averages when established. Most companies utilize a forward-looking test year, thereby reducing regulatory lag. The state's electric utilities operate under adjustment clauses to recover costs associated with renewable resources, and partial revenue decoupling mechanisms are in place for certain electric and gas companies.

Retail competition is in place only for large-volume nonresidential energy users; small-volume customers continue to be served under a traditional regulatory paradigm. Electric and gas commodity cost-recovery mechanisms are in place; these contain earnings tests and/or deadbands with cost-sharing provisions.

The commission has generally approved utility-related mergers without onerous restrictions. However, the commission has utilized various ring-fencing mechanisms designed to shield the regulated utilities from the diversified activities of their parent companies or affiliates. RRA accords Oregon an Average/2 ranking. For additional information, see RRA's Oregon commission profile.

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