The Washington UTC has limited rate increases for Puget Sound Energy's electric and natural gas customers, while allowing the investor-owned utility to amortize and defer other expenses, in an attempt to reduce the economic impacts on customers during the COVID-19 pandemic.
These actions came in an order released July 8 on the utility's general rate case.
PSE originally requested an increase of $139.9 million, or a 6.9 percent rate increase, for its electric customers, and $65.5 million, or a 7.9 percent rate increase, for its natural gas customers.
But the commission approved a total combined revenue increase of approximately $66 million, with almost $64 million of that not reflected on customer bills for at least two years.
As a result, PSE's average residential electric customer using 900 kWh a month will see a rate increase of 0.05 percent and can expect to pay 4 cents more, for an average monthly bill of $90.14. Meanwhile, the average residential natural gas customer using 64 therms a month will see a 0.15 percent increase and pay 9 cents more for an average monthly bill of $59.69.
"In the throes of the COVID-19 pandemic, it is not fair either to significantly increase customer rates or to deny the company recovery of the costs it must incur to continue providing safe and reliable service," the commission said in its order.
The commission approved a revenue increase of approximately $29.5 million, or 1.6 percent, for PSE's electric operations, but extended the amortization of certain regulatory assets and the utility's electric decoupling deferral "to mitigate the impact of the rate increase in response to the economic instability created by the COVID-19 pandemic." That reduced the revenue increase to approximately $857,000, or 0.05 percent.
On Puget's natural gas side, the commission authorized a revenue increase of approximately $36.5 million, or 4 percent, but also extended the amortization of certain regulatory assets and extended the Purchased Gas Adjustment deferral from two to three years, which reduced the revenue increase to $1.3 million, or 0.15 percent.
The commission denied PSE's request for an attrition adjustment to address revenue shortfalls of $23.9 million for electric and $11.7 million for natural gas, determining a rate adjustment was not in the public interest at this time.
Instead, the commission authorized PSE to recover funds through several methods, including allowing the company to include short-term technological investments that would otherwise be excluded; deferral of certain investment costs to be considered in a future rate case; and adjustments of amortization periods to ease the cost burden on customers.
The WUTC also lowered the utility's return on equity by 10 basis points, to 9.4 percent, and accepted PSE's short-term and long-term costs of debt of 2.47 percent and 5.51 percent, respectively. The commission also set PSE's capital structure of 48.5 percent equity, 49.2 percent long-term debt, and 2.3 percent short-term debt, resulting in a 7.39 percent rate of return for PSE.
The order also directed PSE to speed up the return of $51.7 million in federal tax savings resulting from the decrease to corporate income tax rates in the 2017 Tax Cut and Jobs Act. PSE will now need to pass back those savings to customers in three years instead of four as originally proposed by the company.
To help PSE's customers most impacted by the coronavirus pandemic-induced economic downturn, the commission directed the utility to increase its investment in its Home Energy Lifeline Program by either twice the amount of the base rate increase, or $1.4 million, whichever is greater. HELP provides bill-payment assistance to customers experiencing financial hardship.
Additionally, the commission ordered PSE to work with its Low-Income Advisory Group to develop a disconnection reduction plan within one year and to file a detailed annual report to better monitor and analyze customer disconnection trends.
The order also granted PSE's request to adjust the annual depreciation expense of Colstrip units 3 and 4, a portion of which includes decommissioning and remediation costs, to ensure those Montana coal-fired units are fully depreciated by 2025.
The commission was unanimous in its decision to keep rates low, but commissioners were divided in two areas.
The commission retained its current methodology for financing natural gas line extensions, despite arguments from the NW Energy Coalition that it may shift burdens to existing customers if customers stop using natural gas, or if state law or policy changes relating to natural gas infrastructure.
Commission Chair David Danner said the Perpetual Net Present Value (PNPV) methodology "has the potential in many instances to require existing gas customers to subsidize the costs of bringing new customers on to its system" and is based on outdated assumptions.
In his dissenting opinion, Danner said that he agreed with the NWEC witness that "it is time to question the rationale for aggressively expanding the natural gas customer base, and, certainly, to rethink the idea of incentivizing switching from electric to natural gas service."
"Quite simply, it is contrary to the legislative intent of reducing the direct use of fossil fuels to maintain a methodology that in many cases effectively promotes the direct use of fossil fuels," he said.
The commission, in the order, and PSE have agreed to explore alternatives to the PNPV methodology in the future.
Meanwhile, Commissioner Jay Balasbas disagreed with the commission's decision to exclude PSE's SmartBurn technology that was installed on Colstrip units 3 and 4 to reduce nitrogen oxide emissions.
The commission found the $7.2 million costs related to PSE's SmartBurn plant investment were not prudently incurred because the company failed to maintain contemporaneous documentation of its decision-making. (CU No. 1945 ).
Balasbas argued that the SmartBurn technology was installed on Colstrip Unit 2 in 2016 and was uncontested when it was included in the utility's 2017 general rate case.
"If the investment was uncontested in 2017, I see no rational basis for treating the installation of the same technology in Units 3 and 4 any differently. If parties had a prudence concern about SmartBurn, the appropriate time to raise it was in the 2017 GRC," he wrote.