Utility reduces rate rise request

PSE pursues 8.3 percent surcharge and 6.5 percent permanent increase

JOHN DODGE THE OLYMPIAN

OLYMPIA -- A proposed settlement that would keep electricity rate increases for Puget Sound Energy customers below double-digits was announced Wednesday.

If approved by the Washington Utilities and Transportation Commission, consumers would see a three-month, 8.3 percent surcharge on their electric bills effective April 1. It would add about $5 to a typical monthly electric bill.

Originally, the company had asked for a 21.6 percent temporary increase in rates.

Also, the company trimmed its permanent rate increase request to 6.5 percent from an original 16.5 percent.

"The customer did very well in this proposed settlement," said Simon ffitch, an assistant attorney general in the State Attorney General's Office of Public Counsel. "This is significantly less money than they had originally asked for."

The three-member commission will review and decide the fate of the settlement next week. The permanent rate increase is subject to further negotiations between now and July.

Balancing interests

Stephen P. Reynolds, Puget Sound Energy's new president and chief executive officer, called the proposed settlement reasonable and a balance of customer and investor interests.

"It establishes a sound basis for Puget Sound Energy to rebound from the financial shock waves of the West Coast energy crisis," Reynolds said in a prepared statement.

Puget Sound Energy is the state's largest investor-owned utility, serving 935,000 electricity customers, including all of Thurston County.

And, in a major change of direction, the company has scrapped a controversial proposal that would require electricity customers each year to choose between a fixed electric rate or a variable rate.

A variable rate could be higher or lower than the fixed one, depending on the wholesale electricity market.

"People were not ready for that type of a rate," ffitch said.

In return, the company's permanent rate increase would be settled by July 1, rather than November.

And public counsel agreed to drop a potentially costly complaint against the company that alleged Puget Sound Energy had overcharged customers since 1997.

Parties in the case also agreed to continue work on a rate adjustment system that would allow the company to share risks and benefits of power cost changes with customers.

Dividend reduced

The interim rate increase allows the company to recoup about $25 million in increased power supply costs. The company has said the rates they're allowed to charge now aren't covering their power costs.

In addition, the Puget Sound Energy board of directors has lowered the dividend payment on company common stock to $1 from $1.84, effective May 15.

Critics, including ffitch, had argued the company was using too much of its earnings to pay stock dividends that were nearly double the industry average for gas and electric utilities.

The settlement also reduces the company's rate of return to 11 percent from the 14 percent originally sought.

The company's about-face on rate requests, stock dividends and rates of return coincides with Reynolds assuming the leadership of the Bellevue-based utility.

"Mr. Reynolds made all the difference in the world in our ability to negotiate this settlement," said Merton Lott, energy industry coordinator for the UTC staff.

The company also cut its natural gas rate increase request to 9.1 percent from 14.5 percent with a targeted effective date of Sept. 1.

John Dodge covers energy and the environment for The Olympian. He can be reached at 360-754-5444 or by e-mail at jdodge@olympia.gannett.com.

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