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Utility: Deregulation won't be cheap

Pacific Power warns of big rate hikes

SALEM -- Pacific Power says if Oregon business and industry are allowed to choose their own power suppliers too soon, its residential customers may end up with increases of up to 10 percent in their utility bills.

A vice president of PacifiCorp, parent company of the utility that serves most of Southern Oregon, is attempting to slow down the timetable for deregulation in a bill that has passed the Senate.

Senate Bill 1149 would open competition by Oct. 1, 2001, for business and industrial customers in the areas served by Pacific Power and Portland General Electric. The private utilities, which together cover about 75 percent of Oregon's power customers, also would have to devise alternatives for residential rates that are not subsidized by large power users.

Our numbers indicate that the departure of industrial and commercial customers and the subsequent elimination of the subsidy they provide would increase residential rates by as much as 10 percent, said Tom Imeson, a PacifiCorp vice president. An increase of 10 percent for residential customers sounds like `rate shock' to me.

PacifiCorp asked the House Commerce Committee this week to put off open competition for business and industrial customers until Jan. 1, 2003. Imeson said it would allow more time for the gradual phaseout of an estimated $30 million in subsidies. The committee will continue its hearing Friday.

Under questioning by Rep. Bill Witt, R-Portland, Imeson said the 10-percent increase for residential customers is a projection, but a worrisome one.

If we were to do it rapidly, and if those (industrial) customers were to depart, some of this is hard to know precisely until we are actually in those circumstances, Imeson said. That is why we think the subsidies ought to be phased out prior to moving to direct access (for residential customers). But it could have an effect of that magnitude.

Imeson also said that because it operates in six states, PacifiCorp cannot easily separate its generating capacity from its distribution system, unlike Portland General Electric.

Nearly all of Pacific Power's 30 percent share of Oregon customers are outside the Portland metropolitan area. Portland General Electric, which Enron Corp. of Houston bought in 1997, has its own deregulation deal with the state Public Utility Commission. It serves about 45 percent of Oregon customers.

Both utilities by the fall of 2001 will have to devise three choices for residential customers:

A regulated rate similar to what they have now.

A rate based on significant green power from renewable sources.

Or a rate linked to the rise and fall of wholesale power prices.

Imeson said that is another reason Pacific Power seeks more time than Senate Bill 1149 now allows to develop those choices. It is hardly enough time to implement the expensive, time-consuming infrastructure that would be needed, he said.

Oregon's public utilities, including Ashland's municipal utility and its 8,000 households, are largely exempt from the Senate's deregulation bill. Their opposition helped kill similar legislation without a vote in 1997. They are neutral on this session's bill, which lets them decide whether and how to offer their customers direct access to power suppliers.

PacifiCorp's concerns were minimized by Senate Majority Leader Gene Derfler, R-Salem, floor manager for Senate Bill 1149. The bill is backed by Associated Oregon Industries, the state's largest business lobbying organization, and consumer and environmental groups.

Derfler said the bill allows the PUC to stop deregulation for residential and small-farm customers if it determines they will be harmed by utilities' loss of low-cost federal hydroelectric power from the Bonneville Power Administration.

Under the bill, Pacific Power, Portland General Electric and participating public utilities would have to invest — percent of their income from retail customers to promote energy conservation, help with renewable sources of energy and weatherize low-income households. This fee would start when direct access to power suppliers takes effect, and end in 10 years.

All utilities also would have to collect a charge, not yet determined, from retail customers that will help pay utility bills of low-income households.

Imeson said neither of these costs is accounted for in PacifiCorp's projection of a 10 percent increase in residential rates.