News Story about Pac

Utility Pushes Panel for Rate Hike in Utah

By Steven Oberbec, The Salt Lake Tribune -- July 31
PacifiCorp Chief Executive Judith Johansen on Monday told the Utah Public Service Commission (PSC) her company was devastated by the Western power crisis last year and needs a $118 million rate hike in Utah to help it return to financial health.

Utah Power's parent company requested the rate increase in January and the PSC will hold hearings through Friday to consider the company's request.
PacifiCorp wants the $118 million -- about $7 per month for an average Utah customer -- to cover the millions it spent last year to buy electricity on the wholesale market. The power was needed to meet its Utah customers' demand during peak usage periods.
Johansen said PacifiCorp's power costs are almost double what it is allowed to charge its customers under existing rates. Without the increase, the company's credit rating may suffer.
Credit-rating companies such as Moody's and Standard & Poors "have a very keen eye" on PacifiCorp rate cases in Utah and other Western states because they are concerned about the company's cash flow and overall liquidity, she said.
A decrease in PacifiCorp's credit rating could make it more difficult and expensive for the company to finance new power plant construction needed to meet the growing demand for electricity in its operating territory.
Yet throughout most of the past decade, PacifiCorp generated more power than it needed to serve its residential customers. It sold the excess electricity under long-term wholesale contracts.
Those long-term contracts benefited the company's customers to the tune of $1.3 billion over the past decade, said Stanley Watters, managing director of wholesale energy services at PacifiCorp.
Critics, however, contend the company at the same time adopted a business strategy to increase its wholesale power business and entered into long-term power supply contracts while relying on the spot market for the electricity.
The strategy worked until the spot-market price for electricity soared last summer when PacifiCorp suddenly got caught in the squeeze.
The question of who should pick up the tab for the company's wholesale power strategy lies at the heart of the rate case now before the PSC.
"Their [wholesale] business strategy exposed ratepayers to enormous risk," said Dan Gimble, who serves on the staff of the Committee of Consumer Services that represents residential energy users and small businesses in utility rate cases.
PacifiCorp, though, contends it wholesale market strategy was prudent and benefitted its retail customers by helping lower the cost of a kilowatt-hour of electricity 30 percent from 1985 to 1999.
"Absent the high market prices we've seen, I don't think any of us would be here today," Watters said.
Utah Power's customers will be able to tell the PSC what they think of the company's rate hike request at 5 p.m. Wednesday.