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“Rates set to jump for Pacific Power, PGE customers in January.  The biggest factor driving the increases: renewable power.”

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—Ted Sickinger, The Oregonian (12/17/10)

Come New Year’s, better strip the lights off the house and the Christmas tree ASAP.

Customers of Pacific Power will see their electric rates spike 14.5 percent in January. The increase comes in a one-two punch: an 8.4 percent general rate increase state utility regulators approved Friday, and a 6.1 percent increase for increased power costs they are expected to approve Dec. 28. Both take effect Jan. 1.

Meanwhile, customers of the state’s largest electric utility, Portland General Electric Co., will see a lesser, but still significant, rate increase of about 3.9 percent. A few mandatory cost adjustments in the works will bump that overall increase to 4.2 percent, effective Jan. 1.

The biggest factor driving the increases: renewable power.

Oregon’s public policy choices during the past few years are coming home to roost in rates, a trend that will continue and likely be exacerbated in coming years by environmental edicts dealing with global warming and haze reduction.

For the time being, state mandates requiring utilities to meet 25 percent of customer demand with renewable power by 2025 — with interim targets before then — are jump-starting utility investments in wind farms, hydroelectric projects and the transmission lines to access remote, windy areas. Those projects have a long life span and low fuel costs. But the upfront capital costs are steep, and the resource is intermittent.

The largest part of Pacific Power’s general rate case was driven by a new transmission line and the two new Wyoming wind farms it connects to the utility’s customers. The company also installed pollution controls at a coal plant in Wyoming and needs to replace cheap electricity it has been buying under long-term contracts that are expiring.

“It’s a big increase,” said Pat Egan, a spokesman for Pacific Power. “We know this is not a great time for this.”

But in the end, he said, the utility has little choice. It has been told to invest in renewables.

PGE, meanwhile, says almost three-fourths of its new costs support projects such as its recently completed Biglow Canyon wind farm in Sherman County and improvements to a hydroelectric dam on the Clackamas River.

“I hope we can avoid the situation in the future where large capital projects and power costs hit customers in the same year,” said Ray Baum, chairman of the Oregon Public Utility Commission. “However, these are resources that will serve customers for decades.”

Consumer ratepayer advocates say they’re upset the increases are pancaked on top of one another.

“We knew they were coming,” said Bob Jenks, executive director of the Citizens’ Utility Board of Oregon. “It’s really unfortunate, particularly in this economy. People with electric heat that are Pacific Power customers are going to have a really tough time this winter.”

Yet the board can’t complain too loudly, since it was a big supporter of the renewable portfolio legislation that is driving the investments and resulting rate increases. Renewables advocates argue that wind power is cost competitive today and will become more so in years ahead with its low fuel costs and low carbon output. The economics of renewables should also improve with energy storage technology and more efficient use of existing transmission capacity.

Industrial customers, which were never big fans of the renewables legislation, say the increases simply add to the pain of the recession. Melinda Davison, a lawyer for the Industrial Customers of Northwest Utilities, said she was disappointed that regulators didn’t force Pacific Power to sell off all the renewable energy credits it earns from generating wind power in order to offset rate increases, rather than allow the utility to bank the credits to comply with future mandates.

“This is a big increase,” Davison said, “and people are going to be really shocked when it hits in January.”

There is little end in sight as the industry goes through a major investment cycle. PGE has outlined a slate of capital projects for Oregon regulators that includes new wind resources, transmission and gas plants that could cost $2.5 billion during the next four years — a sum that is almost double the utility’s rate base today.

Pacific Power officials said Friday there were no immediate plans for more wind investment, but that the utility has more transmission projects in the pipeline and is always looking for opportune additions to its generation portfolio. The utility could also face major costs for pollution controls because of its heavy reliance on coal.

As usual, rate increases vary by customer class and usage. Utility regulators said Pacific Power’s typical residential customers using 900 kilowatt hours of energy a month will see their bills increase by $9.38, or 10.6 percent, from $88.21 to $97.59. Industrial customers will see rates rise by 17 percent and large commercial customers by 17.6 percent.

PGE said customers using 900 kilowatt hours a month would see their bills rise 3.3 percent, from $94.40 to $97.54. Commercial customers will see an increase of about 4.7 percent; small industrial customers an increase of about 7.1 percent; and large industrial customers will see a reduction of about 1.8 percent.