Beginning April 1, two of Oregon’s largest utilities increased their rates for residential customers. Portland General Electric raised rates by 5%, and Pacific Power’s rates went up by nearly 3%.
These rate hikes are on top of others in recent years — since 2020, PGE’s residential rates have gone up nearly 60%.
Usually, rate increases arise in November, but due to the Fairness & Affordability in Residential Energy Act, passed last year, utilities can no longer increase rates during the winter months, when utility costs are often at their peak.
However, this April rate hike has hit at another challenging time for consumers, with gas prices in Oregon soaring due to the war in Iran.
We’ll hear details about these increases from Kristen Sheeran, the Vice President of Policy and Sustainability for PGE, and Bob Jenks, the executive director of the Oregon Citizens’ Utility Board.
Note: The following transcript was transcribed digitally and validated for accuracy, readability and formatting by an OPB volunteer.
Dave Miller: From the Gert Boyle Studio at OPB, this is Think Out Loud. I’m Dave Miller. Two of Oregon’s largest electrical utilities increased their rates for residential customers at the beginning of this month. Pacific Power’s rates went up by nearly 3%. Portland General Electric raised their rates by 5%. But these are on top of much larger recent hikes. When you combine the increases, PGE’s residential customers are paying nearly 60% more over just six years. Kristin Sheeran is the vice president of policy and sustainability for PGE. Bob Jenks is the executive director of the Oregon Citizens’ Utility Board. They both join us now. It’s great to have both of you on Think Out Loud.
Bob Jenks: Thank you.
Kristin Sheeran: Thank you.
Miller: Kristin first. My understanding is that rate increase requests, these packets that you send to PUC are hundreds of pages long. But can you give us the short version of this year’s explanation? What are the different factors that drove the rate increase request this year?
Sheeran: Sure, happy to, and thanks for having us. This is an important conversation. We know that energy bills are really important to every household and business that we serve. And that’s why we’re doing everything we can to keep costs as low as we can for our customers by keeping our own operating costs low and making careful investments in our system. Specifically to the rate increase on April 1st, roughly half of that increase was due to an increase in market prices for electricity in the region. We generate a lot of our own power at Portland General. But we also buy power on the market and through contract to meet our customer demands. So, being in the market, purchasing power is critical to ensuring reliable electrical service. What we’ve seen in recent years is power costs have nearly tripled in the region. That’s primarily due to supply and demand imbalances around electricity. So that accounted for roughly about half of the increase on April 1st.
The remainder of the increase that our customers saw go into effect on April 1st reflected some investments in our distribution system; basically, the poles, the wires, and the technology that makes sure that we can deliver power to homes and businesses. It reflected some storm costs related to the restoration and recovery work we did around the January 2024 ice storm. And it also reflected an increase in the amount of money we have to collect from customers that goes to low income assistance programs. That’s a result of Oregon House Bill 3792, which basically doubled the statewide collection for energy assistance from $20 million to $40 million, basically backfilling for what the federal government had reduced, in terms of energy assistance for our most vulnerable customers.
Miller: Okay, so infrastructure, a state change by lawmakers about the low income energy assistance program, storm connected expenses from two years ago. But as you said, the first and biggest reason that you brought up there, was the increase in the price of electricity, for the electrons that you have to buy as opposed to the ones that you’re creating. You said that’s supply and demand. But what do you mean by that? Why is it that the price of wholesale electricity that you’re buying, as a utility, has gone up threefold in recent years?
Sheeran: If you look across our region, I think you’re seeing a lot of dynamics come into play over the last five or so years. So one, you have a region here in the West that is committed to decarbonization. As a result of that, you’ve seen some baseload resources like coal plants coming offline. While the region is rapidly trying to build to replace that capacity in the system, with renewables and batteries, there is somewhat of a supply and demand imbalance. As the region itself is growing and as the grid is modernizing across our region, you’re seeing needed investments in transmission, as well as an increase in need for generating capacity across the region, to meet rising energy demands for customers and for businesses.
Miller: Bob, can you remind us the basics of what you do? What is the Citizens’ Utility Board?
Jenks: We’re an advocate for residential utility customers. So when you mentioned, their rate case filing can be hundreds and hundreds of pages. Our job is to go and look at those hundreds and hundreds of pages, and the exhibits and supporting documents, ask lots of questions and look for places to challenge these, and see if the rates that they’re asking for really are deserved or not.
Miller: So the Public Utility Commission, they’re the ones who actually make the final decision as a regulator. But you are people with expertise standing in the corner for residential customers, the rest of us who don’t have the expertise. You can look through the hundreds of pages and say to the PUC, here’s where we think the utilities got it wrong, for example?
Jenks: Yeah. If you look at the Commission as sort of the judge of a rate case, we’re sort of the defense attorney on behalf of the ratepayer.
Miller: PGE’s residential rates, as I mentioned, have gone up nearly 60% in six years. So the 5% increase this year you could look at and say, it’s not huge. But it’s when you combine it with all the others, that it really starts to seem like a shocking number. It’s grown way faster than overall inflation. But just to be clear, can the PUC consider the total combined increases for ratepayers over a period of time? Or can they only look at this year’s case and this year’s increase request?
Jenks: We think they have to look at the context, which is the larger environment. And they have to find ways to sort of push back to get utilities to manage their costs well. The rates are going up way faster than the rate of inflation. Some of that is things like market costs. Some of that is also what the utility’s doing. I mean, PGE, if you look at their most recent five year capital investment plan that they submit to investors, it’s $7.9 billion. Three years ago, the five year capital plan was $4 billion. It’s increased by 79% in three years, and that’s the money that they’re spending in the future. But all of that is then going to come into rates. So my concern is that what we’ve seen over the last five years reflects lower capital spending than what we’re going to see over the next five years.
My rate today is just under 25 cents a kilowatt hour. When I take my usage on my most recent bill, my usage is just slightly under 25 cents per kilowatt hour. We’re going to be at 30 cents per kilowatt hour and above pretty quickly, based on these spending plans. And that really worries me because we’re seeing too many people shut off. Rates that are unaffordable don’t do customers any good at all.
Miller: Kristin Sheeran, so what Bob is talking about there is looking at the capital expenditure plans going forward. He’s saying it looks like we’re gonna have much bigger increases in the years to come as well. What are the reasons for the projected capital spending increases in the coming years?
Sheeran: There are certainly significant capital needs for the grid as we look to the future. First of all, the grid that serves our customers today was primarily built more than a generation ago, to serve a very different economy and a very different type of energy system than what we have today. So there’s modernization, sort of bread and butter, replacing lines, poles, equipment. Wildfire has emerged as one of the fastest growing components of our customer cost. That’s obviously to deal with the escalating wildfire risks that we see in our region. [It’s] absolutely necessary to maintain the safety and well-being of our customers and the communities we serve.
We’re also seeing significant growth. But importantly, while we’re looking at these increased capital needs on our system, we’re also deploying strategies to keep customer costs as low as possible. So when we talk about infrastructure growth on our system, we have a philosophy now that growth has to pay for growth. And thanks to the work that the Citizens’ Utility Board and other advocates did two legislative sessions ago with the passage of the Power Act, we now have tools at our disposal to make sure that as we are building out infrastructure to support large energy users like data centers, we can allocate the cost of that growth to that user group.
For example, we have a filing right now at the PUC which would increase rates, if adopted, for data centers, by 20%. By shifting costs off of our small business and residential customers, residential customers could see a decrease of about 2%, if that particular proposal was adopted. As we look to the future where more of that growth may be associated with those large energy users, we would see more and more of those infrastructure costs being allocated to those large users.
Miller: How much is that happening now? Why not already say if data centers or other heavy industrial users are, by far, responsible for a bigger – I don’t know about the overall energy use – but in terms of the percentage change. Data centers, their demand is growing way faster than residential demand. So are you already taking that into account as you make these prices? Are you already saying, “hey data centers, we’re gonna give you a bigger piece of our overall cost increases, because you are demanding more and more every year?”
Sheeran: Well, because of the way that rates are set and regulated by law, we weren’t able to do that for data centers, as a specific class of customers, until the Power Act was passed a couple of years ago. And that’s what makes that legislation so important. It basically cleared the path for the Public Utility Commission to work with utilities and work with CUB to establish a different set of rate-making tools for data centers as a whole that could allow them to shoulder more of the growth that they are directly bringing to the system.
Miller: Are you thinking this is eventually, or in the coming years, going to lead to a decrease in residential electricity costs or a slowing down of what seems like an inexorable increase?
Sheeran: I don’t have a crystal ball. I think we’re probably in an environment where we’re talking about a slowing down of future residential rate increases. But I think this is an important point of the growth debate. When you have a system like the grid that is very capital intensive, when you can spread those capital investments out over a larger customer base over more kilowatt hours served, then that has a decreasing effect on customer rates. If, through the Power Act and other tools that may be developed over time at the Commission in the state, we can shift more of the cost to growth to those who are causing the growth, then we have a much fairer way of financing the capital investments on the system and taking some of those capital expenses off the backs of our residential and small business customers.
Miller: Bob, in the last six years when PGE’s residential customers have seen a nearly 60% increase in their rates, PGE shareholders have seen a nearly 50% increase in the stock price. How do you think about these two numbers?
Jenks: I think there’s a connection between the two. The way a utility makes money is making those capital investments and they earn a rate of return on the investment. And that pushes their stock price up. So when I said that their five year capital investment plan went from $4.3 billion to $7.6 billion, that increases the profits that the shareholders are going to make. That increases their stock price. But that also, when those investments get made, and then come into rates, they push up rates. So I think there’s a direct connection between these investments that they’re making, these massive and massive and billions of dollars of investments, and the rate increases that customers have been experiencing and the stock price.
Miller: Kristin, how do you think about this, about the increasing rates that residential customers have to pay, some of them at this point who cannot afford those increasing rates, and the really healthy returns over this period for shareholders?
Sheeran: Again, as I said, we’re managing customer rates as carefully as we can, committed to keeping rates as low as possible for our customers through a variety of strategies. The reality is, investor-owned utilities… Our model does deploy capital to provide grid infrastructure and electricity service to customers. Generally, investor-owned utilities can access that capital and deploy that capital in our communities at lower cost than other entities like the state, for example, could.
So a financially healthy utility is a utility that is poised to make the right investments that our state needs to serve our customers reliably and with increasingly clean electricity and meet the state’s needs for economic growth. Since 2020, PGE’s reinvested earnings have enabled over $800 million of investments in Oregon, directly benefiting our customers and helping to support Oregon’s economy. So it’s a virtuous cycle where a financially healthy utility is important to the economic well-being of both our customers and the state.
Miller: What would happen if a significant number of Oregonians, both residential customers and industrial customers, became much more energy efficient and used less of your electricity? It seems like it would be good, in that scenario, for the world as a whole. We’d be burning less fossil fuel, even though we haven’t decarbonized that much yet in terms of our electrical grid. That’s the hope, but natural gas still makes CO2. But what would that mean in terms of the price you charge? I guess I’ve been a little bit forever mystified by what seemed like opposing goals: Using less energy overall, but how that plays into your business model?
Sheeran: Energy efficiency, right, is one of the most cost effective resources that a utility has out there to meet their customers’ energy demands. This region historically, and Oregon in particular, has invested heavily in energy efficiency, out ahead of other regions and utility peers in the country, in terms of bringing energy efficiency investments and lowering the amount of electricity that customers use on average. As a result – and Bob sometimes has these numbers closer to the top of his head than I do – it has helped keep electricity rates in our region lower than in other regions of the country.
Miller: Rates or overall bills? That’s the part I guess that I’m wondering about. Like if people are buying fewer electrons from you, but a lot of your fixed costs remain the same, don’t you just have to increase rates, as people use less electricity?
Sheeran: As people use less electricity, we don’t need to generate or procure, in the market, as much electricity to meet that demand. With modern technologies like demand response, in addition to more traditional energy conservation measures where we can have two-way information flows between our customers and our businesses and the utility, we can signal what are the best times of day to utilize electricity that puts less demand on the grid. That then lowers the amount of power costs that we face. All of those kinds of system investments, which are part of building a modern grid, are critically important in helping our customers, first of all, directly manage their own energy bills through the amount of electricity they’re consuming. But it also lowers costs system wide, for all of our customers, because it decreases the amount of generation investments we have to make.
Miller: Bob, what are you paying the most attention to over the next couple of years?
Jenks: I think your question on energy efficiency is an important one. And one of the issues with that is we’re really seeing a two-tiered electric system. There’s folks like me, and probably you, that have relatively efficient heating at our home. And a 5% raise in bills isn’t that unmanageable. But then you’ve got a lot of folks, mostly poor folks who live in manufactured housing that’s older or rental housing still with resistance heat, And suddenly people are seeing $300, $400, and $500 bills in the winter. It’s the folks who can least afford it are doing that. And they’re not people who can put in a heat pump. They’re not folks who can take advantage of energy efficiency measures because they’re dependent on a landlord, or they’ve got manufactured housing that’s pre-1990s. So one of the things that I’m watching is whether we can find a way to start to break through. If we really want to deal with the level of disconnections and shutoffs, we’ve got to fundamentally change people’s HVAC systems in their homes, and get people into modern, efficient heating for their homes. Because it’s winter heating costs that are in the hundreds of dollars a month that, in my mind, are driving the disconnections. And that’s the real harm that we’re seeing from these electric increases.
Miller: Bob Jenks and Kristin Sheeran, thanks very much.
Sheeran: Thank you.
Jenks: Thank you.
Miller: Bob Jenks is the Executive Director of the Citizens Utility Board. Kristin Sheeran is Vice President of Policy and Sustainability at PGE.
“Think Out Loud®” broadcasts live at noon every day and rebroadcasts at 8 p.m.
If you’d like to comment on any of the topics in this show or suggest a topic of your own, please get in touch with us on Facebook, send an email to thinkoutloud@opb.org, or you can leave a voicemail for us at 503-293-1983.
