On February 24, 2015, the Oregon Public Utility Commission (Oregon Commission) issued an order approving PacifiCorp’s five-year direct access opt-out tariff. All other parties to the case, including the Commission Staff, commercial and industrial customers, independent power producers, and energy marketers opposed PacifiCorp’s proposal and supported an alternative five-year opt-out tariff. The five-year opt-out tariff was intended to provide PacifiCorp’s Oregon direct access eligible customers with a realistic opportunity to purchase power from non-utility energy marketers. The order, however, will likely maintain the status quo with minimal participation in PacifiCorp’s direct access program.
Oregon law allows most commercial and industrial customers to purchase power from independent electricity service suppliers (called direct or retail access). Customers remain physically connected to their local utility, but are allowed to purchase their electricity from a third party. Oregon’s direct access law is long and detailed, but the legislature left many of the important implementation details up to the Oregon Commission.
The Oregon Commission has conducted near annual proceedings that have considered revisions to the direct access programs. The Oregon commission has consistently decided not to promote direct access, but to instead err on the side of ensuring that customers who continue to purchase their power from their local utility are not harmed. In addition, Pacific Power has strenuously objected efforts to allow direct access, particularly in comparison to Portland General Electric Company (PGE). Participation in PacifiCorp’s program has been anemic, with less than 2% of eligible customers on direct access. PGE’s program has had more success, with about 20% of eligible customers on direct access and market options. Therefore, while there is legal option for direct access, few customers purchase power from third party suppliers, especially in PacifiCorp’s service territory.
Prior to 2015, PacifiCorp had four options for commercial and industrial customers: 1) a one-year program; 2) a three-year program; 3) market indexed rates; and 4) traditional cost of service rates. PGE, however, also offered customers a five-year opt-out tariff that supporters of direct access believed was one reason that PGE’s program is more successful.
The opt-out tariff is an attempt to address a unique problem in the implementation of Oregon’s direct access law. Direct access eligible customers can choose to purchase power from third parties; however, they must pay or be credited for their utility’s stranded costs or benefits through a process called ongoing valuation. Each year, PacifiCorp and PGE re-calculate their transition charges or credits. The Oregon Commission’s methodology is complex, but it essentially results a charge or credit that often offsets any savings that an eligible customer could receive. The opt-out tariff allows a customer to pay PacifiCorp for delivery charges, generation fixed costs, and a transition adjustment for five years. After this five-year period, the customer will have opted out of some of these charges and will only pay the delivery charges. Thus, after providing notice and paying exit fees for five years, a customer could avoid future charges when purchasing power from third party electricity service suppliers.
PacifiCorp’s opt-out tariff included a number of provisions that the company claimed were necessary to protect remaining cost of service customers. The Commission Staff, industrial and commercial customer trade associations, individual industrial and commercial customers, independent power producers, and energy service suppliers opposed PacifiCorp’s provisions on the grounds that they were unnecessary and would make the five-year opt-out tariff uneconomic. Therefore, all the parties in the case that represented the interests of customers opposed PacifiCorp’s recommendations.
The Oregon Commission, however, agreed with PacifiCorp on nearly all major issues, including the imposition of a large exit fee, a short “election window” time period for customers to choose direct access, narrow eligibility criteria, and the manner in which transition charges and credits would be calculated. The Oregon Commission only rejected one of PacifiCorp’s proposals and decided that customers that select the five-year opt-out could decide in the future to return to cost of service tariffs. The practical result of the Commission’s order is that customers that decide to “opt out” will be required to pay a large exit fee, which is likely to ensure that participation in PacifiCorp’s program remains extremely limited.
The Order can be found HERE
Disclaimer
These materials are intended to as informational and are not to be considered legal advice or legal opinion, nor do they create a lawyer-client relationship. Information included about previous case results does not assure a similar future result.
