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<BR>&nbsp;&nbsp;&nbsp;SB 1149: Oregon's energy deregulation


   In order to better understand Oregon's deregulation, Bob Valdez of the Oregon Public Utilities Commission produced the following. Valdez's piece is a synopsis of testimony by Ron Eachus, Chairman of OPUC, appearing before the Legislature's House Smart Growth and Commerce Committee earlier this month. The full 20-pages of testimony is available to peruse at the offices of the Central Oregon or by email: This email address is being protected from spambots. You need JavaScript enabled to view it..

   The 1999 Legislature passed SB 1149 to restructure the way electricity was delivered in Oregon in the territories of the state's two largest utilities - PGE and PacifiCorp. The bill does not deregulate the utilities. Instead, it requires a redesign of the way rates are set in order to allow larger customers the opportunity to buy supply from an entity other than the utility. The utilities are still required to offer regulated rates to customers.
   In addition, the bill created a three percent set-aside of utility revenues to fund "Public Purposes," including energy efficiency, development of new renewable energy and low-income weatherization. This is not a three percent rate increase. Existing utility expenditures for these purposes will be backed out of rates. And future expenditures the utility otherwise would have made for these purposes will be included in the three percent instead of rates.
   The implementation of SB 1149 is a combination the law and the rules adopted by the Public Utility Commission. The Oregon plan is not a California look-alike! There are significant differences between the two approaches.
   The Current Situation: Prices in the wholesale market have gone up due to tight supply and increased natural gas costs. The California situation has exacerbated the situation and made it even worse. This would be the case even without SB 1149. Because of the high wholesale prices and high natural gas prices, the utilities have increased costs. Those costs will lead to rate increases with or without SB 1149. The Commission does not have the authority to order a utility to build a resource. In fact, building a resource may not be the best option. When a utility builds a resource to serve its load the costs of that resource are embedded in rates and will stay there through the life of the resources, which is usually several decades. The utilities are choosing to purchase power to serve load increases from others rather than build a plant and put its costs in the rate base for a long period of time. The resources used to serve load will consist of existing utility owned and ratepayer funded resources and market purchases.
   SB 1149 Is Not A California Look-alike
   California forced utilities to sell generation assets --Oregon's plan does not.
   California required utilities to buy from a volatile short-term market and prohibited them from protecting customers by negotiating long-term contracts. Oregon's plan does not.
   California forced customers into the market. Oregon's plan does not. No one is forced into the market and all customers will get a regulated rate from the utility.
   California has a cumbersome siting process that is a barrier to new generation. Oregon's plan does not. Already 1300 MW of new generation has been sited and another 1600 MW is under review.
   California's scheme was the product of last minute political deal making. Oregon's plan is not. It is the product of over four years of consensus building that produced a thoughtful and cautious plan with built in contingencies and flexibility.
   The objectives of SB 1149 are:
   Through the law and the PUC rulemaking, SB 1149 implementation embodies a number of objectives in the approach to restructuring the way rates are set and the way power is delivered. In meeting these objectives the Commission and the parties participating in the dialogue over implementation have taken into account the uncertainties that exist in today's marketplace.
   The Basic Objectives:
    To restructure the way rates are set to allow non-residential customers the opportunity to buy from a non-utility supplier.
    To provide a platform from which the state can make a gradual transition to a more competitive market for electricity at both the wholesale and retail level by establishing more efficient markets and opening the door to new products, new services and new technologies.
    To provide a buffer for customers while the wholesale market matures.
    To give customers more choices and more influence over the way electricity is delivered and used.
    To assure sufficient support for energy efficiency and fuel diversity through stable funding for energy conservation and new renewable energy.
    To protect customers from undue cost shifts when other customers choose non-utility suppliers.
    To mitigate market power of the incumbent utilities that could otherwise be used to give it an unfair advantage over potential competitors.