On February 23, 2015, the Oregon Public Utility Commission (Oregon Commission) took the unusual step of rejecting an all-party settlement in Avista’s general rate case. The parties had agreed to reduce Avista’s $9.8 million (9.8% average) rate increase to $6.1 million (6.1% average), resolve a number of controversial issues, and allow Avista to increase rates early (March 1, 2015 rather than July 3, 2015). The Oregon Commission rejected the settlement because of concerns regarding a proposed early rate increase and implementation credit, the rate spread, and the customer count tracking mechanism.
The settlement was joined by Avista, the Commission Staff, the Citizens’ Utility Board (CUB), and the Northwest Industrial Gas Users (NWIGU). The Commission Staff operates independently of the Commission providing expert testimony and recommendations. CUB represents the interests of residential customers, and NWIGU represents the interests of large industrial customers.
The settlement reduced Avista’s rate increase, but allowed the utility to increase rates four months early. The early rate increase would have allowed Avista an additional $1.5 million in revenues. In order to offset the early rate increase, the parties agreed to an early rate implementation credit of $850,000. The early rate implementation credit and the elimination of a separate surcharge would have resulted in an overall $5 million net revenue increase. As part of the settlement, the parties agreed to spread (or allocate) the rate increases among the different customer groups, resulting in higher rate increases for residential customers and lower rate increases or rate decreases for industrial customers. Finally, the settlement included a customer counting tracking mechanism.
The Oregon Commission had issues with each of these key components. The Oregon Commission recognized that industrial customers may be entitled to lower rates than residential customers based on traditional cost of service principles, but the commissioners did not believe that the record supported rate decreases for larger customers while other customers’ rates increased. The Oregon Commission also concluded that there was no support in the record for why an early rate increase should be allowed, or why the early rate implementation credit should be paid to large customers who would receive a rate decrease. In addition, the Oregon Commission found that the settling parties did not offer any rationale to support the adoption of the proposed customer count tracking mechanism.
The rejection of an all-party settlement was surprising because it is extremely rare. Typically, the Oregon Commission will carefully review, but ultimately approve an all-party settlement. The Oregon Commission’s decision indicates that it was not only concerned with the specific terms of this settlement, but also wanted the parties to more strongly support their recommendations. In this and other recent cases, the Oregon Commission has made it clear that parties cannot support a settlement by simply stating that they reached a compromise in their litigation positions.
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.
