08. Pacific Power
08. Pacific Power
FRAMEWORK FOR ENSURING FINANCIALLY HEALTHY UTILITIES AND CERTAINTY FOR CUSTOMERS RELATING TO INVESTMENT IN ELECTRIC ENERGY INFRASTRUCTURE IN OREGON A framework is needed to facilitate strategic planning, development, construction and investment in electric energy infrastructure in Oregon to grow our economy, meet state energy goals, mitigate impacts of extreme weather, address reliability and achieve improved rate certainty for customers to address affordability. Progress toward development of this framework can be made with an appropriately scoped Commission-led study. Foundational Principles The following principles serve as the foundation of the study: Oregon’s regulated utility model plays a critical role in supporting fairly-priced energy, reliability and resiliency, sustainability, utility responsiveness and enabling economic growth. Oregon has taken important steps to set out policies to ensure improved certainty for customers, including multi-year rate plans and protection against cost causers. Sound energy policy, clear regulatory guidance, transparency, regulatory stability and regulatory efficiency are necessary to secure long-term energy investment. Wildfire affects everyone and Oregon needs solutions that emphasize community protection, wildfire prevention, responsible investment and rapid recovery. Healthy utilities are crucial to economic prosperity, growth and a competitive business environment. Oregon is focused on clean generation development, innovation and resource diversity to achieve a clean energy future. Transmission development is essential for delivering energy and meeting the shared objective of powering Oregon's economic growth. The modern era of demand growth requires new tools and mechanisms to meet load requirements in a timely and efficient manner, while protecting existing customers. We can bolster innovation, research and environmental stewardship by investing in new technologies and grid solutions, without compromising reliability or affordability, through robust and aligned data-driven analysis and transparent planning without overburdening the development of solutions with time-intensive process. Customer service, affordability and reliability can be secured by creating a policy and regulatory environment that enables investments for long-term value, system efficiency and future rate certainty. Establish, enhance and optimize cost-recovery mechanisms and transparent data-driven metrics to achieve balanced outcomes for customers, utilities and Oregon. Study Framework Using the foundational principles identified above, below are categories for collaboration to secure Oregon’s energy future. 1
Wildfire Policy Creation of a Wildfire Fund. The goal is to create a fund that could be accessed in the event of a catastrophic wildfire to compensate impacted individuals and businesses in a timely way and provide a shared safety net for utilities facing high wildfire costs, especially from catastrophic events. It is designed to make wildfire liability more predictable and manageable – protecting customers, stabilizing energy service and promoting investment in safety. Fund concepts create a pool of money potentially sourced from multiple contributors, including state governments, utilities (shareholders and customers) and other private industry partners related to wildfire prevention. Limitations of Liability. Along with funds, there should also be clear and effective limitations of liability relating to wildfires, including limitations on noneconomic damages. Limitations of liability are the single most effective measure for supporting utilities and reducing the cost of the risk borne by customers. Limitations of liability are a clear signal to investors about the risk they will bear by investing in a regulated utility in the state. Limitations of liability, in combination with a Wildfire Fund, also have the benefit of extending the overall life of funds created to compensate those affected by fires. Standards of Care. Defining standards of care by which a reasonable utility should operate to prevent wildfire provides certainty for utilities and customers. Wildfire mitigation plans are developed by utilities and approved by the Commission. Policies associated with certifying that a utility is operating to an approved wildfire mitigation plan should provide rebuttable presumptions in a court of law. Lowering The Costs. Limitations on attorneys fees and subrogation claims serve to reduce overall costs for utilities and customers. Certainty as to these costs help to ensure capital investment and lower costs for customers. Regulatory Certainty and Efficiency Regulatory Lag. Regulatory lag results in a drag on a utility’s financial ability to make continual progress in the investments needed to reliably serve its customers in a way that achieves state energy goals. It is important to more closely align cost recovery with when costs are incurred for all elements of revenue requirement. All tools, inclusive of cost- recovery mechanisms, that can improve efficiency and reduce regulatory lag should be explored (i.e., interim rate adjustments, trackers, true-up mechanisms, multi-year plans, etc.). Recovery of Operational Costs. New challenges in load growth and generation mix are creating a significant amount of volatility and uncertainty in the ability of utilities to recover the operational costs necessary to meet these challenges. Reviewing existing mechanisms, and the possible development of new mechanisms, to ensure that they are structured effectively to ensure that the incentives are aligned with the state’s energy goals is important. 2
Capital Recovery. Uncertainty in a utility’s ability to recover costs for the capital investments needed to deliver on the state’s energy goals can result in a drag on that utility’s ability to make the necessary investments. Regulatory processes that can be used to improve certainty for the utility, with appropriate customer protections, will facilitate growth in needed energy infrastructure while promoting economic development, and these types of processes (i.e., pre-approvals) need to be evaluated. Guardrails. Customer protections are an important element of the clean energy transition. These protections serve as an important backstop to reign in potentially unexpected cost pressures that threaten affordability. A review of how these offramp protections are being, or could be, implemented, is needed to ensure they are able to function as intended considering both process and efficiency. Actions taken to trigger a guardrail need to be made in a timeframe that does not challenge effectiveness or that increases uncertainty and risk for the utility. 3
Parent: Appendix E: Submissions & Feedback · PDF: pp. 156-158