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Utility Reform Project

Daniel Meek, attorney
10949 S.W. 4th Avenue
Portland, OR 97219
(503) 293-9021
dan[AT]meek.net

November 10, 2003

PRESS RELEASE

MARION COUNTY CIRCUIT COURT
ORDERS REFUNDS OF TROJAN
PROFITS CHARGED TO RATEPAYERS
SINCE 1995

NEW CORPORATE OWNER WOULD ALSO OWE THE REFUNDS

In an order issued November 7, the Marion County Circuit Court ruled that PGE must refund to ratepayers “the full amount of all excessive and unlawful charges collected by the utility for a return on its Trojan investment as previously determined to be improper by both this Court and the Court of Appeals.”

The full order is available via an FTP client or a web browser at ftp://ftp.voters.net/urp/trojan

After going to an FTP site with your web browser, you may have to hit Refresh or Reload to make the list of files appear.

The plaintiffs in the case, led by Utility Reform Project, calculate these refunds at over $300 million. If Enron sells PGE before this refund is paid to customers, the new owner will still owe the refunds to customers.

Judge Paul Lipscomb did not mince words in describing the flawed positions of PGE and the Oregon Public Utility Commission (OPUC). He stated:

Moreover, in the form urged by PGE and adopted by the OPUC, the filed rate doctrine would, in practice, become a powerful prescription which would immunize the utility from any meaningful judicial review. Clearly at least a potential source of mischief, adoption of the filed rate doctrine in the form urged by PGE could well encourage increasingly aggressive and perhaps even deceitful utility rate proposals. Once approved by the OPUC, the full financial benefit of all rates collected, no matter how poorly warranted and justified, would be permanently locked in and would never become refundable even when finally determined to be unlawful after years of successive court appeals. In short, Defendants’ version of the filed rate doctrine has more in keeping with the satiric scenarios of Joseph Heller’s Catch 22 and Lewis Carrol’s Through the Looking Glass than with responsible utility rate regulation.


Background

In 1978, Oregon voters adopted by a vote of 69 to 21% a ballot measure (Measure 9) to prohibit utilities from charging ratepayers any cost of plants not currently providing utility service to customers. Lloyd Marbet and other activists worked on this measure.

In 1992, PGE spent over $5.5 million to defeat a statewide ballot measure to close Trojan in what is still the most expensive statewide ballot measure campaign in Oregon history. Then, within a week, the Trojan plant suffered yet another steam generator tube leak of radioactive water and shut down permanently.

We said that the 1978 ballot measure then required that PGE no longer charge ratepayers to earn a profit on Trojan or to get back its investment in Trojan. At that time the investment in Trojan was about $250 million.

In 1995, the OPUC allowed PGE to continue to charge ratepayers both for return of the investment over the original expected 35-year life of Trojan and to charge ratepayers to receive a profit on Trojan of over 13% before taxes, for a total of $251 million of Trojan investment and $304 million for profit over the next 17 years (see table below). This is in addition to another $300 million in Trojan decommissioning costs over the next 17 years as well, all of which is being paid by PGE ratepayers.

The Utility Reform Project, Lloyd K. Marbet, and CUB appealed this decision to the courts. In June 1998, the Oregon Court of Appeals agreed that allowing the $304 million in profit was a violation of Ballot Measure 9 of 1978. The utilities then substantially increased their contributions to candidates for the Oregon Legislature running in November 1998. As soon as the Legislature convened in January 1999, Enron/PGE had Rep. Jim Hill of Hillsboro introduce a bill to overturn the decision of the Court of Appeals. Jim Hill was quoted in the paper as saying that he was "carrying water for the utilities." After the Legislature passed the bill and Governor Kitzhaber signed it, we waited for the end of the 1999 session and then collected over 60,000 signatures within 90 days to place this bill on the November 2000 ballot as a referendum, Measure 90. We won by over 88% of the vote and received more votes that any side on any Ballot Measure in Oregon history, over 1.2 million.

In the meantime, however, CUB in September 2000 entered into a Settlement Agreement with Enron/PGE, under which CUB withdrew from all of the lawsuits and supported a deal for PGE to collect from ratepayers either the same amount as before or even more. In return, PGE agreed to pay CUB $227,000 in attorney fees. Under the PGE-Cub “Stipulation,” PGE got to keep all of the profits on Trojan it had collected from ratepayers, and more.

The Utility Reform Project (URP) immediately filed a complaint at the OPUC challenging this deal as illegal under Ballot Measure 9 of 1978 and the 1998 Court of Appeals opinion.

Our expert witness concluded that, for ratepayers, the Settlement was worse than losing the lawsuits that we had been winning. PGE ratepayers have already paid to PGE more than the full investment of Trojan, plus $186 million more, as of October 1, 2001. The Settlement took away all of that money and far more. It took away:

$161.9 million in credits owed to ratepayers when PGE sold itself to Enron in 1996 and sold long-term power contracts to California

$15.4 million in NEIL (nuclear industry insurance) distributions

It also imposed upon ratepayers an additional cost of $36.7 million (present value) cost in the form of a "new Regulatory Asset." "Offsetting" this admitted $214 million (present value) cost to ratepayers is a "Customer Credit" of $2.5 million, leaving ratepayers with a net cost of $211.5 million (present value) from the "CUB Stipulation". This is on top of everything ratepayers had already paid. So the CUB Stipulation gave up over $300 million that should have been credited to ratepayers over the next 10 years.

PGE and the OPUC staff admitted, under oath, that the Settlement actually increased PGE's rates by $25.7 million as of October 1, 2001, and further increased PGE's rates by $15.7 million per year for the 2 years starting October 1, 2002.

The OPUC again approved the PGE-CUB Stipulation deal in April 2002 (OPUC Order No 02-227), and URP again appealed to the courts. Judge Paul Lipscomb of the Marion County Circuit Court on November 7, 2003, issued his decision that OPUC Order 02-227 was unlawful and that ratepayers were entitled to refunds. He stated:

The challenged OPUC’s order, No. 02-227, is reversed and remanded to the Commission with directions to immediately revise and reduce the existing rate structure so as to fully and promptly offset and recover all past improperly calculated and unlawfully collected rates, or alternatively, to order PGE to immediately issue refunds for the full amount of all excessive and unlawful charges collected by the utility for a return on its Trojan investment as previously determined to be improper by both this Court and the Court of Appeals.

URP believes that the amount of the refund should exceed $300 million. Calculation of that sum is shown on the attached table.

 

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