Oregon Customers Seek Permanent Opt-Out from Direct Access Exit Fees, Expansion of Eligibility

"The transition adjustment mechanism is probably the single largest barrier to development of a competitive market," in Oregon, the Industrial Customers of Northwest Utilities told the Oregon PUC.

ICNU's comments came in a list of issues proposed for the PUC's comprehensive review of direct access rules and policies (Docket UM 1587), previously reported by Matters.

Direct access customers in Oregon are required to pay transition charges, or exit fees reflecting prior utility procurements on their behalf. Although utilities are required to offer multi-year opt-out direct access programs, only an option under Portland General Electric schedules 485 & 489 allows the customer to avoid future transition charges after the initial term (in this case, five years). Other direct access schedules, even where offering a multi-year term, require the customer to continue paying transition charges if the customer renews their direct access service after the end of the initial term.

PGE's schedule 489 is the only direct access program offered in Oregon that has had significant participation, and all current participants on Schedule 489 are on the 5-year option, which allows customers to permanently avoid the utility's resource costs after five years.

The PUC's January 2012 Restructuring Status Report indicates that 8.7% of PGE's eligible load is on direct access. In the past, that number has been as high as 20%. In contrast, PacifiCorp, where there is no permanent opt-out from transition charges, only reports 0.6% participation in direct access. "The 5-year Schedule 489 option is likely a significant driver of that difference," industrials said.

ICNU proposed the creation of a new option for customers larger than 1 average megawatt to permanently opt out of cost-of-service rates in exchange for a permanent waiver of transition adjustments.

"Customers should have the ability to plan for their own needs and avoid utility resource decisions, and a permanent opt-out option seems to be the only viable mechanism to achieve this," industrials said.

"In both the PGE and PacifiCorp direct access programs, the transition adjustment mechanism, which is based on an ongoing valuation methodology, appears to negate the opportunity for customer savings; therefore, a permanent option to avoid transition costs may be the only way to provide for a competitive direct access market," industrials added.

Furthermore, ICNU said that the transition mechanism could discourage new loads from even locating in Oregon. ICNU noted that, "new loads do not raise the same equity considerations as existing customers for whom a utility has planned resources," and said that, as a result, new customers should be given a separate market option based on the fact that the utility never planned to serve their load.

ICNU also sought a requirement that PacifiCorp offer a permanent opt-out direct access option similar to the 5-year option under PGE's Schedule 489.

The PUC should also create more flexible shopping windows, industrials said.

The City of Portland sought to expand eligibility for the long-term cost-of-service opt-out, as the city's streetlights and traffic signals are currently not eligible for the program under PGE schedules 485 or 489, which include a minimum demand threshold of 200 kW.

"Street Lighting (Schedule 91), Traffic Signals (Schedule 92) and medium sized customers (Schedule 83 and some Schedule 85 customers) are economically disadvantaged by being denied multi-year Direct Access. At present, a select group of larger users experience lower Transition charges (exit fees) than do the mid-sized commercial customers who only have access to a one-year Direct Access and higher overall Transition charges," the city said.

The city sought to expand the long-term cost-of-service opt-out to all non-residential customers larger than 30 kW demand, including the unmetered ratepayers under PGE Schedule 91 for Street Lighting and PGE Schedule 92 for Traffic Signal rate schedules, plus all medium-large sized customers of PGE under Schedules 83 and 85.