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Unique new deregulation law in Oregon

Electricity customers in Oregon will pay a 3% surcharge on their bills to make sure that utilities continue to invest in renewable resources and conservation after the state's two largest utilities are deregulated in 2001. At the same time, residential customers will be able to choose renewables at a premium "green" power rate and utilities will provide consumer information on monthly bills. The provisions are contained in an electric industry restructuring bill signed into law by Oregon governor John Kitzhaber.

Taking a different deregulation route to other states so far, the Oregon law provides retail choice to commercial and industrial customers of Portland General Electric (Enron) and PacifiCorp, but not to their residential customers. The purpose is to protect residential customers by leaving them regulated under the Oregon Pubic Utility Commission (PUC), says Rachel Shimshack of the Renewables Northwest action group. "In other states that have deregulated, there has not been much of a vibrant open access market for residential customers," she adds.

In Oregon, however, they will be offered one of three portfolio rate options: a regulated cost of service rate, a market based rate, or a rate that includes electricity from renewable facilities. Wind hardly features in the renewables package, making up less than 1% of the mix so far being offered by either Portland General Electric (PGE) or PacifiCorp.

Shimshack says about 150 organisations supported the bill and only PacifiCorp opposed it. "We didn't like the uneven playing field aspect of the bill," says PacifiCorp's Jan Mitchell. The bill opens access to customers of PacifiCorp and PGE/Enron, but not to the state's public utilities, except if they choose to do so. Public utilities serve almost one-third of Oregon's electricity consumers. "If customer choice is good, then it should be good for everyone," Mitchell comments. She adds that a number of small commercial customers also opposed the bill because they did not want to look for another energy supplier.

Shimshack says standards for setting the legislation in motion still have to be set. They will be determined publicly at proceedings before the Oregon PUC and the Oregon Energy Office over the next year. Implementation is set for October 1, 2001.

The 3% surcharge will result in a three-fold increase of expenditures for public purposes and yield as much as $50 million, based on current PGE and PacifiCorp annual revenues, Shimshack predicts. Nearly $10 million, or 19%, will be used for above market costs of renewables. The remaining $40 million will go to conservation, "weatherisation" of homes and market transformation programs.

The renewables option includes a mix of output from wind, solar, geothermal or hydropower. What the actual mix could be will be up to the Oregon PUC, but Shimshack says people in the advocacy community will push for an appropriate product.

PacifiCorp developed the portfolio concept in 1997 with the Oregon PUC, environmental groups and other advocacy organisations, according to Mitchell. It then applied the concept to a year long open access pilot project in Klamath Falls, Oregon, which ended in July. In that pilot, the utility did not open access to residential customers. It only offered the portfolio. PacifiCorp has about 485,000 customers in Oregon, including 30,000 in Klamath Falls. PGE/Enron adopted the concept in a recent open access proceeding before the PUC, although it tested only open access for residential customers in its 1998 pilot project, not the portfolio offerings. PGE has 714,000 customers in Oregon.

"We considered the pilot project to be successful considering the short period of time," says PGE's Mark Friberg. He says 14% of residential customers chose another energy provider. "We thought that was a great response, whereas in the proceedings before the commission [PUC], it looks like they thought the response was inadequate."

Consumer information

The final green feature of the legislation requires energy providers to supply information about their mix of resources, including information about the environmental impact of producing power. "We think this consumer protection information is part of building a credible market structure," Shimshack says. "Without this information, people can never relate to what they are buying." Mitchell says PacifiCorp already provides such information along with the power it feeds to the deregulated California market.

PacifiCorp's mix is 39% hydro, 54% coal, 5% gas or oil, 1% nuclear and 1% geothermal and wind. The mix includes both purchases and PacifiCorp-owned generation. PGE's mix is 54% hydro, 30% coal, 12% natural gas or oil, 2% nuclear and 2% other, which includes an average 7.5 MW output from Florida Power's Vansycle Ridge wind farm in Oregon.

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