UE 394 Policy BEFORE THE PUBLIC UTILITY COMMISSION OF THE STATE OF OREGON PORTLAND GENERAL ELECTRIC COMPANY - Direct Testimony of
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BEFORE THE PUBLIC UTILITY COMMISSION
OF THE STATE OF OREGON
UE 394
Policy
PORTLAND GENERAL ELECTRIC COMPANY
Direct Testimony of
Maria Pope
Brett Sims
July 9, 2021UE 394 / PGE / 100
Pope – Sims / i
Table of Contents
I. Introduction ...................................................................................................................1
II. Context for This Case ...................................................................................................7
III. Price Increase..............................................................................................................16
IV. Key Proposals and Structure of the Filing.................................................................20
V. Qualifications ...............................................................................................................25
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I. Introduction
1 Q. Please state your names and positions with Portland General Electric.
2 A. My name is Maria Pope, and I am President and Chief Executive Officer of Portland General
3 Electric Company (PGE).
4 My name is Brett Sims, and I am PGE’s Vice President of Strategy, Regulation and
5 Energy Supply.
6 Our qualifications are included at the end of this testimony.
7 Q. What is the purpose of your testimony?
8 A. The purpose of our testimony is to:
9 • Provide the context for our rate case filing.
10 • Describe the customer value and benefits from investments we have made to enable
11 a clean energy future with a stronger, smarter, more resilient, better integrated
12 electric grid.
13 • Discuss actions to keep electricity prices as low as possible as we make these
14 investments, serving customers efficiently and equitably.
15 • Summarize the proposed average all-in price increase in 2022 of 3.9%, 2.9% of
16 which is supported by this filing,1 (the proposed price changes for specific classes
17 of customers is detailed in Exhibit 1200, Pricing).
18 • Identify key proposals and provide Commissioners, Staff, and stakeholders a
19 roadmap for our filing.
20 Our testimony is organized according to these objectives.
1
The all-in price increase is comprised of the following: 2% for NVPC; 2.9% base rate increase; less 0.9% for
supplemental schedules and less 0.1% for cycle basis billing.
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1 Q. Please provide a brief description of PGE.
2 A. As a vertically integrated, regulated electric utility company, PGE proudly serves more than
3 900,000 customers in 51 Oregon cities, including the state’s rapidly growing population
4 centers in the City of Portland, tri-county metropolitan area and north Willamette Valley. Our
5 service territory encompasses 4,000 square miles, reaching roughly from Mt. Hood west to
6 Gaston and Grand Ronde and from the Portland metropolitan area south to Salem.
7 Headquartered in Portland since 1889, we have more than 2,900 employees in counties across
8 Oregon – making us one of the state’s largest employers. We are a key economic engine with
9 the responsibility and privilege of providing essential electric service for our fellow
10 Oregonians. This requires safe, reliable, and affordable power, while also making investments
11 like our Wheatridge Renewable Energy Facility, which combines wind, solar and batteries
12 and projects such as our smart grid test bed to build a cleaner, smarter, and more equitable
13 energy future benefiting all customers and communities. We pride ourselves on reflecting the
14 values of the customers and communities we serve and taking action to support their needs.
15 We are also inspired by the opportunity to partner with them to go further, faster to address
16 climate change. Several cities and counties in our service area have adopted resolutions to
17 move to 100% carbon-free power, and our voluntary renewable energy program leads the
18 country in both customer participation and the amount of energy sold.
19 Q. Please state PGE’s mission and strategic vision.
20 A. Our fundamental mission remains unchanged: Deliver safe, reliable, secure, and affordable
21 energy to Oregonians as a regulated and integrated utility. Reliability and affordability are
22 the foundation of our role in supporting customers, Oregon’s economy, and the overall
23 advancement of society. Yet the drivers that guide how we fulfill our mission – and
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1 expectations for how quickly we must act on those drivers – have evolved as the impacts of
2 climate change and other environmental concerns mount and societal awareness of systemic
3 inequalities expands. In that context, our strategic vision is to integrate the delivery of
4 affordable, cost-effective customer choices with our approach to decarbonization and our role
5 of ensuring reliability, resiliency, and access for all through a smarter grid. One core aspect
6 of our strategy is to decarbonize our energy supply for the energy we serve customers by 80%
7 or more by 2030 and achieve net-zero carbon across the enterprise by 2040 when we aim to
8 reach the goal of delivering 100% carbon free energy to customers. We will also work with
9 customers and others to further decarbonize our economy by electrifying it through the
10 increased use of grid-connected electric vehicles, water heaters, heat pumps, and other clean
11 technologies, and to achieve these goals on our customers’ behalf as efficiently and equitably
12 as possible. The investments and initiatives reflected in this rate case are part of that effort.
13 Q. Have recent events underlined the importance of PGE’s mission?
14 A. Yes. While the past one and a half years have been challenging, recent events have solidified
15 the importance of our mission more than ever. In addition to the Covid-19 pandemic,
16 Oregonians have endured historic wildfires, unprecedented winter storms, and record-
17 breaking summer heat that may represent “new normal” events as our climate changes.
18 During this time our society also awakened to a compelling new sense of urgency around the
19 need to address systemic inequality and racial bias so that all members of the community are
20 treated equitably.
21 These challenges have illustrated again how essential the service we provide truly is for
22 our customers, and how critical it is for us to transform and modernize the electric system by
23 investing in smart and clean technologies that help us address climate-driven and human-
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1 caused threats to service reliability. At the same time, we must use this opportunity to rapidly
2 increase efficiency and reduce costs by leveraging technology to transform and improve our
3 business so we can keep customer prices affordable. We are being purposeful in partnering
4 with our customers, communities, and other stakeholders to seek innovative and equitably
5 delivered solutions as we formulate and execute our strategy.
6 Q. How do economic conditions impact PGE and its customers?
7 A. In our last general rate case, we discussed in-migration to our service territory, the growing
8 customer connects and the need to meet increasing demand. Since then, exacerbated by the
9 pandemic, we have seen small businesses reduce operations or go out of business and more
10 customers – residential and business – experience difficulty paying their bills. We responded
11 with a voluntary moratorium on disconnecting customers for nonpayment, which was
12 extended to August 20212 for residential customers and was effective until December 1, 2020
13 for nonresidential customers. Our voluntary efforts are memorialized in a stipulation we
14 entered with stakeholders, facilitated by Commission Staff and approved by Commission
15 Order No. 20-324. There are strong indications that economic recovery in Oregon and across
16 the nation is accompanying widespread vaccination against COVID in 2021 and will continue
17 through 2022, yet we understand that for some customers the impact of the pandemic will be
18 felt for an extended period. We took that into account in determining the scale and timing of
19 this rate case and have worked to minimize the impact on customers while still providing for
20 essential investments needed to assure reliable service and enable grid transformation. Details
21 of those efforts are provided below. In addition, we continue to work with customers who are
22 struggling to pay their bills, and with Commission Staff and stakeholders, to look for
2
For residential customers, energy utilities may resume the 15-day disconnection notice (in accordance with OAR
860-021-0405) on August 1, 2021.
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1 appropriate avenues to ease the burden on these customers, including our support for
2 legislation adopted this year to give the Commission authority to consider differential pricing
3 for energy burdened customers.3
4 Q. Given the pandemic and resultant customer hardships, did you consider not filing this
5 general rate case?
6 A. Yes. In making the decision to file this general rate case, we actively considered the pandemic
7 and its effects on our customers, many of whom lost jobs, businesses, or had other cutbacks
8 in employment, and are challenged making ends meet. We have seen this first-hand through
9 sometimes distressed calls from customers who cannot pay their bills. Given this, we analyzed
10 the consequences for customers and our ability to deliver on customer-driven priorities if we
11 were to delay filing a rate case. We concluded that, while a rate case filing in 2021 is a
12 practical necessity, we could – and did – minimize the price increase request, and we filed
13 later in the year to allow recovery from the pandemic to begin and the economy to start to
14 rebound. The decreased proposal reduces the immediate impact on customers, while the delay
15 in filing until mid-year moves the effective date for a Commission-approved price change in
16 2022 further into what is anticipated will be the post-pandemic economic recovery (and out
17 of the high bill season during the winter months).
18 Q. Is there any significance to the timing of this rate case filing?
19 A. Yes. As noted above, we decided to submit the filing at a later date so the smaller price
20 increase will become effective in May 2022, when residential customer loads are traditionally
21 lower due to milder temperatures, rather than January 1, 2022 when, with colder weather and
3
See HB 2475; https://olis.oregonlegislature.gov/liz/2021R1/Downloads/MeasureDocument/HB2475/Enrolled
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1 less daylight, loads are higher. Consequently, the proposed increase will take effect later and
2 have less overall impact for most customers than would otherwise have been the case.
3 Q. How is the rest of your testimony organized?
4 A. In the next section, we explain how PGE’s strategic vision relates to current State of Oregon
5 and Commission policy. We also explain how this general rate case fits into this larger
6 context. Next, we summarize the average price increase proposed in this case and the primary
7 drivers of that increase, as well as our efforts to mitigate cost impacts while still making
8 essential investments to benefit customers. We then identify PGE’s key proposals in this case
9 and introduce the exhibits and witnesses who provide additional testimony in support of our
10 requests. In the final section, we provide our qualifications.
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II. Context for This Case
1 Q. What role do customers play in driving your strategy?
2 A. Our strategic vision to decarbonize, electrify and perform can only be successful if it is
3 informed by and reflects customer values and desires.
4 We understand that our customers care deeply about the environment and the planet, and
5 that they expect PGE to be a leader in addressing climate change and we are working to meet
6 our shared priorities to accelerate sustainability and decarbonization. We also know
7 customers want us to provide more offerings and better solutions for their individual energy
8 needs, as well as customized options involving the deployment of new technologies and
9 innovative programs and services. Finally, we know our communities recognize the urgent
10 need to address systemic inequalities and achieve more equitable outcomes across all
11 institutions and segments of our society and economy. And they expect these priorities to be
12 achieved while maintaining the foundational mission of safe, reliable, and affordable electric
13 service.
14 To accomplish this, we need to meet our customers’ evolving needs and expectations.
15 Our first priority has been to invest in our transmission and distribution (T&D) system to
16 maintain and build its strength as equipment has aged out and as we face new challenges with
17 extreme weather and wildfires. Our customers do not just expect us to provide them with
18 clean energy seamlessly and affordably; they also expect us to be easy to do business. Our
19 customers expect us to make thoughtful investments, operate prudently, meet all regulatory
20 standards and requirements, and think ahead to anticipate their future needs, while also being
21 transparent and inclusive. We aspire to be our customers’ trusted energy advisor, engaging
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1 with customers in creative and continuous ways to ensure that we understand what they want
2 from us so customer priorities can drive our actions.
3 Q. Please provide specific examples of customer-driven strategy and priority.
4 A. Our focus on decarbonizing our energy supply and partnering with customers and
5 communities to electrify and reduce transportation sector emissions is informed by the
6 majority of our customers who want cleaner energy sources to serve their needs and address
7 climate change. In this vein, we now offer residential and nonresidential charging rebates,
8 EV chargers on distribution poles for our customers who may not have home charging,
9 nonresidential heavy duty EV charging, and assistance in conversions of fleet to electric
10 vehicles.
11 Our customers also want new and individualized ways to engage with service providers
12 of all kinds – whether through traditional means like call centers or more advanced digitally-
13 enabled channels like mobile applications, social media and voice assist technologies. We
14 have rolled out an advanced Interactive Voice Response (IVR) system and improved website
15 capabilities as well as provided new payment options through mobile and social platforms,
16 such as PayPal, so that we can meet the growing variety and individuality of customers’
17 preferred channels, even those customers who do not have traditional bank accounts.
18 To meet these needs of our customers, a strong T&D system is essential. Over the past
19 three years, we have invested heavily in needed pole and underground wire replacements that
20 have come to the end of their useful lives, and we have made numerous substation upgrades
21 to maintain reliability and address new and growing load.
22 Q. How does this rate case further your strategic vision?
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1 A. Key drivers of this rate case reflect our customer’s expectations, including investments we
2 have made in our new Integrated Operations Center (IOC) – and the smart grid platforms it
3 will house – the repowered Faraday Powerhouse, and our wildfire mitigation program. Most
4 significantly, we have made investments in hundreds of individual projects, large and small,
5 to modernize, strengthen, and upgrade our T&D system for customer growth, enhanced
6 reliability, and resilience. The investments reflected in this rate case will meaningfully
7 contribute to the realization of our strategy to deliver a clean and smart energy future while
8 they also deliver value for our customers by creating a more flexible, reliable, resilient, secure,
9 and integrated grid.
10 The foundation we are creating will allow deployment of new assets and technologies to
11 securely integrate increasing volumes and types of distributed energy resources. These will
12 provide both local and system-wide customer benefits, maximizing the contributions of
13 flexible load programs and taking advantage of growing numbers of smart and connected
14 customer end-use devices. Ultimately, these foundational investments will help us more
15 rapidly advance decarbonization at a lower cost, while providing new and more compelling
16 service options for customers.
17 Q. How do your customers’ changing expectations influence the services PGE delivers and
18 their associated costs?
19 A. Customers across the territory, from residential to large industrial, want to go cleaner faster
20 while maintaining affordability. Municipal customers want to decarbonize their energy
21 supply further and faster than the current Renewable Portfolio Standard prescribes, and we
22 are working with them to develop more comprehensive clean energy options, like our recently
23 launched Green Future Impact program. Residential and commercial customers are also
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1 looking for more renewable and carbon free options in their energy supply, and in some cases
2 looking for ways to produce power and contribute to the grid themselves. Commercial and
3 industrial customers are expressing urgency with respect to meeting their own climate and
4 sustainability goals to meet their customer and stakeholder expectations and looking to PGE’s
5 energy supply to play a significant role in reducing the overall carbon footprint of their
6 businesses. These customers are demanding both faster decarbonization of our supply and a
7 broader and more customized range of alternatives to help them achieve their sustainability
8 goals. Also as noted above, customers want PGE to be easy to do business with, because they
9 seek to engage with us to find energy solutions – not just products – to meet their needs.
10 Consequently, we are increasing the number of channels we have available to engage
11 with customers more effectively and meet them on their own terms. In addition, driven by the
12 needs of our customers, state policy, and climate imperatives, we have added renewable and
13 carbon-free generation of various types, scales and locations to our supply mix – like our
14 triple-resource Wheatridge project – created additional green energy service options, deployed
15 the smart grid test bed and expanded flexible load programs, and launched a variety of
16 transportation electrification pilots and residential storage rebates.
17 In this rate case the IOC and the platforms and control systems it will house require a
18 substantial investment on behalf of customers, in addition to the significant investments made
19 in the grid itself. At the same time, over the long run the added flexibility, cleaner energy
20 system and greater variety of energy solutions enabled by this newer, smarter, more reliable,
21 and more resilient system also protects the affordability of electric service. As the electric
22 power system begins to serve a larger share of customers’ overall energy demand, the
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1 improved range of customized energy solutions and greater efficiency of this smarter system
2 will yield benefits and increased value on both the grid level and the individual customer level
3 Q. Please provide additional detail on PGE’s strategic investments.
4 A. The IOC is the single largest investment on behalf of customers in the rate case and supports
5 safe grid operations, modernization, and decarbonization. In short, the IOC will allow PGE
6 to efficiently control and monitor all elements of the integrated grid in a single facility, even
7 under extreme conditions. As the nerve center of the smart grid, the IOC will be hardened
8 against natural disasters, such as earthquakes, as well as physical and cyber threats, resulting
9 in a more reliable delivery of electricity for our customers when faced with crises and in day-
10 to-day operation or when faced with crises or events like winter storms or summer heatwaves.
11 This investment in our future means greater reliability for customers with fewer and shorter
12 outages, as it provides the foundation for an integrated grid with greater visibility and
13 operational control over our T&D system and the ability to support future technologies and
14 innovations without disruption. A detailed explanation of the role of the IOC is offered in
15 PGE Exhibit 800.
16 In addition to the IOC, PGE has made significant investments in its T&D system to
17 address increasing customers and electricity demand, safety and system hardening. These
18 investments provide customers with safer and more reliable energy and are also described in
19 greater detail in PGE Exhibit 800.
20 The rate case also includes the repowered Faraday Powerhouse on our Clackamas River
21 Hydroelectric Project. The original powerhouse was one of PGE’s earliest investments on
22 customers’ behalf, made in 1908. After more than a century of service, its replacement
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1 illustrates an important element of our clean energy strategy: We are building a new, modern
2 facility with more efficient turbines.
3 Q. Please provide more detail regarding your grid modernization and decarbonization
4 efforts.
5 A. PGE is implementing multiple projects as part of our grid modernization and decarbonization
6 effort, including an Advanced Distribution Management System (ADMS), expansion of
7 Dispatchable Standby Generation resources, enhanced Enterprise Data Analytics, and
8 expansion of the Reliability Performance Monitoring Center to include T&D assets.
9 Each of these provides important value and benefits to customers, supporting our ability
10 to deliver on our clean energy commitments through improved integration of carbon-free
11 resources, and our ability to partner with customers and offer them more options and greater
12 choice and control over how they use energy.
13 T&D systems are experiencing an evolving and growing interdependence due to the
14 growth of customer-sited distributed energy resources like storage devices and flexible load
15 and our increasing ability to directly monitor, control and optimize those resources. All these
16 systems, resources and devices will be managed, monitored, and secured at the IOC, which
17 will facilitate reliable and resilient system operations under varied and even extreme
18 conditions, providing customers with both day-to-day value and just-in-case peace of mind
19 for both natural and human-caused disasters.
20 As part of the IOC, we will deploy ADMS, a new software platform that will allow us to
21 manage increased demand while integrating existing and new renewable resources. It will
22 also enhance our integration and optimization of flexible loads (e.g., demand response
23 resources), distributed energy resources, microgrids, energy storage and electric vehicles, all
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1 of which will help advance our decarbonization efforts. The platform supports the prediction,
2 monitoring, control, optimization, and safe operation of all elements within a distribution
3 system, which will enable us to proactively detect and respond to issues before they impact
4 customers, helping to reduce outages. Additionally, the new technology will provide a self-
5 healing capability for the grid, helping to further reduce outages and downtimes. ADMS
6 functions are still being developed and expanded across the industry, but include fault
7 location, isolation and restoration, volt/volt-ampere reactive optimization, and conservation
8 voltage reduction. PGE Exhibit 800 also provides additional detail regarding ADMS.
9 Q. How does state policy fit into PGE’s strategic vision?
10 A. PGE’s strategic vision strongly aligns with the outcomes envisioned in the Governor’s recent
11 Executive Order 20-04 on Climate Action, which directs state agencies to take actions to
12 reduce and regulate greenhouse gas emissions, 4 and in the 100% Clean Electricity law (House
13 Bill 2021) recently passed by the Legislature. 5 Our strategy also furthers the state’s
14 transportation electrification policies articulated in Senate Bill (SB) 15476 and SB 1044,7 and
15 the recently enacted House Bill 2165. 8 In addition, we are leveraging new technologies that
16 will maximize the value of our assets and productivity of our people, while driving costs out
17 of our systems and processes. This will help us maintain affordability and reliability, as we
18 deliver increased customer value through expanded platform capabilities that enable enhanced
19 energy products and services and exceptional customer experiences.
4
https://www.oregon.gov/gov/Pages/carbonpolicy_climatechange.aspx
5
https://olis.oregonlegislature.gov/liz/2021R1/Downloads/MeasureDocument/HB2021/Enrolled
6
https://olis.leg.state.or.us/liz/2016R1/Downloads/MeasureDocument/SB1547/Enrolled
7
https://olis.oregonlegislature.gov/liz/2019R1/Downloads/MeasureDocument/SB1044/Enrolled
8
https://olis.oregonlegislature.gov/liz/2021R1/Downloads/MeasureDocument/HB2165/Enrolled
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1 It is also important to note that managing the increasing risks of wildfire is also reflected
2 in both Executive Order 20-04 and in PGE’s strategy. The adoption of new technologies for
3 improved visibility, flexibility, and operational control of our T&D systems at our IOC will
4 also play an important role in monitoring and helping to reduce the potential for wildfire-
5 related impacts from our system.
6 Q. Regarding electric system decarbonization, does the vertically integrated model allow
7 PGE to do the greatest good for the greatest number of customers?
8 A. Yes. The vertically integrated model is being leveraged by Oregon’s key clean energy
9 policies, the Renewable Portfolio Standard and the new 100% Clean Electricity law (HB
10 2021), to decarbonize the Oregon’s electricity system at scale and at an accelerated pace, while
11 keeping it affordable and reliable. To build the security, reliability, resiliency, and efficient
12 integration of resources that customers need as we decarbonize consistent with these important
13 policies, vertically integrated, fully regulated utilities like PGE will need to remain at the heart
14 of the system. Placing the regulated utility at the center of the state’s decarbonization strategy
15 also allows public policymakers, regulators, and stakeholders to retain a strong voice in
16 overseeing how that strategy is implemented. The integrated grid, with increasing diversity
17 of resources, more distributed resources, and a greater range of customer options for
18 interacting with the system has a critical role to play in helping to balance load and variable
19 resources. These efforts will take Oregon further, faster if customers and the electric system
20 remain integrated and coordinated. Increasing energy volumes and system scale also puts
21 downward pressure on customer prices while maximizing the value of our collective
22 decarbonization efforts.
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1 When large nonresidential customers choose to purchase energy from an alternate
2 electricity supplier, it is our obligation to protect all customers and ensure that customers
3 departing PGE’s supply service pay their fair share of system costs, including costs related to
4 public policy directives and resource adequacy. In this rate case, we are proposing that the
5 costs of two mandated state programs – the solar payment option (feed-in tariff) and demand
6 response – are not bypassed when customers choose long-term and new load direct access.
7 The non-bypassability pricing approach is discussed further in PGE Exhibit 1200, Pricing.
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III. Price Increase
1 Q. Given the recognition of price affordability, please summarize PGE’s request to the
2 Commission.
3 A. We request that prices be adjusted to yield approximately $59.0 million in additional revenue,
4 which represents a 2.9% increase in base rates beginning May 2022. PGE has separately
5 requested a 2.0% increase in power costs as filed in PGE’s annual update tariff (Docket No.
6 UE 391), for a total revenue requirement increase of $99.0 million. These values are offset
7 by a decrease of 0.9% related to supplemental schedules, and a decrease of 0.1% for cycle
8 billing basis. This results in an all-in price change of 3.9% in 2022. Our last rate case was
9 for 2019, making this our first base rate increase in over three years. The primary costs driving
10 this increase, along with the impacts by customer class, are detailed in PGE Exhibits 200,
11 Revenue Requirement, and PGE Exhibit 1200, Pricing.
12 Q. What are the primary elements of PGE’s rate increase?
13 A. As discussed above, our request is centered on investments made to enhance reliability, safety,
14 and efficient service as the basis for increased customer value as we transition to a clean
15 energy system through the use of a more integrated grid. Consequently, most of the requested
16 increase is based on capital expenditures and capital-related costs, the primary components of
17 which are a significant number of T&D-related system modernization and resiliency projects,
18 as well as strategically-focused projects such as the IOC and the repowered Faraday
19 Powerhouse.
20 Q. What are the drivers behind the T&D capital investments made in this case?
21 A. The customer price increase in this case is being driven primarily by increases in T&D capital.
22 From 2019 through April 30, 2022 we have or will have invested $1,566.3 million in T&D,
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1 net of $119.2 million of depreciation in the areas shown in Table 1 below. These values
2 include pole replacements, major system inspections and upgrades, customer driven projects,
3 replacement of failed underground cables, replacement of unjacketed cable, and major
4 upgrades to substations. For more details on these investments, please see PGE Exhibit 800.
Table 1
T&D Capital Additions
($millions)
Category Additions
Poles & Wires $ 809.1
Substations $ 351.7
Integrated Operating Center (IOC) $ 215.2
Line Transformers $ 67.8
Meters Additions and Replacements $ 53.5
Advanced Distribution Management Systems (ADMS) $ 27.4
Field Voice Communications $ 17.4
Field Area Network (FAN) $ 16.2
Remote Sensing Project $ 8.0
Gross Plant $ 1,566.3
Net Plant* $ 1,447.1
* Net of accumulated depreciation
5 These projects benefit customers by maintaining and improving reliability and resiliency,
6 and by addressing specific customer needs and customer load growth.
7 Q. What actions has PGE taken to mitigate the price increase in this rate case?
8 A. To mitigate the price increase while still allowing us to make essential system improvements,
9 we have managed our operations and maintenance (O&M) costs carefully to keep the increase
10 in O&M to a level well below the average rate of inflation. In addition, we modified our
11 request as follows: 1) this case does not include any officer incentive compensation and we
12 have removed 50% of all other forecasted incentive compensation costs; 2) we are not
13 requesting an increase in the return on equity (ROE); and 3) we have maintained the
14 uncollectibles rate approved in PGE’s last general rate case, UE 335. Our proposal is to
15 maintain PGE’s ROE of 9.5%, despite support from our ROE witness that would justify a
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1 higher ROE rate, and a capital structure of 50% debt and 50% equity. The specifics regarding
2 cost increases and the efforts to mitigate them are discussed in more detail in the testimonies
3 addressing PGE’s operations. We also honor our commitment to exclude all costs related to
4 PGE’s August 2020 trading losses.
5 Q. How does this rate case reflect your commitment to managing your costs?
6 A. This case reflects the savings achieved through our continuous improvement and operational
7 planning efforts. Our commitment is to manage costs, streamline processes, learn from others,
8 and maintain a culture of continuous improvement at PGE that benefits customers through
9 improved service and reduced long-term cost impacts.
10 For example, over recent years, we have incorporated cloud-based services that provide
11 us with a new level of flexibility in how we manage and organize our Information Technology
12 (IT) capabilities. Using cloud-based services instead of traditional data center services
13 provides more reliability, supports business continuity plans, and reduces IT costs. The use
14 of this technology also increases efficiency and reduces enterprise risk, as well as increasing
15 financial transparency and enabling more informed financial decisions. Lastly, it also
16 enhances customer service by increasing elasticity to support increased usage and resiliency,
17 especially during major outage events such as storms.
18 PGE has also realized efficiencies through renegotiating long-term service agreements,
19 improving plant maintenance practices, improving line operations processes to decrease
20 reliance on contractors, material cost reductions through supplier renegotiations and decreases
21 to labor resources across the company. The testimonies discussing PGE’s operations provide
22 additional detail regarding efficiencies and savings achieved and incorporated in this filing.
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1 Q. Has PGE protected customers from costs related to last summer’s trading losses, in this
2 rate case?
3 A. Yes. All costs attributable to the losses as well as the losses themselves are not included in
4 this case and our intention is that customers will not bear any of them.
5 Q. Will the results of this rate case affect PGE’s access to and cost of capital to fund
6 investments in the near future?
7 A. Yes. The results of this case, as filed, will provide PGE the opportunity to fund capital
8 investments, meet financial obligations, and provide an opportunity for our shareholders to
9 receive a reasonable return on their investment – which in turn benefits customers by giving
10 investors an incentive to provide access to capital used to support reliable, affordable service
11 to customers.
12 Q. Are there other risks of changes to PGE’s requested price increase that are not currently
13 factored into the costs for the 2022 test year filing?
14 A. Yes, given that the Oregon Legislature very recently adjourned, newly enacted laws will
15 impact PGE’s costs and revenue structures including laws that enable further decarbonization
16 and transportation electrification, modify the public purpose charge framework, provide for
17 differentiated rates for low-income customers, and establish wildfire protections, among
18 others. We have developed the 2022 test year within the context of the current regulatory and
19 statutory model and PGE operations within that model. As the case proceeds, we will work
20 with parties as appropriate to update costs, revenues, and utility actions as necessary and
21 appropriate.
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IV. Key Proposals and Structure of the Filing
1 Q. Please summarize the specific proposals you are requesting the Commission approve as
2 part of this general rate case.
3 A. We request the Commission approve the following proposals:
4 • Increase our revenue requirement by $99.0 million and prices by 3.9%. The
5 requested price increase is the combination of an approximate 2.0% increase in
6 PGE’s 2022 net variable power costs (requested in pending docket UE 391), offset
7 by a 0.9% decrease in supplemental schedules, to be effective January 1, 2022,
8 offset 0.1% when taking into consideration cycle billing, and an approximate 2.9%
9 base business increase to be effective May 1, 2022. This request is discussed in
10 more detail in PGE Exhibit 200, Revenue Requirement. In PGE Exhibit 1200, we
11 provide information on 2022 supplemental schedules and their offsetting impact to
12 the overall price increase for 2022.
13 • Include the IOC and other proposed capital additions in rate base. This request is
14 discussed in more detail in PGE Exhibit 800, Transmission and Distribution.
15 • Accelerate Colstrip depreciation. This request is discussed in more detail in PGE
16 Exhibit 200, Revenue Requirement and is reflected in the depreciation study filed
17 in Docket UM 2152.
18 • Improve wind modeling within PGE’s power cost forecast by updating the hourly
19 price-shaping model, known as Lydia, to incorporate the effects of wind generation
20 volatility on energy prices. This request is discussed in more detail in PGE Exhibit
21 100, Net Variable Power Costs, as filed on April 1, 2021, Docket No. UE 391.
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1 • Modify PGE’s Level III Outage Restoration mechanism to include a balancing
2 account with sharing percentages. This request is discussed in more detail in PGE
3 Exhibit 800, Transmission and Distribution.
4 • Adopt a non-bypassable rate spread method for the costs associated with state
5 policy and state mandates tied to the Solar Payment Option cost recovery rate
6 schedule. This request is discussed in more detail in PGE Exhibit 1200, Pricing.
7 • Change the residential customer basic charge to distinguish between those who live
8 in multi-family and single-family dwellings to create more equitable residential
9 customer pricing. The request is discussed in more detail in PGE Exhibit 1200,
10 Pricing.
11 Q. How is PGE presenting this case?
12 A. We are presenting the following direct testimony:
13 • In Exhibit 200, Alex Tooman, Senior Regulatory Consultant, and Greg Batzler,
14 Regulatory Consultant, summarize the overall $2,105.0 million test year revenue
15 requirement, comparing the request with that most recently approved in our last
16 general rate case UE 335 (2019 test year). In Exhibit 200, we identify a specific
17 Colstrip revenue requirement and propose that all identifiable Colstrip-related costs
18 be included in a separate tariff schedule. The revenue requirement of $2,105.0
19 million includes $55.9 million of Colstrip related capital and expense costs. This
20 testimony also discusses our net rate base, plus associated depreciation and
21 amortization expense, and unbundled results.
22 • In Exhibit 300, Anne Mersereau, Vice President, Human Resources, Diversity and
23 Inclusion, and Tamara Neitzke, Director of Total Rewards, present total
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1 compensation costs for the 2022 test year and describe how PGE's
2 compensation philosophy is designed to address compensation challenges.
3 • In Exhibit 400, Jim Ajello, Chief Financial Officer, and Greg Batzler, Regulatory
4 Consultant, explain PGE’s request for administrative and general (A&G) costs in
5 2022.
6 • In Exhibit 500, Larry Bekkedahl, Senior Vice President of Grid Architecture,
7 Integration, and System Operations, and John McFarland, Vice President and Chief
8 Customer Officer, explain PGE’s forecast of Customer Service O&M costs and
9 address the Transportation Electrification program. They also discuss customer
10 payment options and the proposal to offer fee free debit and credit card payments
11 to small non-residential customers.
12 • In Exhibit 600, Jason Salmi Klotz, a Principal Product Development Specialist,
13 discusses PGE’s Flexible Load Plan and explains PGE’s proposal for submitting a
14 portfolio level, multi-year plan and cost recovery options to address that plan, later
15 this year.
16 • In Exhibit 700, Bradley Jenkins, Vice President, Utility Operations, and Stefan
17 Cristea, Sr. Regulatory Analyst explain the O&M expenses associated with PGE’s
18 long-term power supply resources. They also discuss the recent plant performance
19 of our generation fleet.
20 • In Exhibit 800, Larry Bekkedahl, Senior Vice President of Grid Architecture,
21 Integration, and System Operations, and Bradley Jenkins, Vice President of Utility
22 Operations, discuss T&D capital expenditures from 2019 through April 2022 and
23 incremental O&M costs for the 2022 test year. Their testimony includes a detailed
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1 discussion of the IOC, ADMS, Wildfire Mitigation, Vegetation Management, and
2 Level III storm restoration costs.
3 • In Exhibit 900, Jardon Jaramillo, Senior Director of Treasury, Investor Relations,
4 and Risk Management, and Jaki Ferchland, Manager of Revenue Requirement in
5 Regulatory Affairs, recommend our cost of capital and capital structure for the 2022
6 test year; and Bente Villadsen, economist and principal at The Brattle Group,
7 estimates our required ROE and describes the supporting analyses.
8 • In Exhibit 1000, Amber Riter, Economist and Lead Load Forecasting Analyst,
9 provides PGE’s 2022 test year load and customer forecast.
10 • In Exhibit 1100, Robert Macfarlane, Manager, Pricing and Tariffs, and Christopher
11 Pleasant, Senior Regulatory Analyst, describe the methodologies and results of
12 PGE’s generation, transmission, distribution, customer service, and street lighting
13 marginal cost of service studies.
14 • In Exhibit 1200, Robert Macfarlane, Manager, Pricing and Tariffs, and Teresa Tang
15 Regulatory Consultant, describe how the proposed tariff changes recover our 2022
16 revenue requirement to achieve fair, just, and reasonable prices for our customers
17 and price changes to various supplemental schedules. They also discuss PGE’s
18 proposal to implement non-bypassability of costs associated with the state’s solar
19 payment option program, allocating costs to all customers.
20 Q. Has PGE submitted testimony regarding its power cost forecast?
21 A. Yes. As discussed above, PGE delayed the filing of this general rate case to help mitigate the
22 price impact on customers. Because this filing is made on July 9, 2021, we submitted our
23 initial filing for net variable power costs (NVPC) on April 1, in accordance with Commission
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1 Order No. 07-015. In this proceeding we intend to include the value of NVPC, when
2 appropriate, as updated and approved with UE 391.
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V. Qualifications
1 Q. Ms. Pope, please describe your educational background and experience.
2 A. I am President, CEO and a member of the Board of Directors of Portland General Electric,
3 Oregon’s largest electric company. Before becoming CEO in 2018, I served as PGE’s senior
4 vice president of Power Supply, Operations and Resource Strategy. In that role, I oversaw
5 PGE’s transition to the Western Energy Imbalance Market, a foundational step in creating a
6 regional smart grid. I joined PGE in 2009 as the company’s CFO. Prior to PGE, I was CFO
7 of Mentor Graphics Corporation and have held senior operating and finance positions within
8 the forest products and consumer products industries. I began my career in banking with
9 Morgan Stanley.
10 I serve on the Oregon Global Warming Commission. My other board and commission
11 activities include The Nature Conservancy, Edison Electric Institute, Electric Power Research
12 Institute, and the Federal Reserve Bank of San Francisco. I am an alumna of the Stanford
13 Graduate School of Business and earned my bachelor’s degree from Georgetown University.
14 Q. Mr. Sims, please state your educational background and experience.
15 A. I received a Bachelor of Arts degree in Business with a focus in Economics from Linfield
16 College in 1990, and a Master of Business Administration degree from George Fox University
17 in 2001. Prior to being promoted to Vice President in October 2020, I was the Senior Director
18 of Strategy Integration and Regulatory Affairs at PGE. I have also held other managerial
19 positions in the banking, technology, and communications sectors prior to working at PGE.
20 Q. Does this conclude your testimony?
21 A. Yes.
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