But excludes higher rate of return on equity
Update courtesy of Utility Regulatory News #4072: The Washington Utilities & Transportation Commission has determined that even though the capacity from a new wind power project is not presently needed to assure service reliability, it would be appropriate for the sponsoring utility, Puget Sound Energy (PSE), to recover project costs from current ratepayers. The commission conceded that the multi-phase wind facility, known as the Lower Snake River Wind Project, is not yet complete and that even the first part of the project that is complete will not be necessary to meet projected demand for at least another four years. Nevertheless, the commission ruled that current customers should be required to pay for the project’s costs up front. It explained that the initial phase of the wind farm offers numerous environmental benefits on a present basis, in the form of reduced carbon dioxide emissions. Moreover, the commission said, the facility will prove crucial to PSE’s ability to satisfy future renewable energy mandates. Consequently, citing the wind project as a major driver, the commission authorized the utility to raise its electric rates by $63.3 million. However, the commission rejected the company’s recommended rate of return on equity (ROE), which PSE had sought to increase from 10.1% to 10.75%. The commission stated that in light of historically low interest rates, reduced yields on U.S. Treasury bonds, and ongoing economic instability, there was no justification for a higher ROE. Indeed, the commission commented, current market conditions had produced lower investor expectations, such that the utility’s ROE should be decreased rather than augmented, leading the commission to find a 9.8% ROE reasonable. For the full story, subscribe to URN.