Regulators should set rate caps, then allow utilities to earn whatever profits they can without sacrificing customer service, Washington Water Power Co. officials say in recently filed documents.
Such a system would ensure electricity rate stability for small customers. At the same time, it would give utility managers the flexibility to compete with new entrants in the market for wholesale and major industrial customers, WWP says.
The company’s comments were made in response to a Washington Utilities and Transportation Commission inquiry launched in January.
The panel is considering regulatory changes that would allow more competition within once exclusive service territories.
Tom Dukich, WWP manager of rates and tariffs, compared the potential reforms to those that swept the natural gas industry a decade ago.
“Customers are being given more and more choice,” he said.
Although WWP, because of its low rates, can probably fend off any challengers for its residential and small commercial customers, Dukich said, the Spokane-based utility needs more freedom to respond to market forces elsewhere.
The company sells a substantial amount of electricity to other utilities as far south as Southern California.
Dukich said California and some European countries are considering or have taken steps that would make it possible for all their customers to select their electricity supplier.
The danger, he said, is widespread abandonment of utilities with “stranded” investment in higher cost generating or transmission facilities.
Customers without access to alternative suppliers could be stuck with higher bills to pay for those plants, he said, asking “How far can you let the market go?”
Dukich noted WWP has proposed a rate freeze that would be in place until the year 2000 in its request for approval of a merger with Sierra Pacific Resources of Reno, Nev.
He said the request is in line with the modest changes in regulations the company thinks are necessary, and likely, to respond to the competitive forces in the marketplace.
The number of responses to the commission’s inquiry suggests a high degree of interest in the subject, said spokesman Steve King.
The panel regulates only four investor-owned electric utilities in the state, but comments were received from 36 groups ranging from environmentalists to financiers to industrial consumers.
Staff members are summarizing the responses and identifying key issues that the three commissioners will take up in hearings and workshops later this year, he said.
The potential restructuring of rates, he said, is a high priority.