ORDER NO. 96-023

ENTERED JAN 12 1996

THIS IS AN ELECTRONIC COPY

BEFORE THE PUBLIC UTILITY COMMISSION

OF OREGON

UM 782

DISPOSITION: APPLICATION APPROVED

On November 28, 1995, Portland General Electric Company (PGE or Company) filed an application pursuant to ORS 757.480 and OAR 860-27-025. PGE is requesting blanket authorization to sell surplus air emission allowances; for an accounting order to record all gains from air emission allowance sales in the year a sales agreement is executed in FERC Account 411.8, Gains from Disposition of Allowances; for waiver of certain filing requirements in OAR 860-27-025; and that this authorization become effective January 1, 1996.

At its January 9, 1996, public meeting, the Commission adopted staff's recommendation to approve the application with reporting requirements.

Based on the application and the Commission's records, the Commission makes the following:

FINDINGS OF FACT

PGE is an Oregon corporation whose utility function consists of providing heat, light, and power to the public in Oregon.

The Federal Clean Air Act Amendments of 1990 require that certain power plant operations must hold allowances equal to the plant's sulfur dioxide (SO2) emissions. An allowance constitutes an authorization to emit one ton of SO2 annually. The Act created two phases of allowance requirements. Plants with high SO2 emission rates fall under a Phase I allowance requirement beginning in 1995. Other plants fall under Phase II requirements beginning in the year 2000. Plants with emissions in excess of the standards either must reduce their SO2 emissions or acquire allowances from other sources.

A market has developed in the United States which enables holders of surplus allowances--those in excess of the number required to operate the affected plants in compliance with the Act--to sell to utilities needing additional allowances to achieve compliance. Through an open and dynamic bulletin board trading market, sales and purchases of allowances can be agreed upon. Conditional sales are not permitted in bulletin board transactions. After retaining sufficient allowances, including a reasonable "cushion" for changes and contingencies, PGE believes it has surplus allowances to sell. PGE states that it cannot effectively participate in the allowance trading market if it must obtain regulatory approval prior to each sale. Therefore, the company requests blanket authorization, effective January 1, 1996, for emission allowance sales.

PGE states that sales of surplus emission allowances is in the public interest because the sales would produce a stream of revenues which may be credited against the company's revenue requirement in future rate cases, thereby benefiting Oregon ratepayers. PGE is to provide a report to the Commission within 60 days following execution of each air emission allowance sales agreement.

PGE is also requesting an accounting order directing that all gains from air emission allowance sales be recorded in the year the sales agreement is executed in Account 411.8, Gains from Disposition of Allowances. Commission approval of this proposed treatment is for accounting purposes only. Ratemaking treatment will be withheld until a subsequent rate proceeding. In PGE's next general rate proceeding, staff will likely recommend that the gains from the sale of surplus emission allowances be given appropriate recognition in PGE's revenue requirement; i.e., that rates reflect a recognition that PGE's system, which is fully supported in rates, generates surplus air emission allowances.

PGE further requests waiver of certain filing requirements in OAR 860-27-025 pertaining to the Company's securities and general financial condition. This information is not needed to make a public interest finding with regard to emission allowance sales because the allowances have no recorded value on the company's books and any sale will not affect the currently authorized ratemaking rate base or expenses.

OPINION

Applicable Law

ORS 757.005(1)(a)(A) defines a public utility as, among other things, an entity that owns, operates, manages, or controls any plant or equipment in this state for the furnishing of heat, light, or power to the public.

ORS 757.480 requires a utility proposing to sell, lease, assign, or otherwise dispose of property necessary or useful to the performance of its duties to obtain approval from the Commission.

OAR 860-27-025 specifies the information a public utility must submit when it makes application to sell or lease its property. OAR 860-11-005(6) allows the Commission to waive a rule if good cause is shown. The Commission concurs that this information is not relevant for a public interest determination. The requested waiver is reasonable.

CONCLUSIONS

1. PGE is a public utility subject to the Commission's jurisdiction.

2. PGE's proposed transaction meets the requirements of ORS 757.480.

3. The application should be granted.

 

ORDER

IT IS ORDERED that:

The application of Portland General Electric Company (PGE) for blanket authorization to sell surplus sulfur dioxide emission allowances, and to record all gains from air emission allowances sales in the year the sales agreement is executed in Account 411.8, Gains from Disposition of Allowances, is granted. For accounting purposes, the effective date is January 1, 1996.

PGE shall provide the Commission a report within 60 days following execution of any emission allowance sales agreement.

Commission approval of the accounting treatment does not constitute approval for ratemaking purposes.

Filing requirements of OAR 860-27-025(1)(f),(1)(g), (1)(o), and (2) are waived.

Made, entered, and effective ________________________.

A party may request rehearing or reconsideration of this order pursuant to ORS 756.561. A party may appeal this order pursuant to ORS 756.580.