Editors Note: Our friends at the excellent Oregon Capitol Chronicle produced this story. Together, they create some of the best independent journalism and content in the State. The story link is right here.
The Hillsboro Herald has covered our Data Centers for several years now and the risk they pose to our power grids and limited power resources, among other issues. We are grateful to see this story and to see Senator Wyden putting the tough questions to PGE. As a community course, we must course correct and get the answers we need lest we suffer dire consequences to our friends and neighbors. Now on the the story.
Residential PGE customers subsidizing industrial customer growth, CEO letter to Wyden indicates
by Alex Baumhardt, Oregon Capital Chronicle
December 5, 2024
Oregon’s largest investor-owned electric utility has enjoyed a 34% rise in power demand from industrial customers such as semiconductor manufacturers and data centers in the last five years, requiring the company to buy more, and more expensive, energy and build more infrastructure.
But rather than recouping the bulk of those costs from the customers driving them up, it appears that Portland General Electric, or PGE, is spreading some of the added cost across its entire customer base, according to data presented by its leader.
CEO Maria Pope told Oregon’s U.S. Sen. Ron Wyden in a letter on Nov. 27 that the reasons behind its residential rate hikes — which have increased by over 40% since 2020 — have to do with the rising cost of buying power — which has tripled in the last five years — and increased demand from industrial customers.
“These customer price changes over the last five years have primarily been driven by the rising costs to purchase necessary power from the open energy market to serve customers,” she wrote. “Like utilities nationwide, PGE is experiencing a surge in requests for new, substantial amounts of electricity load, including from advanced manufacturing, data centers and AI-related companies.”
Pope’s letter came in response to questions from Wyden about its rate hikes in recent years. On Nov. 25, Wyden asked Pope for documentation on electricity demand, customer shutoffs for nonpayment and details about how the company has spent federal subsidies meant to reduce ratepayer fees. The same day, Wyden said in a news conference that rising electricity prices is among the top concerns he hears from Oregonians.
PGE has requested an average 7.3% rate hike for 2025. If granted, that would make residential rates next year more than 45% higher than they were in 2020.
The Oregon Public Utilities Commission is likely to make a decision on the increase by Dec. 20, according to Kandi Young, a spokesperson for the commission.
Wyden has reviewed Pope’s letter and “will follow up with PGE to keep pressing the case for fair rates that Oregon consumers can afford,” according to Hank Stern, a Wyden spokesperson.
Rising rates
Pope’s data shows that since 2020 residential customer rates have increased more than industrial customers — nearly 43% compared with nearly 38%. But over that time, the cost of buying or generating power for PGE’s industrial customers has been 16% higher than that for its residential customers.
In 2022 and 2024 the cost of power bought or generated by PGE for industrial customers was two to three times higher than the cost of power generated or bought for residential customers. Yet rate increases for residential customers were nearly double those of industrial customers during those years.
PGE officials said residential rates are often higher than industrial rates because its more expensive to get power to residential customers.
“Rates reflect cost-based prices — which include many factors such as necessary investments in system maintenance and replacement of aging infrastructure, and reliability and resiliency upgrades,” Drew Hanson, a spokesperson for the company, said in an email. “Residential customers rely on a larger portion of distribution assets – such as power poles and transformers – compared to large customers, these investments and maintenance costs have a more pronounced impact on residential rates.”
The percentage of rate increases attributed to such costs for residential rate payers has been four times that of the industrial rate payers in the last five years. In terms of the cost per unit of power, residential rates today are more than three times higher than they are for industrial customers, such as semiconductor manufacturers like Intel and large data centers owned by tech companies such as Meta, Google and Apple, according to the Citizens’ Utility Board, a watchdog group established by Oregon voters in 1984 to represent the interests of utility consumers. Between 2015 and 2024, residential customers saw rates go up about 7.5 cents per kilowatt hour, according to the board, while industrial rates increased about 2 cents per kilowatt hour. In that same time, demand from PGE’s largest industrial customers went up more than 100%, according to the board.
“My primary takeaway is that PGE is refusing to take any responsibility for unaffordable rates,” said Bob Jenks, executive director of the board.
Shouldering costs
Jenks said PGE is not assigning rising costs to customers based on which customers are incurring the costs associated with higher demand. When PGE has to increase industrial energy storage, install new transmission lines and create more energy by building a solar or wind facility, for example, it charges all customers for the infrastructure, despite increased demand coming from industrial users who need the electricity. New data centers, which can be built in as little as 18 months, are far outpacing the growth in new electrical energy supply and transmission, according to regional transmission experts.
Demand for electricity for Hillsboro’s data centers now outpaces demand from nearly every residential customer in Washington County combined, according to Jenks’ analysis.
In her letter, Pope said that the question of assigning more of the costs of these investments to data centers and other industrial customers would be up to the Oregon’s Public Utilities Commission.
“Existing regulatory frameworks will need to evolve to appropriately reflect how investments serve different customers and how costs are allocated given the changes in the new large load demands,” she wrote to Wyden.
Pope also said the utility largely needs to raise rates by 7.3% next year to pay for “long-term capital investments.” These include adding energy storage systems, renewable energy sources and grid expansion and reliability. These costs are borne by all customers equally, not proportionally, across all customers.
Young, the commission spokesperson, said this is something its three members are looking into.
“The PUC is actively analyzing the issues and reviewing proposals to introduce new planning and cost allocation mechanisms related to large customer load,” she said in an email.
Shutoffs
Wyden also asked pope for information about PGE shutoffs in the last five years due to customer nonpayment. In April, three months after a cold snap in January, PGE shut off power to a record number of households — 4,700 in one month alone — due to nonpayment, according to the Citizens’ Utility Board.
Pope said most PGE customers aren’t left without power for long.
“Like other regulated utilities, PGE disconnects a customer as a last resort and most customers are reconnected quickly. In Q3 2024, 80% of residential customers disconnected for nonpayment were reconnected within one day and an additional 6% were reconnected within seven days. These rates have been consistent year to date,” she said.
Jenks, of the Citizens’ Utilities Board, said those statistics are still worrisome.
“PGE says 86% of shutoffs were reconnected within a week. This means that 14% are living without electricity for an extended period of time,” he said.
Despite pausing many shutoffs during COVID, PGE disconnected about 32,292 customers at some point in 2024 — 4,800 more than in 2023. PGEs residential electricity rates went up nearly 21% in 2024.
Meanwhile, PGE’s stock (POR), is up more than 10% in the last year, while Pope’s compensation has doubled in the last four years. She went from receiving more than $3.5 million in base salary and other compensation in 2020 to about $7 million in 2023, according to data from the Securities and Exchange Commission and The Oregonian/Oregon Live.
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Excellent — thanks for posting. Just what I have suspected and I saw that Wyden had asked good questions from PGE (and impressive of him responding to citizens frequent complaints here!). Amazing the CEO is so forthright (and responded quickly) about the details of Big Industrial electrical users Not paying their fair share, with their extreme use driving the need for growth (hmm, sounds identical for our need for a secondary water system with significant rate increases year after year — although Hillsboro water was a bit smarter spreading it out way longer, before construction began — so the % of increase for residential wasn’t as severe per year = not as noticable!) – yet somehow it has seemed fine for PGE to pass that on to residential customers. And simply appalling that the amount of shutoffs prompts No concern, while the CEO’s already exorbitant salary doubles, And stock prices increase.
And Dirk you know I will add more details on Hillsboro Water that our largest, by far user, Intel also doesn’t pay it’s fair share and residential overpays. They do have their excuse for Intel, so
I branched out on my water studies to other cities Intel manufactures in–to see if the fee schedules are the same (also found Intel’s yearly report on amount of water used each place). So far in looking at those water companies fee schedules — every category pays the same rate for water usage (as opposed to each category in Hillsboro having a different rate). I need to fine tune that study–contacting companies to make sure what I have found googling is the full story and then will report!!
On salmonprotectiondevice.com is a class action lawsuit against PGE. They will have to roll back their 18% increase.
I thought that all PGE customers have additional fees already included in our bills for infrastructure. That was explained to me once when I asked about all the fees and taxes in my bill. So, does this mean that PGE hasn’t estimated correctly about what they were supposed to charge all along? Or are they just tacking on even more fees to cover their needs? Also, with all the disconnections mentioned in this article, I seem to recall that, not only is it disastrous to a family to be without power, there is usually a RECONNECTION CHARGE in order to get things going. So by disconnecting service, they build in an additional source of income, again at the expense of the customers who have been paying for service for, sometimes, generations. My last observation is that much of the new, massive demand for power from the manufacturing and data factories could be met by solar panels installed on those facilities. This seems like a more efficient solution. Perhaps city permits should include such a requirement for facilities that will draw over a specific amount of power. That would disarm PGE’s need to build new power generating resources.
We could use a power SDC for large MW users
Well Mr Varney, nice to have you weigh in. I agree! A massive one. I also think that a wise city would find a way to put a fee on the transmission of power and data through the City. The METRO SHS Tax was one example of how a tax could be implemented. A target tax captured from the transmission of data that would be used for schools and energy subsidies to prevent shutoffs of our most vuneralble makes sense to me. These companies emply very few people and most of the profits and data are served up oustide of our Region. The wall street profits are insane. So I think of it like the TLT- they are here enjoying our power and water, they can pay 2 or 3 % of the amount the pay for power to support the community. Otherwise they are like giant vampires living off the commuunity.