Puget Sound Energy has filed for an increase in electric and natural gas rates, a request driven largely by the effect of high natural gas prices on PSE power costs and the utility's need for ongoing investments in power supplies, energy-delivery systems, and initiatives for protecting customers from volatile energy markets.

The filing with the Washington Utilities and Transportation Commission would raise PSE's average electric and natural gas rates by 9.2% and 5.3%, respectively. The requested rate change is an integral part of PSE's long-range strategy for ensuring reliable and cost-effective energy service for a growing region, said Kimberly Harris, PSE senior vice president for Regulatory Policy and Energy Efficiency.

"The bottom line is we are working to give our customers and our utility more energy independence," Harris said. "Over the long term we're trying to shield our customers, as much as we can, from the financial stings an unstable energy market can inflict. The way to do that, we believe, is to plan ahead -- to invest now and secure the energy resources and infrastructure needed to serve our region long into the future."

PSE has added approximately 155,000 customers over the past five years, a pace of growth that's expected to continue. PSE customers' rising energy demands and the expiration of purchased-power contracts is forcing the utility to acquire about 1500 average-MW of new power supply by 2013. At the same time, major investments are needed in PSE's aging natural gas and electric distribution systems to maintain their structural integrity, meet stricter safety requirements, and serve a steadily growing customer base.

All told, PSE plans to invest about $2 billion over the next three years on new energy supplies and infrastructure, with equally large investments expected in later years. The utility also is investing more in risk-management initiatives to better protect its customers from the turbulence of wholesale energy markets.

A key driver of today's rate filing, Harris said, is PSE's jump in costs both to generate and to purchase electricity, an increase triggered mainly by record-high wholesale prices for natural gas. In addition, the filing seeks to help PSE cover its rising operations and maintenance costs, which will include the cost of operating PSE's second large wind farm, the 127-turbine Wild Horse Wind Project. The wind project, located in central Washington between Ellensburg and the Columbia River, is expected to be operational by late 2006.

PSE completed its first wind farm in late 2005, the 83-turbine Hopkins Ridge Wind Project in southeast Washington's Columbia County. Together, the two projects will produce enough clean, low-cost electricity to serve more than 120,000 households. What's more, they're expected to produce a $170 million net reduction in PSE's overall power-supply costs over the next 20 years. The two wind farms' power-cost savings for customers could be even greater if natural-gas and coal prices remain high or rise even further.

The rate proposal filed also would support the acquisition of other cost-effective, long-term electric supplies and natural-gas-system investments by PSE, including:

  • A new 20-year power-purchase contract between PSE and the Chelan County Public Utility District. The contract offers PSE 234 average-MW of low-cost power annually from 2011 through 2031. The PUD power from the Columbia River's Rocky Reach and Rock Island dams will save PSE customers an estimated $360 million over the contract's 20-year life.
  • The installation of new power generators and other major enhancements at PSE's largest hydropower facility, the Baker River Project. The enhancements are called for in a regional agreement that aims to extend the project's federal license for up to 45 years.
  • Refurbishment of the generators at PSE's single largest power-production facility and one of its lowest-cost power resources, the Colstrip Power Project in eastern Montana.
  • The acquisition of more fuel-transport capacity in two of the Northwest's three interstate natural gas transmission pipelines. PSE customers' peak, wintertime demand for natural gas is expected to increase by about 50% over the next 20 years.