Citing the need to enhance customer service and stabilize energy costs, Bellevue, WA-based Puget Sound Energy (PSE) Monday asked state of Washington regulators for a $128.8 million general rate increase, or between 5% and 7% for its electric and natural gas customers in the western half of Washington.

The utility, the prime subsidiary of Puget Energy, said its rate hike request is a “strategic response” to a new state energy policy.

PSE is proposing to raise electric rates $81.6 million annually, or 5.7%, and natural gas rates by $47.2 million, 6.3%. Under the state of Washington process, general rate requests can take up to 11 months to process, and in the meantime the utility is expecting a decision later this month on a request last year for increased rates in excess of $50 million to cover higher power supply costs incurred in 2003.

“Washington state’s latest energy policy recommends that utilities regain control of the energy supplies their customers need, and thereby limit customers’ exposure to the price volatility of the open energy market,” said a prepared statement from PSE, the state’s largest private-sector utility. “PSE’s filing with the Washington Utilities and Transportation Commission is part of the utility’s strategic response to that government policy.”

The theme of the increase request is to financially strengthen the utility to help it regain its economic clout in building/buying new transmission and generation infrastructure, or wholesale purchased power.

Two key elements cited by PSE are: (1) recovering costs in extending and upgrading its utility infrastructure to serve a growing number of gas (644,629) and electric (977,743) customers; and (2) increasing the utility’s return on equity from its current 11.0% to 11.75%, and revising the utility’s rate design so it has a better opportunity to earn at the authorized levels, which it has not done in recent years.

“We agree with state policymakers that the best way to ensure reliable service and hold down consumers’ energy costs, long-term, is for utilities to have more control over their electricity and natural gas resources,” said Kimberly Harris, PSE vice president, regulatory and government affairs, who added the utilities must be “financially strong” to invest wisely in both people and energy resources.

Acknowledging that the rate hike will be unpopular, Harris said that nevertheless, “payback for our customers is greater reliability at more stable, reasonable prices over the long run.” The stronger financial position, she pointed out, will allow the utility to “more aggressively protect” customers through various hedges as a means of “insurance” against future wholesale energy price spikes.

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