BEFORE THE
WASHINGTON UTILITIES AND TRANSPORTATION      COMMISSION
 
Petition of
PUGET SOUND ENERGY, INC.
For an Order Regarding the Accounting Treatment of a Proposed Virtual Right-Of 
-Way Program	 
	Docket UE-980877
	ORDER AUTHORIZING ACCOUNTING TREATMENT

 On June 23, 1998, Puget Sound Energy ("PSE" or "the Company") filed with the 
Commission a Petition pursuant to WAC 480-09-420(7) for an order regarding the 
accounting and ratemaking treatment of a proposed Virtual Right-Of-Way Program 
("VROW Program").  According to the Petition, the VROW Program allows the 
Company the opportunity to achieve significant improvements in the reliability 
of its electric service. The Company expects the VROW Program to significantly 
reduce non-storm tree related overhead outages, the number and duration of 
outages, and repair costs during major storm events.  These benefits are 
realized over 15-20 years while the Program expenditures occur within the first 
five years.  Therefore,  the Company requests an accounting order authorizing 
it to defer the expenses as a regulatory asset and to begin immediate 
amortization of the costs of the Program on a half month convention method over 
a ten-year period.
 The Company states that in its distribution planning process, it seeks new and 
innovative ways to meet customers' reliability needs at the lowest possible 
long-term cost. According to the Company, the VROW Program responds to 
customers' desires and quickly delivers the most benefit for the least cost.  
The Company submits that its filing is responsive to the following statement in 
the Merger Order:
Given the storms we experienced this winter, the Commission has a heightened 
awareness of the need to explore ways to improve the reliability of electric 
transmission and distribution facilities.  . . . [V]egetation management goes 
beyond merely "cutting trees".  Long term reliability of the distribution 
system would seem to involve a comprehensive look at the causes of system 
outages, studying alternative ways of improving system reliability, and 
assessing the costs of different management alternatives against their benefits 
before making a decision on how to proceed. Docket Nos. UE-951270 and 
UE-960195, Fourteenth Supplemental Order at pages 32-33.


       Docket UE-980877         Page 1
 According to the Company, it historically constrains its primary vegetation 
management efforts within its designated right-of-way.  Outside the designated 
right-of-way, the Company removes dangerous trees only when necessary.  The 
Company asserts the Virtual Right-of-Way Program achieves the benefits of 
widening the Company's dedicated right-of-way without actually buying land or 
the rights to maintain it.  Under the Program, PSE will selectively remove 
trees outside of its dedicated right-of-way with the landowners’ permission.  
The expected cost is $43 million over the next five years.  PSE claims 
alternatives to the VROW Program, such as actually securing a wider 
right-of-way or accepting the status quo, are either cost-prohibitive or ignore 
the necessary improvements in reliability.  PSE states the Virtual Right-of-Way 
Program is an extraordinary one-time program that produces long-term benefits 
as compared to the current on-going vegetation management efforts.
 The Company’s petition seeks deferred accounting treatment for ratemaking and 
regulatory accounting purposes.  PSE proposes to defer the costs of the VROW 
Program in account 182.3, Other Regulatory Assets, and to amortize the balance 
to the proper expense accounts over 10 years.  The Company proposes to amortize 
immediately each month’s VROW expenditures using a half month amortization 
convention.  PSE defines VROW Program costs as those costs incurred beyond the 
dedicated right-of-way and includes only the direct costs of identifying and 
removing specific trees, additional tapered trimming of conifer overhang 
between 12 and 15 feet, and replacing trees with more appropriate species at 
landowners’ request.  Alternatives to removing trees, such as installing 
underground conductors, use of tree wire, or reconfiguring overhead 
construction, will be considered when it is financially and physically viable.  
PSE requests normalization of federal income tax benefits related to the VROW 
Program over the amortization period.  PSE also proposes to include all related 
balance sheet accounts in working capital.  The Company proposes no changes for 
costs associated with its traditional, dedicated right-of-way tree trimming 
program.
 The Company specifies it will evaluate the effectiveness of the Program 
through development of a measurement model.  Beginning in September 1998, PSE 
will start tracking outages at a grid number level and developing improvement 
and maintenance plans at a circuit’s subsection.  PSE will use this information 
to estimate historical performance for a circuit subsection, capture outage 
information, estimate costs for improving or maintaining the subsection, and 
capture actual costs for any work performed on the subsection.  The Company 
will report annually on effectiveness of the Program following the first full 
year of Program and evaluation model operation.  The first report will be 
issued in September 1999.  At each reporting period for the first four years, 
the Company will determine whether Program expenditures have resulted in 
measurable system reliability improvements and if so, will continue to 
implement the Program.  If the Company cannot demonstrate measurable 
system improvements have resulted from the preceding years’ Program 
implementation, then further expenditures will be curtailed.
 According to the Company, this proposal is consistent with the accounting 
treatment for the purchase of additional right-of-way and the initial clearing 
of trees under the traditional approach.  The accounting treatment related to 
this proposal is designed to achieve the benefits of this virtual right-of-way 
program without increasing the Company's revenue requirements.
FINDINGS
 THE COMMISSION FINDS:
1. PSE is a public service company furnishing electric and gas service 
primarily in the Puget Sound region of the State of Washington and is subject 
to the regulatory authority of the Commission as to its rates, service, 
facilities and practices.
2. On June 23, 1998, PSE filed with the Commission a Petition for an order 
regarding the accounting and ratemaking treatment of a proposed Virtual 
Right-Of-Way Program ("VROW Program").
3. The accounting treatment proposed by PSE is reasonable, and should be 
approved.
ORDER
 WHEREFORE, THE COMMISSION HEREBY ORDERS:
 
1. Authorization is hereby given for PSE to:

(a) Capitalize, for recovery in rates, the VROW Program costs in account 182.3, 
Other Regulatory Assets, as a deferred charge; (Deferral will cease when the 
VROW Program is completed, terminated, or  June 30, 2003, whichever is sooner.)

 (b) Commence amortization in 1998 of the regulatory asset using half month 
amortization convention over a 10 year period;

 (c) Normalize federal income taxes related to the VROW Program expenditures; 
and

 (d) Include the regulatory asset and related deferred tax accounts in working 
capital for ratemaking purposes.

2. PSE will prepare and submit annual evaluations of the VROW Program’s 
effectiveness. The first report will be issued in September 30, 1999 and will 
continue annually through September 30, 2003, inclusive. The Company will also 
submit with the annual report PSE’s actual expenditures under both the VROW and 
Standard Vegetation Management Programs.  The Company’s VROW program 
communication strategy will be included in the evaluation process.

3. Nothing herein shall be construed to waive or otherwise impair the 
jurisdiction of the Commission over the rates, services, accounts, and 
practices of Applicant, Puget Sound Energy.  Under the Commission’s general 
ratemaking authority, such regulatory accounting and the potential ratemaking 
treatment of the Company’s costs under the Virtual Right-of-Way Program are 
subject to evaluation and review in subsequent rate proceedings.  PSE bears the 
burden of proving the fairness, justness, and reasonableness of these matters 
in such proceedings.

4. The Commission retains jurisdiction to effectuate the provisions of this 
Order.
 
 DATED at Olympia, Washington and effective this  [8]  th day of July, 1998.

  WASHINGTON UTILITIES AND TRANSPORTATION COMMISSION

       ANNE LEVINSON, Chair

       WILLIAM R. GILLIS,        Commissioner