BEFORE THE WASHINGTON UTILITIES AND TRANSPORTATION COMMISSION


WASHINGTON UTILITIES AND  ) DOCKET NO.  UE-981238
TRANSPORTATION COMMISSION, )
      ) SEVENTH SUPPLEMENTAL      )
   Complainant,  ) ORDER
v.      )
      ) 
PUGET SOUND ENERGY,   ) ORDER APPROVING AND
      ) ADOPTING STIPULATION
   Respondent.  ) AND SETTLEMENT
      ) AGREEMENT
      ) 
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . )


  PROCEEDINGS: This proceeding concerns Puget Sound Energy’s (PSE) filing to 
establish a fair, just, reasonable, and sufficient optional firming rate under 
the company’s rate Schedule 48 (Optional Large Power Sales Rate) for the period 
November 1, 1998, through October 31, 1999.

  On November 3, 1999, PSE and the Industrial Customers of Northwest Utilities, 
together with its members who take service under Schedule 48, filed a 
Stipulation and Settlement Agreement that would resolve all issues in this 
proceeding, establish the optional firming rate under Schedule 48 for present 
and future periods, result in certain tariff revisions to Schedule 48, and lead 
PSE to voluntarily dismiss with prejudice its pending Petition for Review of 
Agency Action, Case No. 99-2-01673-1, Thurston County Superior Court, which 
concerns the Commission’s final order in Docket No. UE-981410.  Commission 
Staff does not oppose the proposed Stipulation and Settlement Agreement.

  PARTIES:  Matthew Harris, attorney, Seattle, Washington, represents Puget 
Sound Energy (PSE).  Bradley Van Cleve and Melinda J. Horgan, attorneys, 
Portland, Oregon, represent the Industrial Customers of Northwest Utilities, 
Air Liquide America Corporation, Air Products and Chemicals, Inc., The Boeing 
Company, Equilon Enterprises LLC, and Tesoro Northwest Company (collectively 
ICNU).  Simon ffitch, Assistant Attorney General, Seattle, Washington, 
represents Public Counsel.  Public Counsel did not participate actively in this 
proceeding.  Robert Cedarbaum, Assistant Attorney General, Olympia, Washington 
represents Commission Staff (Staff).

  COMMISSION:  The Commission approves the Stipulation and Settlement Agreement 
as a full and final resolution of the issues in this proceeding, adopts the 
Stipulation and Settlement Agreement and makes it part of this Order, and 
authorizes and requires that PSE make appropriate compliance filings to 
effectuate the terms of the Stipulation and Settlement Agreement.

MEMORANDUM

  Background and Procedural History.  PSE’s Schedule 48, Optional Large Power 
Sales Rate, provides market-based pricing for PSE’s industrial and large 
commercial customers.  The Commission approved Schedule 48 in Docket No. 
UE-960696, effective November 1, 1996.  Adoption of Schedule 48 recognized a 
“non-core” customer class whose members elect under PSE’s tariff to bear risks 
of power unavailability and price variability.  Schedule 48 provides for 
“optional firming” service to allow customers to receive the equivalent of 
firm, or “core,” service.  The Commission approved a $0.50 per kVa-month rate 
for optional firming service.  That rate was to remain effective until November 
1998, when it was to be redetermined based on market prices; annual 
redetermination is required for subsequent years.  PSE Electric Tariff G, Third 
Revised Sheet No. 48-a.

  On September 28, 1998, PSE filed to adjust the rate for optional firming 
effective November 1, 1998 through October 31, 1999.  The company’s proposed 
tariff revision would establish a $0.46 per kVa-month rate.  PSE contends this 
represents the then-current market price for service.

  On October 28, 1998, the Commission issued its Complaint and Order Suspending 
Tariff Revisions and Order Authorizing Temporary Rates.  The Order states:

Since Schedule 48, as originally filed and approved by the Commission on 
October 31, 1996, requires that a new rate for Optional Firming Service be in 
effect on November 1, 1998, the Commission determines that the proposed rate 
for the service shall be authorized on a temporary basis, subject to refund 
pending investigation and hearing(s), until such time as a final determination 
can be made with respect to the proposed rates.

  Administrative Law Judge Dennis J. Moss conducted prehearing conferences at 
the Commission’s offices in Olympia, Washington on December 15, 1998, January 
8, 1999, and September 2, 1999.  The January 8, 1999, conference was a joint 
conference with Air Liquide America Corporation, Air Products and Chemicals, 
Inc., The Boeing Company, Equilon Enterprises LLC, and Tesoro Northwest Co. v. 
Puget Sound Energy, Docket No. UE-981410, a related complaint proceeding.  One 
result of the January 8, 1999 conference was an agreement by the parties, 
endorsed by the presiding officer, to hold Docket No. UE-981238 in abeyance 
pending the conclusion of Docket No. UE-981410.  Docket No. UE-981410 was 
concluded before the Commission by entry of a final order on August 3, 1999.  
PSE appealed the Commission’s final order to the Thurston County Superior Court 
by a Petition for Review of Agency Action, Case No. 99-2-01673-1.  

  One purpose of the September 2, 1999, conference in this proceeding was to 
establish a procedural schedule.  Among other things, evidentiary hearings were 
scheduled for November 9-10, 1999, and simultaneous briefs were set for filing 
on November 24, 1999.  

  On October 8, 1999, counsel for Staff filed a letter including an agreed 
request for continuance pursuant to WAC 480-09-440 (6).  The Commission granted 
the request for continuance to permit the parties an opportunity to conclude 
ongoing settlement negotiations.  On November 3, 1999, PSE and the Industrial 
Customers of Northwest Utilities, together with its members who take service 
under Schedule 48, filed a Stipulation and Settlement Agreement that would 
resolve all issues in this proceeding, establish the optional firming rate 
under Schedule 48 for present and future periods, result in certain tariff 
revisions to Schedule 48, and lead PSE to voluntarily dismiss with prejudice 
its pending Petition for Review of Agency Action, Case No. 99-2-01673-1, 
Thurston County Superior Court, which concerns the Commission’s final order in 
Docket No. UE-981410.  Commission Staff does not oppose the proposed 
Stipulation and Settlement Agreement.

  On November 30, 1999, the Commission conducted hearing proceedings to receive 
the proposed Stipulation and Settlement Agreement into the record of this 
proceeding and to inquire into the terms of the Stipulation and Settlement 
Agreement.

  Stipulation and Settlement Agreement.  On November 3, 1999, PSE and the 
Industrial Customers of Northwest Utilities, together with its members who take 
service under Schedule 48, filed a Stipulation and Settlement Agreement that 
would resolve all issues in this proceeding.  Staff does not oppose the 
proposed Stipulation and Agreement.  The essential terms of the Stipulation and 
Settlement Agreement, which we adopt by reference and append to this Order, are 
as follows:

•The order of suspension should be lifted in this Docket and the $0.46 firming 
rate originally filed should be effective for the period November 1, 1998 
through November 30, 1999.

•PSE must file within a time certain all necessary pleadings to effect a 
voluntary dismissal with prejudice of PSE’s pending Petition for Review of 
Agency Action, Case No. 99-2-01673-1, Thurston County Superior Court.

•PSE must file within a time certain all necessary documents to withdraw the 
proposed revisions to Schedule 48 that have a requested effective date of 
November 16, 1999.  Concurrent with that filing, PSE shall file proposed tariff 
revisions to modify certain language in Section III.1 of Schedule 48, as 
provided more specifically in the Settlement Agreement.  The customers will 
support the proposed tariff revisions.

•The optional firming rate for the period December 1, 1999, through October 31, 
2000, willl be $0.46 per kVa-month.

•Schedule 48 customers have until November 30, 1999, to elect optional firming 
for the period December 1, 1999, through October 31, 2000.  In future years, 
Schedule 48 customers must elect optional firming service no later than October 
31, for the succeeding 12-month period.

•PSE and the Schedule 48 customers must attempt, in good faith and using 
reasonable best efforts, to develop, propose, and implement a collaborative 
process for setting the optional firming rate commencing in 2000.  If this 
effort fails by March 31, 2000, the optional firming rate for the period 
November 1, 2000, through October 31, 2001, will be $0.46 per kVa-month.

•Other than changes contemplated by the Settlement Agreement, neither PSE nor 
the Schedule 48 customers will file or support material changes to Schedule 48 
to be effective before October 31, 2001.

  Commission’s Analysis and Decision.  The Commission is satisfied on the basis 
of the record, including the Commission’s inquiry conducted by hearing 
proceedings on November 30, 1999, that the proposed Stipulation and Settlement 
Agreement reflects a full and fair resolution of the issues pending in this 
proceeding. The Stipulation and Settlement Agreement accordingly should be, and 
is, approved and adopted as a final resolution of the Commission’s Complaint 
and Order Suspending Tariff Revisions.

  The Commission approved Schedule 48 on October 31, 1996. Washington Utilities 
and Transportation Commission v. Puget Sound Power & Light Company, Docket No. 
UE-960696, Commission Order Approving Schedule 48 With Conditions.  As the 
caption to that Order reflects, the Commission imposed conditions. Among those 
conditions is the following:

(1) No Cost Shifting - The revenue difference between Schedule 48 rates and the 
effective tariff rates that otherwise would be applicable to current Schedules 
31, 46, 49, or special contract customers (i.e., lost revenues), shall not be 
shifted to other customer classes and shall be borne by shareholders until a 
future Commission determination regarding allocation of costs and cost savings, 
and then on a prospective basis only.

Id. at 5.  We emphasize that this condition, along with the others established 
by the Commission’s Order approving Schedule 48, remains effective.  We 
reiterate, too, the Commission’s understanding that this condition is a 
“guarantee that other classes will not pay more as a result of Schedule 48.”  
Id. at 7.

  The Commission’s Order approving Schedule 48 also relates that one of the key 
elements of Schedule 48 is that it introduces

a new class of non-core service for Puget’s largest customers.  These customers 
would assume risk in both variations in non-firm energy prices and the 
availability of energy.

Id. at 2.  The Order also discusses that rates under Schedule 48, including the 
optional firming rate are “based upon market prices . . ..”  Id. at 3.  Our 
approval of the Stipulation and Settlement Agreement here depends in part on 
our acceptance of the $0.46 per kVa-month optional firming rate as being a rate 
that reasonably reflects market prices and the parties’ apparent belief that 
the $0.46 per kVa-month rate is expected to continue to reflect market prices 
during the effective period of the settlement.  Swings in actual market prices 
in future periods vis-ŕ-vis the $0.46 per kVa-month rate for optional firming, 
however, may result in lost revenue to PSE, or may result in customers paying 
more than might be the case in a fully open, competitive market.  The 
respective parties have assumed these risks of market fluctuation under the 
terms of the Commission’s Order approving Schedule 48 and under this Order 
approving the Stipulation and Settlement Agreement.  We expect both PSE and the 
Schedule 48 customers to conduct themselves accordingly on a going-forward 
basis.

FINDINGS OF FACT

  1.  The Washington Utilities and Transportation Commission is an agency of 
the State of Washington, vested by statute with authority to regulate rates, 
rules, regulations, and practices of public service companies, including 
electric companies.

  2.  Puget Sound Energy is engaged in the business of furnishing electric 
service within the state of Washington as a public service company.

  3.  The Stipulation and Settlement Agreement establishes rates for optional 
firming service during various periods that reasonably reflect market prices as 
required by the Commission’s Order approving Schedule 48, considering recent 
past and current market conditions, and market conditions anticipated to 
prevail during the relevant future periods.

CONCLUSIONS OF LAW

  1.  The Commission has jurisdiction over the subject matter and all parties 
to this proceeding.  RCW 80.01.040, Chapter 80.28 RCW.

  2.  The Stipulation and Settlement Agreement adopted by reference in, and 
appended to, this Order is in the public interest and represents a full and 
fair resolution of the pending issues.  RCW 80.01.040.

  3.  The rates, terms, and conditions of service established by the 
Stipulation and Settlement Agreement adopted by reference in, and appended to, 
this Order are fair, just, reasonable, and sufficient.  RCW 80.28.020.

  4.  The rates, terms, and conditions of service established by the 
Stipulation and Settlement Agreement adopted by reference in, and appended to, 
this Order are neither unjustly discriminatory nor unduly preferential.  RCW 
80.28.020.

ORDER

  THE COMMISSION ORDERS That the suspension of Puget Sound Energy’s September 
28, 1998, filing to adjust the optional firming rate under Schedule 48 for the 
period November 1, 1998, through October 31, 1999, is lifted.  The optional 
firming rate under Puget Sound Energy’s Schedule 48 for the period November 1, 
1998, through October 31, 1999, shall be $0.46 per kVa-month.  The optional 
firming rate under Puget Sound Energy’s Schedule 48 for the period November 1, 
1999, through November 30, 1999, also shall be $0.46 per kVa-month.  Puget 
Sound Energy is required to make any tariff filings necessary to effectuate the 
approved rate for the periods indicated.

  THE COMMISSION ORDERS FURTHER That the optional firming rate under Puget 
Sound Energy’s Schedule 48 for the period December 1, 1999, through October 31, 
2000, shall be $0.46 per kVa-month.  Puget Sound Energy is required to make 
appropriate tariff filings to effectuate the approved rate for the period 
December 1, 1999, through October 31, 2000.  

  THE COMMISSION ORDERS FURTHER That Puget Sound Energy shall make such filings 
as necessary to effectuate all terms and conditions stated in the Stipulation 
and Settlement Agreement appended to this Order and adopted here by reference.  

  THE COMMISSION ORDERS FURTHER That the parties shall conduct their affairs in 
accordance with the terms of the Stipulation and Settlement Agreement, which is 
made part of this Order.

  DATED at Olympia, Washington, and effective this 30th day of 
November, 1999.


      MARILYN SHOWALTER, Chairwoman
     

      WILLIAM R. GILLIS, Commissioner

NOTICE TO PARTIES:  This is a final Order of the Commission.  In addition to 
judicial review, administrative relief may be available through a petition for 
reconsideration, filed within 10 days of the service of this Order pursuant to 
RCW 34.05.470 and WAC 480-09-810, or a petition for rehearing pursuant to RCW 
80.04.200 or RCW 81.04.200 and WAC 480-09-820(1).