VII. Legal Standard For Granting Interim Relief

PacifiCorp cites several court cases and Commission decisions that demonstrate that the Commission may grant interim relief when:

· A financial emergency exists (and a showing that utility results of operations fall below an authorized rate of return, and the utility has been subject to increased costs, constitutes a financial emergency), or

· Fairness to both the utility and the public require immediate action, or

· Future increases are contemplated and a gradual increasing of rates will avoid rate shock, or

· Interim relief would arrest a downward trend in interest coverage, and enhance the utility's ability to attract capital at reasonable terms.

ORA and Roseburg argue that the Commission can only grant interim relief if a financial emergency exists. They maintain that a financial emergency exists when the utility faces an imminent inability to satisfy its fiscal responsibilities and/or discharge its obligation to serve. Siskiyou contends that the Commission may grant interim relief when there is a financial emergency or, where no emergency exists in the sense of a threat to the utility's survival, when fairness to both the utility and the public require immediate action.

The Commission's authority to grant interim rate relief under the circumstances of this proceeding is well established. In Toward Utility Rate Normalization v. Public Utilities Commission, 44 Cal. 3d 870, 750 P. 2d 787, 256 Cal. Rptr. 8 (1988), Toward Utility Rate Normalization (TURN) contended that the Commission could not authorize interim relief unless failure to do so would result in a financial emergency or unless the reasonableness of the investment costs covered by the utility's rates is undisputed. The Supreme Court recognized that the Commission has granted interim relief under the standards cited by TURN, but stated:

"From the existence of those two exceptions, however, it does not follow that no other circumstances can justify an interim increase." 44 Cal. 3d at 875.

The Supreme Court continued:

"The commission's power to grant interim rate increases was recognized by this court in City of Los Angeles v. Public Utilities Commission (1972), 7 Cal. 3d 331, [01 Cal. Rptr. 313, 497 P. 2d 785]. There we annulled a commission order granting a general rate increase to Pacific Telephone but provided that the commission `may grant interim rate increases should it find them appropriate while it reconsiders Pacific's application for rate increase,' ... It is apparent that the authority delegated to this commission by the Public Utilities Act to award rate relief to a public utility carries with it the incidental and implied power to grant interim relief, if the facts warrant such summary relief." (Id. at p. 878.)

"In the present case, the commission was not faced with an `emergency' in the sense of a threat to the utility's survival, but the situation was one in which fairness to both the utility and public required immediate action." (44 Cal. 3d at 879.)

In granting a substantial interim rate increase to Southern California Edison Company in 1988, and in response to the contention that it had not made a case justifying interim relief, the Commission said:

"We disagree with these parties and find that several factors in fact support our granting such relief for Edison. None of these factors suggest the existence of an emergency, but all relate to preserving the financial integrity of the utility, minimizing costs incurred by ratepayers, and ensuring rate stability for Edison's customers. As mentioned previously, however, the existence of a financial emergency is no longer a standard which must be met in granting interim relief." (D.88-05-074, p. 14.)

Thus, the utility's continued viability need not be on the line before interim rate relief may be granted. Re California Utilities Services, Inc., (D.91-02-035.) It is sufficient "where there is a showing that fairness to both the utility and the public require immediate action." (D.91-02-035 at p. 10, citing TURN v. PUC 44 Cal. 3d 870, 879.)

As previously discussed, we have estimated that the test year rate of return on equity is 1.2% for California jurisdictional operations at present rates, if net procurement costs are the same as in 1999, $432 million. This means that we forecast that PacifiCorp has a reasonable opportunity to earn a rate of return on equity of 1.2% at present rates. This is well below the reasonable rate of return adopted by the Commission for PacifiCorp.

With the requested rate increase, PacifiCorp would have a reasonable opportunity to earn a rate of return of 5.8% on equity. No party has suggested that a 5.8% return on equity would be unreasonable. A return on equity of 5.8% is not excessive.¹ Therefore, a one-cent per kWh rate increase designed to achieve such a return is not inherently unreasonable.

PacifiCorp has filed a general rate increase application for which no decision can reasonably be expected before the third quarter of 2002. Present rates may not allow PacifiCorp a reasonable opportunity to earn a fair return. Therefore, immediate action may be necessary.