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PacifiCorp's year earnings hold steady despite mild weather, revenue decline

Rate increases partly offset higher power costs caused by having to buy more expensive electricity
Thursday, June 02, 2005
GAIL KINSEY HILL

Relatively mild, dry weather kept earnings at PacifiCorp flat for the year ending March 31, according to annual financial filings with the Securities and Exchange Commission.

Portland-based PacifiCorp, a utility with a six-state territory including Oregon, reported earnings of $251.7 million for its latest fiscal year, up a slight 1.5 percent from earnings of $248.1 million in 2004. Revenues dropped by 4.6 percent from $3.19 billion to $3.05 billion.

Rate increases in Utah and Washington partly offset higher power costs as low stream flows reduced hydroelectric operations and forced the company to buy more expensive electricity on wholesale markets.

"We feel we operated pretty well," said Richard Peach, chief financial officer for PacifiCorp. "We did the best we could have done, given weather conditions.

The financial news came just days after MidAmerican Energy Holdings Co. of Des Moines, Iowa, announced it had reached an agreement with PacifiCorp owner ScottishPower to buy the utility for $5.1 billion in cash and another $4.3 billion in assumed debt and preferred stock.

Warren Buffett's Berkshire Hathaway Inc. owns roughly 80 percent of MidAmerican Energy. The energy holding company, which counts Iowa's largest utility among its subsidiaries, says it will invest significantly in new power plants for PacifiCorp, which is experiencing strong growth within its service territory, particularly in Utah.

"We're in the middle of a build cycle," said Peach, noting the construction of two natural-gas fired plants in Utah that together represent a $700 million investment.

Still, PacifiCorp's return on equity, a measure of earnings, was a modest 7.5 percent, Peach said, "way short" of the returns allowed by state regulators.

Oregon regulators allow -- but do not guarantee -- a return on equity of 10.5 percent.

PacifiCorp serves about 1.6 million customers in Utah, Oregon, Wyoming, Washington, Idaho and California. Most of its customers -- about 78 percent -- are in Utah and Oregon, where PacifiCorp operates as Utah Power and Pacific Power respectively.

The utility recently raised rates in Utah and Washington and has rate requests pending in Oregon, Idaho and Washington.

In Oregon, PacifiCorp initially asked the Public Utility Commission for an overall rate increase of $102 million, which would have pushed up by an estimated 12.5 percent the monthly bills for the 517,000 customers in the state. Subsequent negotiations with PacifiCorp, PUC staff and consumer groups whittled the request down to $71 million. Most of the changes, which lowered estimates of the utility's future expenses, concerned power costs and electricity demand.

Company officials say PacifiCorp needs the rate increase to meet rising costs for power, insurance, pensions and health care. The utility also has asked regulators to increase the allowed return on equity to 11.125 percent.

Negotiations are continuing. A ruling by the PUC is expected Sept. 12, at which time any changes to rates would take effect.

Gail Kinsey Hill: 503-221-8590, gailhill@news.oregonian.com

 

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