PSE electricity bills have skyrocketed. Can anything be done about it?

This winter, Kearrah Mayovsky's electricity bills were so high at her Bremerton home that she couldn't pay them all.

Her family of six kept the thermostat in the low 60s, unplugged unused appliances and turned out the lights whenever they could. Still, Mayovsky said when she received a bill of around $800 in March, she had to go on a payment plan, with $1,400 now in arrears.

"I've never been so broke in my life," she said in May. "... I've really been just trying to get ahead, and there is like no way to get ahead."

Puget Sound Energy customers, like Mayovsky, have felt some of the steepest increases in electricity bills in the region. The issue has reached such a peak that consumers have submitted 3,800 complaints since January over PSE's rates, according to the Washington Utilities and Transportation Commission. In interviews with The Seattle Times and on social media, PSE customers have said their winter bills had reached an all-time high, in some cases hundreds more than what they've paid in previous years.

Privately owned PSE is the state's largest utility, serving around 1.1 million electricity customers mostly in Western Washington. These tough financial realities for customers all point to another sign of the region's worsening affordability crisis, especially as gasoline now tops $5 a gallon.

Electricity prices have risen significantly across the country in recent years. But Washington's residential electricity prices, while still below the national average, have been rising quicker than the rest of the country's, according to an analysis of U.S. Energy Information Administration data.

This month, publicly owned Seattle City Light announced its largest rate hike in recent memory, 9.5% for each of the next two years - around $10 a month more for most customers.

But PSE has had the largest price increases in the state and has grown more expensive than Seattle and the U.S. on average, according to the analysis.

In just two years, PSE's electricity prices have increased 45%, meaning the monthly bill for the average customer using 800 kilowatt-hours has increased from $110 to $160. That total is also around double what customers used to pay in 2020. (According to Seattle City Light, customers pay around $123 a month for that amount of energy.)

Customers like Mayovsky, who are heating larger homes that may have worse energy efficiency, are paying even more each month.

Why the sharp uptick at investor-owned PSE? There are a few reasons.

The business of running a utility has become more expensive. The region's electricity market has grown tighter each year with growing demand. And utilities face higher costs related to wildfire, extreme weather, inflation, aging infrastructure, a tight supply chain and labor market. The elimination of some federal tax credits and climate change have only worsened things.

And Northwest utilities are building and buying their way into compliance with the state's ambitious clean energy and climate goals. PSE, for example, has built a wind farm in Montana and severed its ties to the state's coal power, but it still has a lot of catching up to do.

Then there have been regulatory changes with utilities like PSE charging more upfront partially for clean energy projects. To what degree these changes have resulted in higher consumer prices has kicked off a heated discussion on how to keep costs down while keeping electricity reliable, safe and ideally planet-friendly.

What can be done about high prices largely depends on whom you ask.

In the perspective of Washington's utilities, the sharp price hikes are the result of doing business in today's economic and regulatory landscape. To consumer advocates and Washington's assistant attorneys general, who review rate increases on behalf of the public, the price hikes echo concerns they've had for years. They say the Washington Utilities and Transportation Commission, which regulates privately owned utilities, has protected utility investors over consumers' wallets.

There's a lot at stake. Electricity is a basic necessity and customers have no choice but to pay the utility that serves their geographic area. After gasoline, electricity is the largest energy expense most Washingtonians and U.S. residents pay.

Price hikes aren't over either. In February, Puget Sound Energy proposed a rate increase. If approved, the average electric customer would see increases of $28 a month in 2027, $7 in 2028 and around $16 in 2029.

It wasn't always like this.

How rate-making has changed

For most of PSE's history, rate increases were small and stable, typically a single digit percentage, said PSE's vice president of regulatory affairs, Jon Piliaris. The largest increase would come at the beginning of each year and fluctuate typically by less than 1% throughout the year.

But the electricity business has just gotten more expensive. There's been a large increase in demand on the region's aging grid from electrification and population growth, and new power sources haven't been built to match. While PSE doesn't have a significant number of data centers in its service area, tech companies and data centers are competing for electricity on the wholesale market, also leading to higher prices.

Climate change in particular has made electricity more expensive. Once-reliable hydropower has become variable due to drought. Heat waves and cold snaps, supercharged by climate change, have led to eyewatering wholesale electricity prices that have burned utility dollars. The risk of catastrophic wildfire has also become an existential threat for utilities, leading to higher insurance premiums.

The second reason is that in 2019 and 2021 Washington passed ambitious climate goals that would require utilities to significantly reduce carbon emissions and end the use of fossil fuels to generate electricity by 2050.

This was going to be especially difficult for PSE, which has historically relied on coal and natural gas to generate about half of its electricity. The utility serves around a third of the state's electricity customers and has more than twice the number of customers of the next-largest utility in the state. Achieving these climate goals would require significant money to purchase or build solar, wind, battery and hydro resources.

"We're in this period in which utilities have to make a lot of investments at a time when prices are high (and) when we're also trying to transition to clean energy … (which) is still the lowest-cost resource," said Charlee Thompson, a policy associate with the NW Energy Coalition.

Partially to allow for these investments, Washington's rate-making process changed around 2022, according to advocates and PSE. One part of this included incorporating a new model, sometimes called "performance-based rate making," which broadly ties a utility's ability to collect money from customers to hitting certain metrics, like reducing outages and improving energy efficiency. Other states have also adopted this model.

Another change allowed utilities like PSE and Avista, which services Eastern Washington, including Spokane, to file rates to cover projected costs a few years into the future.

Previously, when demand and customer growth were largely flat, rate increases were stable and small, and many privately owned utilities filed rate increases on an annual basis. And how much utilities could charge their customers was strictly judged on what they had spent in the previous year. But now utilities can file future expenses like new wind farms and projected energy costs, resulting in larger upfront increases.

In theory, this new model of rate-making can incentivize utilities to transition toward a climate-friendly and energy-efficient future without raising rates or investing in capital expenditure more than necessary.

Whether these recent regulatory changes have been successful in Washington state so far is the subject of hot debate.

What can be done about high rates?

Last fall, the Washington Utilities and Transportation Commission sought comments from utilities, industry groups, advocates and the state attorney general's office on how the commission ought to approach cost controls.

"Regulated utilities are facing multiple challenges in their obligation to provide reliable energy services, placing upward rate pressures on utility customers, who are also facing other inflationary economic pressures," commission officials wrote.

Unsurprisingly, the utilities had a different perspective from the assistant attorneys general and consumer and environmental advocates, documents reveal.

In general, utilities like PSE have rejected the implication that they are not adequately keeping bills as low as possible. In their view, the clean energy transition was always going to be expensive, and further electricity hikes have been driven by factors out of their control, like inflation, fuel and power costs, and the end of federal tax credits.

Consumer advocates don't deny PSE's arguments, but contend the new way Washington's utilities collect money has disproportionately benefited utility investors over their customers, according to documents, interviews and statements.

To them, documents and interviews reveal, high electricity prices are, in part, emblematic of the shortcomings of Washington's regulatory system to adequately protect consumers.

One example, the attorney general and environmental and consumer groups have pointed to, are industry profits. The figure set by the commission that helps determine how much profit utilities are permitted to generate has increased in recent years. They also argue that this figure is too high nationally and that utilities are generating too much profit for essentially being monopolies. (In the past, PSE has argued its profit figure was needed to attract investment and cash to fund its climate obligations while providing reliable and safe power.)

Another example is how utilities cover costs from complying with the state's climate goals. Washington's nascent carbon market requires polluters to cover their emissions by purchasing carbon allowances. The market was intended, partially, to encourage businesses including utilities to decarbonize to avoid paying high prices as the number of allowances decreased. To ease this transition, utilities receive a number of free allowances from the state to offset costs.

However, according to the state's assistant attorneys general, Washington's laws currently allow utilities to pass 100% of the costs of complying with the state's climate goals on to customers.

"By pushing all of the cost and the associated price signals onto ratepayers, utilities have avoided the cost incentive which is the very purpose of the law," the assistant attorneys general wrote last November.

Ensuring an equitable clean energy transition is essential, said Shaylee Stokes, a director for The Energy Project, a Washington program that advocates for low-income energy customers. Ultimately, utilities have far more control over how to decarbonize than customers, especially ones struggling with their bills.

"Everyone should have skin in the game," Stokes said in an emailed statement.

Stokes added that PSE has made progress on its decarbonization program and offered support for vulnerable communities, more so than other state utilities.

In an emailed statement, UTC spokesperson Amy Reynolds said the commission shares concerns over affordability and taking the steps it can to balance customer affordability with "the need for safe, reliable service and the need to expand new clean energy resources."

"We recognize that increases are impacting customers at a time when many other costs - gas, groceries, and healthcare - are also increasing," she said in the statement.

Can anything be done?

The utility commission is refining the state's new way of setting rates, in a process that could easily take several more years, according to PSE's Piliaris.

The commission is working on an assessment of the current regulatory environment and cost-containment measures, which will be available to the public for comment, Reynolds said. Potentially early next year, the commission will then publish a guidance document for utilities, though "it may take several years to see efficiencies as the result of any changes," she said in the statement.

With prices being so high, consumer advocates say the state should adopt some regulations to keep residents from experiencing more price shocks.

One of those solutions is to force large industrial electricity users, like data centers, to pay more for driving up electricity demand and prevent those costs from being shouldered by residential and small business customers.

The state's assistant attorneys general and groups like the Sierra Club and environmental justice organization Front and Centered have also advocated for capping rate increases around inflation or 10%.

PSE spokesperson Matt Steuerwalt said any limit to rate increases will essentially act as a budget constraint and "force some hard choices" on what to spend money on - with reliable and safe power being the top two priorities.

"I don't think there's a third thing that's even close in the customers' minds," he said.

Reynolds with the UTC declined to speculate on what actions commissioners may take in the future.

For now, it doesn't look like rates will decrease anytime soon. Ahead of a filing for rate increases in January, Steuerwalt had said customers should expect "sustained, significant rate increases" as a clean energy deadline in 2030 nears.

In the meantime, customers are stuck in the lurch.

Misty Frantz remembers the shock when she opened her electricity bill in February and saw that heating her 600-square-foot apartment in Enumclaw cost around $500.

"I thought there was a mistake for sure," said Frantz, who uses electric baseboard heating. "I thought that the reader must be wrong or they just made a mistake, but they did not. I called."

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