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PUGET POWER: RATE ORDER REVIEW

 BELLEVUE, Wash., Sept. 27 /PRNewswire/ -- Late Tuesday, Sept. 21, Puget Sound Power & Light Co. (NYSE: PSD) received two orders issued by the Washington Utilities and Transportation Commission -- one setting new general rates, the other related to an annual rate adjustment under the company's Periodic Rate Adjustment Mechanism (PRAM), the company announced today.
 By way of review, Puget Power sought in a revised general rate request a $97 million increase in rates and, in its revised PRAM request, sought recovery of $76.2 million spread evenly over a two-year period. The commission authorized a general rate increase of $21.9 million reflecting increased costs of service, and an increase of $35.7 million in the first year to recover previously deferred costs under the PRAM. The total of $57.6 million increase in rates is to become effective Oct. 1. Also, the commission authorized the company to increase rates by an additional amount effective Oct. 1 to recognize the effect of the increase in the federal corporate income tax rate from 34 to 35 percent.
 As requested, the commission concluded the PRAM should remain operational for another three years. The PRAM was established by the commission to eliminate disincentives for the company to invest in those energy resources, such as energy conservation, which were outlined in its least cost energy plan. The commission order noted that "...Puget has developed a distinguished reputation because of its conservation programs and is now considered a national leader in this area. Therefore, the PRAM/decoupling experiment should continue for at least another three-year cycle, as modified herein."
 The commission also authorized a 45-percent common equity component in Puget Power's capital structure as requested by the company. The company's request was in response to rating agency concern that the common equity component was necessary in rates for the company to maintain its 'A' bond rating and to offset Puget's increasing reliance on purchased power.
 While the commission's order allows that only $57.6 million of the total $135.1 million in rate relief the company had sought become effective Oct. 1, an additional amount of approximately $35 million remains eligible for deferral and future recovery through the continued operation of the PRAM. This $35 million amount includes such items as Tenaska purchase power contract, a 245-megawatt cogeneration facility scheduled for operation in April of 1994; costs associated with the impact of hydro conditions; costs associated with fueling the Colstrip plant in Montana; and costs associated with additional peaking capacity.
 The commission authorized a 10.5 percent return on common equity, substantially below the 12.25 percent recommended by the company. This lower return on equity reduced the amount the commission granted by almost $30 million.
 Importantly, the general rate case order established a prudency review proceeding for costs associated with certain new power resources acquired by the company under its least cost plan since Puget Power's last general rate case. These new resources consist principally of power purchased from cogeneration plants. Revenues associated with these resources -- some providing electricity to our customers since 1989 -- approximate $86 million over and above what it would have cost the company to buy this power at secondary rates. The company believes that all of its expenses associated with these resources are prudent but cannot predict the outcome of the review proceeding.
 The company will be petitioning the commission promptly for reconsideration of its general rate case order. It will also ask the commission to expedite its prudency review of Puget's new resources and intends to file its prudency case with the commission by Oct. 15 asking for a decision by year end.
 -0- 9/27/93
 /CONTACT: Don Gaines of Puget Power, 206-462-3870/
 (PSD)


CO: Puget Sound Power & Light Co. ST: Washington IN: UTI SU:

JH-RB -- SE021 -- 6167 09/27/93 21:31 EDT
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Publication:PR Newswire
Date:Sep 27, 1993
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