PGE has filed a proposal with the Oregon Public Utility Commission for an overall rate increase of 14 percent to 15 percent beginning Jan. 1, 2009. The filing is the result of rising fuel and wholesale power prices, system investments and increased operating costs. The filing is undergoing a 10-month review and OPUC hearings, leading to a final decision in November or December. During the review process the projected rate change will be revised several times based on updated estimates for fuel costs and other key factors.

• Why is PGE seeking a rate increase?
• What are the proposed cost-of-service rate increases?
• What is PGE doing to minimize costs and be more efficient?
• What is PGE doing to help customers manage their electricity bills?
• What is decoupling, and why is PGE proposing it?
• What is the timeline for this rate case?
• Where can I receive more information?

Why is PGE seeking a rate increase?
Several forces are driving the need for this request:

Higher power and fuel costs PGE buys coal and natural gas to fuel our generating plants and buys electricity on the wholesale market to supplement what we don’t generate ourselves. These costs continue to rise and have become a greater percentage of PGE’s expenses over time. For 2009, we project power and fuel to increase by $166 million.
Higher operating and maintenance costs We’ve seen dramatic increases in energy construction, production and consumption in China, India and other countries, significantly driving up the cost of materials. Prices for components needed to maintain our infrastructure — things like wires, steel, transformers and cable — increased 77 percent in the last five years.
System investment This rate case includes $80 million for the new fish passage system we are building at the Pelton Round Butte hydro project we co-own with the Confederated Tribes of Warm Springs. This investment will allow us to continue using this low-cost resource for years to come.
Increased labor and health care costs PGE has a workforce of more than 2,700 people. By 2009, one-third of PGE’s workforce will be eligible for retirement. PGE must build competitive salary and benefit packages to recruit and retain a highly skilled workforce — all in the face of escalating health care costs. As with other businesses, our employees have been asked to shoulder a larger portion of their health care costs but that alone cannot cover the projected increases.
More regulatory requirements We are facing many new federal, state and local regulations related to the environment, corporate finance, regulatory reporting and tax laws. The cost of complying with increased requirements is estimated to be about $11.5 million higher in 2009.

What are the proposed cost-of-service rate increases?

• Overall: 14 percent to 15 percent

What is PGE doing to minimize costs and be more efficient?

We work hard to control costs and make our business more efficient, while also working to improve system reliability, serve larger numbers of customers and enhance customer service. The average cost of PGE service for our residential customers has remained flat since 1984, when adjusted for inflation, and remains near the national average. Our operating costs are lower than average compared to other Western investor-owned utilities (see chart).

• We are generating more of our own power. This reduces our need to purchase power on the wholesale market, which can be expensive. In 2007, we brought two new generating plants online: a highly efficient, 406-megawatt gas-fired plant at Port Westward, and the first phase of our new wind farm, Biglow Canyon, with a generating capacity of 125 megawatts. During the next three years, we expect to bring the next two Biglow Canyon phases online, ultimately reaching nearly 450 megawatts of installed capacity.
• We are making environmental improvements to keep cost-effective plants in operation. For example, we are working with the Department of Environmental Quality on a plan to install new pollution controls on our Boardman coal plant, which is one of our lowest-cost resources, generating 380 megawatts for PGE customers. We also are making fish passage improvements at several of our hydro facilities so we can keep these low-cost carbon-free resources on line.
• We have made older facilities more efficient to generate more power with less fuel. We have upgraded equipment to improve plant performance, which saves millions of dollars each year.
• We invest in our distribution system. One example is our new system of smart meters, recently approved by the OPUC with installation beginning in June and running through 2010. Once the new system is fully up and running, PGE will save about $18 million per year in reduced operating costs. That savings will be reflected in our customers’ bills. Another example is PGE’s FITNES program, which has increased the life of a typical wood pole from about 35 years to 55 years and reduced annual pole losses, saving millions of dollars in replacement costs.
• We are saving administrative costs. For example, in 2007 we brought maintenance of our customer information system inhouse, reducing converting paper checks to electronic documents and filing customer payments electronically we expect to save $160,000 per year. These are just a few of many examples of cost-efficiencies in our operations (see chart).

What is PGE doing to help customers manage their electricity bills?
Since the spring of 2007 PGE has been advocating on behalf of our customers with the Bonneville Power Administration (BPA) to restore Residential Exchange benefits. Our customers have traditionally received credits on their PGE bills as their share of the Northwest’s low-cost federal hydropower system. When BPA suspended those credits after a court ruling in June of 2007, our customers saw their bills increase about 13 percent. BPA partially restored some benefits in April of 2008, which reduced our residential and small farm customers’ bills by about 6.3 percent. That’s helpful, but we continue to work for a long-term solution with a higher level of benefits to our customers.

We promote energy efficiency with all classes of customers, helping them identify ways they can reduce their electricity bills and get cash back for energy-efficiency improvements such as through Energy Trust of Oregon rebate programs and State of Oregon tax credits. Our Web site is also chock-full of energy efficiency information.

PGE also offers customers an Equal Pay option, which averages customer bills during a 12-month period, allowing them to even out peaks and valleys. We also offer a Time of Use option, with which customers can lower their bills by using electricity primarily at times of day when demand is lowest.

In the long term, the new smart metering system we began installing in June will give customers more information about the amount of energy they use and more opportunities to control their energy consumption and costs.

What is decoupling, and why is PGE proposing it?
PGE encourages our customers to conserve energy and install energy-efficiency equipment and devices because we know it’s good for the environment. At the same time, energy efficiency poses a financial disincentive for utilities like PGE that are compensated based on the amount of electricity they sell. For example, if PGE’s residential customers reduce electricity use by just 0.5 percent per year, it translates to a loss of about $2 million to PGE in the first year alone.

In this rate case, we propose removing this disincentive through a Sales Normalization Adjustment, typically known in the industry as a decoupling mechanism. It is a simple and straightforward “true-up” adjustment which would reimburse PGE for the lost revenue resulting from increased energy efficiency. The adjustment would be structured in a way to remove extremes in weather or general economic activity level.

We believe an adjustment would be fair and would encourage more innovative and cost-effective programs to ramp up energy-savings efforts.

What is the timeline for this rate case?
This request is the first step in a thorough process overseen by the OPUC, which sets PGE’s prices. There will be input from customer groups, local governments and other stakeholders, with opportunity for public input during the 10-month period. Everything in our initial rate case filing is subject to change based on this hearing process. Hearing dates will be set by the OPUC. We expect a final decision in November or December, with an effective date of Jan. 1, 2009.

Where can I receive more information?
To learn more about the process and hearing dates, visit www.puc.state.or.us. Documents filed with the OPUC about the rate case also are available on our Web site at www.PortlandGeneral.com/Tariffs. In addition, residential customers may contact PGE Customer Service at 503-228-6322 or 800-542-8818 or by e-mailing customer.service@pgn.com. Business customers may contact PGE Customer Service at 800-822-1077 or e-mail business.services@pgn.com.