Input Price Inflation Testimony for Puget Sound Energy

 Many energy utilities were not compensated for the rapid input price inflation that was recently triggered by the pandemic and the war in the Ukraine. Rate cases were unwelcome in these years, and few utilities had mechanisms to protect them automatically from unforeseen inflation. Some that did had only crude protection mechanisms that were not based on sound research methods. Inflation has slowed but remains brisk and there is a material risk of reacceleration.

PEG Research personnel have been calculating utility input price trends for decades. Puget Sound Energy engaged us to undertake inflation research that would support credible multiyear rate plan proposals for its gas and electric services. Our expert report and inflation forecast evidence in the case can be found here. We found that familiar macroeconomic price indexes such as the CPI and the gross domestic product price index (“GDPPI”) materially underestimate utility price inflation.  Inflation in material and service prices has been understated by several utilities in past proceedings.