Puget Sound Energy will increase electric and gas rates 18.6% and 12.6%, respectively, over two years, according to the Washington Utilities and Transportation Commission.
The typical residential electricity customer will see an additional $13.08 on their bills in 2025 and then an additional $7.67 in 2026, totaling an average monthly bill of $129.83. Gas customers will see an additional $7.56 increase in 2025 and $1.65 in 2026, totaling an average monthly bill of $89.86, according to the UTC.
The increases mark the end of an 11-month process in which the state’s largest utility and commission staff have sparred over dozens of issues including carbon emissions, affordability and profit.
As a regulated monopoly, PSE must have any rate increases approved by the utilities commission in a process that resembles a trial. The final rates will go into effect sometime in early February, PSE spokesperson Matt Steuerwalt said.
Overshadowing the process are two keystone climate laws Washington has passed in the last decade intended to nudge utilities and industrial polluters toward decarbonizing.
Passed in 2019, the Clean Energy Transformation Act requires utilities to phase out coal by the end of this year and only use renewable sources for electricity generation by 2045. The 2021 Climate Commitment Act requires the state’s largest polluters to buy allowances to cover their emissions and puts a statewide cap on emissions that will ratchet down to near zero by 2050.
The approved rate increases are higher than what was approved in December 2022 during PSE’s last rate case. During that case, PSE increased electric and gas rates around 11% and 8%, respectively, over two years.
In its initial filing, PSE sought higher rate increases for its 1.5 million customers citing the need for more renewable resources, reliable power amid high inflation and the need to be financially competitive as a borrower.
PSE has said to comply with the clean energy laws, it will need to shift away from natural gas and coal, which made up nearly half of its electricity generation in 2023, and acquire an unprecedented amount of renewable power by 2030. In a brief, PSE also argued that the company is in a “risky financial condition” and has struggled with cash flow, a poor credit rating and has been unable to earn its authorized profit.
The attorney general representing commission staff, whose members operate independently from the commissioners who decide cases, conversely accused the company of seeking higher rates to both “enable the transition to clean energy and significantly increase benefits to investors.”
In the final order released Wednesday afternoon, the commission authorized PSE’s “return on equity” — the figure that determines how much profit the utility is permitted to generate — at 9.8% for 2025 and 9.9% for 2026, an increase from past settlements when the rate was closer to 9.4%, said Lauren McCloy, the policy director of the NW Energy Coalition. The organization filed as an intervener in the case with environmental groups Front and Centered and the Sierra Club.
Commission staff had recommended a return on equity of 9.5% and the public counsel representing residential and small-business customers had requested 9.38%.
The final order also reflected the uncertainty over the impacts of Initiative 2066, which was passed by voters in November but faces legal challenges.
The initiative explicitly protects access to natural gas but also includes language that prevents the commission from approving a plan from PSE that “requires or incentivizes” the utility to terminate natural gas service, or a plan that allows PSE to require customers to “involuntarily switch fuel” by either restricting access or making it cost-prohibitive.
Citing that “the ultimate effects” of the initiative are “not settled,” the UTC’s final order declined to approve PSE’s proposal for $22 million toward the second phase of the utility’s targeted electrification pilot, which sought to boost the use of heat pumps and other electric appliances in certain neighborhoods.
The commission also declined to set a schedule that would allow PSE to more quickly pay off its gas infrastructure, a process called “accelerated depreciation,” citing “insufficient information” on the potential impacts of rate increases on “vulnerable populations” and the “legal uncertainties” around Initiative 2066.
The UTC was controversially authorized to grant accelerated depreciation to PSE in a bill last year, which intended to help the utility begin a plan to decarbonize and phase out billions in gas infrastructure that was originally built to last decades.
Commissioners also accepted a proposal from environmental advocates to require PSE to evaluate alternatives like partial electrification or programs that encourage customers to use less energy during peak periods before growing a specific part of the gas system. Commissioners denied a $3 million request from PSE to study the use of hydrogen and renewable natural gas for pilot projects.
Other utilities including Seattle Public Utilities and Seattle City Light have cited the rising costs of goods and labor in rate hikes. In September, City Council members approved a plan that called for average annual rate increases of approximately 4 to 6% through 2030.
