Electricity bills for Puget Sound Energy (PSE) residential customers will drop by 3 percent while natural gas bills will rise by 5 percent as a result of two actions taken by state regulators.

The Washington Utilities and Transportation Commission (UTC) accepted a Bonneville Power Administration (BPA) electric power credit, and approved an uncontested settlement of PSE’s general-rate case filed last December. Both actions take effect Nov. 1.

About 970,000 PSE residential and small farm customers will receive a credit on their monthly electric bills as the result of a partial reinstatement of the federal benefits from the region’s low-cost hydroelectric power system. BPA suspended the credits 16 months ago after the U.S. Ninth Circuit Court of Appeals found they did not conform to federal law. BPA reinstated the benefits based on a revised method, in a decision issued Sept. 22.

The new average credit will be about $10 monthly for PSE customers using 1,000 kilowatt-hours, and will offset the increase of approximately $7.50 a month granted in PSE’s rate request.

Beginning next month, the average residential electric customer using 1000 kilowatt hours will see a decrease of about $2.50 a month, resulting in an average bill of $97.50. The typical natural gas customers using 68 therms a month will see their bills increase by about $4 to about $94.50.

The settlement allows the utility to raise rates to collect $179.2 million in new electric and natural gas revenues annually, less than the $231million PSE originally requested last December.

The agreement calls for a 98-cent hike in the monthly basic service charge for electricity customers, down from the $3 the company originally requested.

For natural gas customers, the monthly service charge will increase by $1.75 to $10. The utility had originally asked for $18 a month.

“While we might prefer to see a higher level of shareholder funding of such programs, the costs proposed in this proceeding are reasonable considering the importance of programs that assist low-income customers,” wrote the UTC in its order.

Under the settlement, the commission could impose penalties of up to $15 million a year – up from $10 million – if PSE fails to meet service standards, such as a high number of complaints or prolonged and frequent power interruptions. In addition, customers will receive a $50 credit in the event of a power outage lasting more than five days.

A new billing and meter performance program will be established to improve PSE’s ability to issue accurate and timely bills to customers. As of June 30, the utility acknowledged potential problems with 17,276 electric and gas meters system-wide, resulting in billing problems for thousands of customers. Under the settlement, the company commits to resolving 75 percent of these complaints by Dec. 31 and the rest by June 30, 2009.

Beginning Jan. 1, the commission will require the company to resolve 75 percent of any new back bills for natural gas service within two months and all of them within four months. For inaccurate electric meters, the company must settle all back billing problems within two months, half in the first month. PSE must submit a plan to the commission to track back-billing complaints and report improvements by Oct. 31.

PSE will be allowed to recover $79.8 million in customer rates for damage caused during the Dec. 13, 2006 “Hanukkah Eve” windstorm. However, costs will be distributed over 10 years, rather than the six years the utility was requesting, so as to spread out the impact on ratepayers.

The commission found that nine power-supply contracts were prudently acquired by the utility and will be allowed to be recovered in rates. These include the Hopkins Ridge Wind Facility in Columbia County and the Sumas natural gas generating plant in Whatcom County.

The commission will address in a separate order whether PSE will be allowed to file power-only rate cases in the future. These proceedings permit PSE to recover increases in power or fuel costs the utility purchases, and to recover the cost of new gas-generating plants or wind farms the company buys in a separate and typically quicker proceeding than a general rate case.