A truck drives toward the Huntington coal-fired power plant, operated by PacifiCorp, in Emery County on Wednesday, July 31, 2024. (Photo by Spenser Heaps for Utah News Dispatch)
A bill aimed to remove a benefit that Rocky Mountain Power has maintained for the last decade is advancing in the Utah House as lawmakers grow frustrated with rate increase proposals from the utility, and what they describe as a delay in a study to split PacifiCorp, its parent company.
Since 2016 ratepayers have covered 100% of Rocky Mountain Power’s unexpected energy costs through its Energy Balancing Account, a price adjustment that either credits or debits users for differences between power prices and the other market costs that are somewhat outside the control of the utility.
But that may change as the House Public Utilities and Energy Committee recommended advancing HB72, titled Electricity Rate Amendments, sponsored by Richfield Republican Rep. Carl Albrecht. Only freshman Rep. Rosalba Dominguez, D-Salt Lake City, voted against the proposal. The bill now goes to the House floor for its consideration.
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The legislation clarified that the public service commission should not assign costs to Utah customers without demonstrating how those costs will benefit them. It also eliminates the Energy Balancing Account altogether.
“One of the reasons that I’m running this bill is not that I do not think that Rocky Mountain Power has done a good job through the years, because they have,” Albrecht said. “Their rates have been low for many years compared to the nation.”
Utah lawmakers push to split PacifiCorp as blue states move away from coal
But then, after much controversy, when the utility’s rate increase proposal dropped from 30.5% to 18.1%, legislators’ eyebrows remained lifted when they realized that the utility may still recover additional costs excluded from its regular electricity rates through Energy Balancing Account fees.
The utility is pushing back on the bill, arguing that not being able to address the fuel market’s volatility may turn coal into a riskier bet for it. Which, James Owen, vice president of environmental, fuels and mining at PacifiCorp, said may push the company to seek renewable resources, which don’t add any fuel costs.
While through the years the Utah coal market hasn’t experienced much volatility, PacifiCorp learned in 2022 and 2023 that it could be significantly disrupted, Owen said. Events like the fire at the Lila Canyon coal mine, which eliminated at least 25% of the state’s local coal supply, and the Russian invasion of Ukraine were unexpected and not included in the standard rate case, for example.
The uncertainty about fuel purchases creates risks shouldered by customers, he added, since the utility may be forced to pursue purchases in the energy market, which could come at a higher cost.
“PacifiCorp could also be incentivized to move up the retirement of coal plants,” Owen said, “or reduce reliance on coal plants in favor of generation resources where all we have to pay is capital costs and there are no fuel costs.”
The company may also be pushed to seek shorter-term coal contracts to reduce that risk.
That argument didn’t mitigate legislators’ frustration with how Rocky Mountain Power has been operating recently.
“We got a report on the divesting from the West Coast states. It wasn’t worth the paper it was written on,” said Majority Assistant Whip, Rep. Casey Snider, R-Paradise. “It said nothing, did nothing, helps us achieve nothing.”
Prior to these rate issues, Rocky Mountain Power and the Legislature were good partners, Snider said, but that has shifted.
“I think there may be some time for a little bit of soul searching on the part of PacifiCorp, Rocky Mountain Power right now that needs to happen. Clearly, you have moved away from what you used to be in terms of a partner, and have created adversaries of what were formerly friends,” Snider said. “So I understand maybe the hesitation with us making this policy change, but I think this is timely.”
Transparency woes
“The Energy Balancing account is very hard to audit if you’re the Division of Public Utilities or if you’re the Office of Consumer Services,” Albrecht said. “It kind of reduces the incentive in a lot of areas for the company to operate efficiently.”
With that, Albrecht questioned whether stockholders should have any skin in the game and whether the utility’s investments are prudent. And while coal prices have gone up — a major driver of the rate increase — he said that PacifiCorp’s strategy to move away from coal in favor of incorporating more renewable energy projects in past Integrated Resource Plans (IRP) may have also played a role in the increase of fuel prices.
“That’s when the legislature got involved,” Albrecht said. “We said, ‘no, no, we don’t agree with that.’”
Things are looking up for his caucus in the energy field. This year’s resource plan, which removed expiration dates for Utah-based coal plants, is one he really likes, he said. A new federal administration is also eager to keep fossil fuels burning, potentially keeping the state’s coal mines operating.
PacifiCorp extends the life of Utah coal-powered plants — indefinitely
But, Utah doesn’t want to pay for the policies of blue states that are part of PacifiCorp — California, Washington and Oregon. So the Legislature is also exploring a split into two consortiums of states with similar energy strategies.
“And we didn’t get much of a straight answer on can they do it? How soon can they do it? But we’d like them to continue that, because we have a different mindset of philosophy and policy between Wyoming, Idaho and Utah,” Albrecht said. “The allocation provisions in this bill should help the public service commission ensure that our ratepayers are not paying for other states’ policies — fire policy, for one — as we wait for PacifiCorp’s study.”
Owen, however, argued that there is accountability in the process of recovering those costs.
The Utah Public Service Commission heavily scrutinizes the Energy Balancing Account proposal filed by Rocky Mountain Power, and other interested parties can intervene in the case, weighing in on whether the utility’s expenses are prudent.
“If it is determined that we weren’t prudent in incurring those costs, then we’re prohibited from any cost recovery, and we cannot pass those costs on to customers, and that includes the cost of coal to fuel or coal-fired power plants,” Owen told the committee. “So if we ask the question, does the utility have any risk with the EBA as it currently is constituted? The answer is yes. If it’s determined that our actions are not prudent, then we get no recovery.”
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