Coal is stored outside the Hunter coal-fired power plant, operated by PacifiCorp, in Emery County on Wednesday, July 31, 2024. (Photo by Spenser Heaps for Utah News Dispatch)
Splitting up the multistate electrical utility PacificCorp would be expensive and politically difficult, officials are warning Utah lawmakers.
Utah Republican officials are pressing hard to break up the six-state system arguing that moves by other states away from coal and natural gas cost Utah consumers money and threaten the state’s efforts to protect the coal industry.
But Dick Garlish, president of Rocky Mountain Power, tells lawmakers that no state can unilaterally break up PacificCorp, which was created by merging business units that are now Pacific Power, which serves California, Oregon and Washington, and Rocky Mountain Power, which covers Utah, Idaho and Wyoming. Both entities are regulated by the public utilities commission of each state and the Federal Energy Regulatory Commission.
All six states have to approve such changes. Top shareholders also need to agree to it. And, he said, there hasn’t been a high-level policy discussion to explore what the appetite for restructuring is.
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“A whole restructuring, or partial restructuring might be an answer to get policy alignment, to get clear direction, to be able to manage the impacts to customers, make sure that states are advancing their policies and keeping an investor engaged in wanting to make investments in big machines for now in the future,” Garlish told lawmakers at a contentious hearing this week. “But it has challenges. You know, it’s costly.”
Republican lawmakers said Utah doesn’t want to bear the cost of the policies of blue Pacific Coast states that are aiming to move away from fossil fuel resources. But, a more detailed report, which could take about 18 months to produce, may shine a light on whether the cost of the separation would be worth it.
There are benefits to the split, according to the report drafted by Rocky Mountain Power. It could potentially narrow the set of policies that govern PacifiCorp, providing customers with more control over the utility’s planning, and offer “financial barriers” between entities in the case of adverse events.
But, with that come potential risks, including reduced financial and operational efficiencies and large impacts on ratepayers in the event of unexpected costs, since they would be divided among a smaller subset of customers.
Oregon requested a similar analysis in 2017, but to explore eliminating coal-fueled resources from its rates, Rocky Mountain Power wrote in the report. Ultimately, the state didn’t move forward with its plans to separate from states that use coal because of the financial challenges that would arise, Garlish said. Refinancing the entity then would have cost $4 billion.
Clashing coal policies
In Utah, PacifiCorp updated its Integrated Resource Plan this year, scheduling to keep two major coal plants operating for four to 10 years longer than expected. It also cut back on investments in renewables.
The set of bills the legislature passed this year to protect coal generators in the state didn’t play a major role in that update, a PacifiCorp spokesperson said then. But, the action was consistent with Utah’s “all-of-the-above approach,” which has at times prioritized coal resources because of its cost and reliability.
While Utah officials bet that coal will keep the state’s electricity prices low, Rocky Mountain Power is forecasting its expenses will go up, mostly because of increased costs of fuel and wholesale power, tied with new electric transmission and generation projects. That led the company to propose an about 30.5% increase for residential rates, prompting harsh reactions from legislative leaders and Gov. Spencer Cox, who described the proposal as “laughable if it wasn’t so dangerous.”
Rocky Mountain Power lowers its rate increase proposal to 18.1%, down from 30.5%
The rate hike proposal was later decreased to about 18% amid public outcry, but the two-digit number along with other additional fees isn’t still sitting well with Utah legislators.
Many Republican elected officials have questioned whether that increase is meant to subsidize cleaner energy efforts made by states like California, as well as its wildfire-related costs.
“These guys,” Sen. David Hinkins, R-Ferron, said referring to Pacific Power states, “they dictate what type of power they’re going to use but yet, they don’t produce no power. They get it all from us, from the western states, and they complain about us polluting.”
The Republican House and Senate leadership and the executive branch agree on their desire for a separation, Rep. Carl Albrecht, R-Richfield, told Garlish.
“Utah is serious about this, and we are serious,” Albrecht said. “We think it would be better for you. We think it’d be better for the citizens of the state of Utah.”
The Legislature seems so dissatisfied with Rocky Mountain Power’s operations, it’s already considering removing a benefit for the utility that was sponsored by now Senate President Stuart Adams, R-Layton, in 2016.
Albrecht presented a bill proposal to be discussed in the 2025 general session to eliminate how Rocky Mountain Power funds its Energy Balancing Account, a market adjustment fee covered by ratepayers, that can be used to make up for the utility’s deferred costs.
Every state in PacifiCorp, except for Utah, has a sharing band with the utility, Albrecht said. That means PacifiCorp and its customers share the responsibility to pay to recover deferred unexpected costs that weren’t covered by electricity rates.
This year the Energy Balancing Account rates went up by 11.6% overall, making summer electricity bills soar. Currently, electrical corporations are allowed to recover 100% of their “prudently incurred costs in an energy balancing account.” Before the 2016 bill, customers covered 70% of the adjustment and shareholders absorbed 30% of it.
Albrecht’s bill would also prohibit “cost recovery from Utah ratepayers for facilities and programs primarily benefiting other states.”
“Rocky Mountain Power is not very happy with this, but based on what we’ve heard today and what we’ve heard in the past, and how the public feels about this, I think there needs to be some discussion,” Albrecht said. “And I think the leadership and both the Senate and the House are in favor of this.”
The utility doesn’t have any comment on the proposed legislation, a PacifiCorp spokesperson said.
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