Utah legislators have found a new target for their frustration with Rocky Mountain Power: the utility’s Energy Balancing Account.
Specifically, lawmakers are now questioning whether the EBA benefits Utah customers, or harms them. A bill now in the Senate would eliminate the account and “prohibit cost recovery from Utah ratepayers for facilities and programs primarily benefiting other states.”
“It reduces the incentive in a lot of areas for the company to operate efficiently,” said Rep. Carl Albrecht, R-Bicknell, the bill’s House sponsor, at a legislative hearing last week. “Are they purchasing power on the market at the best price? Do stockholders have any skin in the game?”
The bill is one piece in a complicated puzzle of possible changes to the utility. Rocky Mountain is looking to increase its rates by 18% for Utah customers, while lawmakers have asked the utility, which supplies energy to roughly four out of five Utahns, to separate from parent company PacifiCorp.
The core critique in each case is that Utah customers are paying for “bad” policies in states like Oregon and Washington. Albrecht told The Salt Lake Tribune he and other lawmakers would still ask RMP to separate from PacifiCorp if HB72 passes.
(Trent Nelson | The Salt Lake Tribune) Rep. Carl Albrecht, R-Richfield, at the Capitol in Salt Lake City on Tuesday, Feb. 7, 2023.
What’s an EBA?
PacifiCorp tries to estimate energy costs every three years in an Integrated Resource Plan (IRP), James Owens, the utility’s vice president for environmental, fuels and mining, explained at the Jan. 22 hearing. The forecast attempts to anticipate things like the market price of coal and other energy sources — and if it misses the mark, the energy balancing account helps make up the difference.
The account “allows for the provider to recover variances between estimates and actual costs, so long as the company was prudent in incurring those costs,” Owen said.
To Rocky Mountain Power customers, the EBA is seen on their bill either as an amount due to the utility or as a credit they’re owed by the company.
If, for example, one of PacifiCorp’s top-producing coal mines catches fire — similarly to the Lila Canto mine fire in 2022 — and cuts off a quarter of its fuel supply, driving up coal costs more than the company anticipated, PacifiCorp would try to recover some of those costs from the Energy Balancing Account.
On the other hand, if PacifiCorp overestimates the cost of coal one year, customers could see a credit.
That’s happened once before, in 2016, according to records from the Division of Public Utilities.
Most of the time, Albrecht said, it’s an added cost to ratepayers.
“Costs in the Energy Balancing Account have grown to more than half of total costs paid by ratepayers,” Albrecht said. “The Energy Balancing Account recovery [in 2023] is more than 2011-2022 combined. It’s been really high the last few years.”
Energy balancing accounts were introduced in Utah in 2011. Then, the accounts included a “sharing band” that split the balance 70/30 between ratepayers and PacifiCorp shareholders, respectively.
Other states in PacifiCorp’s service network still have a sharing band, but the Utah legislature voted to eliminate it in 2016. Utahns have covered 100% of the bill since, and the cost to Utah ratepayers has “skyrocketed,” said Michele Beck, director of the Office of Consumer Services.
“The OCS and other stakeholders have raised concerns in recent regulatory proceedings that the current design of the Energy Balancing Account may no longer be in the public interest,” Beck said.
(Francisco Kjolseth | The Salt Lake Tribune) Utah’s Lila Canyon coal mine, on Tuesday, Dec. 6, 2022, has been burning since a coal pillar spontaneously combusted on Sept. 20. An aggressive drilling program is underway in an effort to extinguish the fire without wrecking the mine, which remains out of production indefinitely. Mine operators plan to inject a special foam into the mine through a series of 35 boreholes in hopes of sealing off the burning area before flooding it with water.
A “bad” policy?
EBAs must be approved by the Public Service Commission, Owen told lawmakers. The commission heard more than seven hours of testimony about the current balance Jan. 22, the same day Owens addressed the legislature. Every expense is scrutinized, he said, and if the commission determines Rocky Mountain Power’s costs weren’t “prudent,” it can exclude those costs from the balance.
But lawmakers who favor the bill said the Energy Balancing Account saddles Utahns with the cost of what they called “bad” policies in other states and the utility. PacifCorp is still paying a $30 billion dollar settlement for its role in a massive fire in Oregon. Are Utahns, Albrecht opined to his colleagues, paying that bill or for the heightened insurance costs as a result?
Utah lawmakers have also suggested that renewable energy policies in coastal states are costing Utahns more money — even as two of those states have the lowest utility rates in PacifiCorp’s portfolio, Albrecht said.
Owen argued that the Energy Balancing Account will help the utility maintain its coal supply as coal prices have skyrocketed in recent years. He pointed to unpredictable disasters like the Lila Canyon coal fire as a reason for the account.
“That was completely outside of expected circumstances,” Owen said. “That single event instantly eliminated 25% of the local coal supply. …Without the Energy Balancing Account, we wouldn’t be able to account for a change as significant as that.”
The Energy Balancing Account served as something of an insurance policy in that case, Owen said. Rocky Mountain found new ways to source coal, but those sources were expensive. Without an insurance plan, he said, supplying coal — which remains a priority in Utah — “becomes a lot more risky.”
Albrecht countered and said Rocky Mountain could — and should — have been prepared for such a disruption. Most utilities have a stockpile of coal to supply in case of emergencies, he said. And in PacifiCorp’s 2023 IRP, the company signaled it would retire many of its coal plants and shift to renewable energy.
“So [coal producers] sold it overseas,” Albrecht said. “So yes, the price went up.”
The latest draft resources plan, published at the end of December, was predicated on keeping PacifiCorp’s coal suppliers active indefinitely.
“This one I really like,” Albrecht said of the draft.
HB72 passed in the House Wednesday afternoon, with one legislator, freshman Rep. Rosalba Dominguez, D-Salt Lake, changing her vote from a “nay” in committee to a “yea” on the floor after “meeting with staff” and learning more, she said. The bill was introduced to the Senate on Thursday.
Albrecht told The Tribune he does not know where his bill will end up — it may be re-introduced with changes, evolve or not pass at all. But it’s all part of a negotiation with a company that has lost its favor with Utah, he said.
“We’d just like them to be a little more honest with us, and more transparent for the customers,” Albrecht said.
Shannon Sollitt is a Report for America corps member covering business accountability and sustainability for The Salt Lake Tribune. Your donation to match our RFA grant helps keep her writing stories like this one; please consider making a tax-deductible gift of any amount today by clicking here.
