Public Service Commission: Rocky Mountain Power rate hike all but certain to be lower than proposed

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Via Wyoming News Exchange

CASPER — The Wyoming Public Service Commission this week held public deliberation on Rocky Mountain Power’s historic rate hike proposal and emerged with a rough outline of a counter agreement that diverges significantly from the company’s preferred outcome. 

The discussions offered a first look at what’s likely to result from the commission’s most contentious case in recent memory. 

“This case, unlike any other since I began serving on this commission in 2018, has garnered intense interest for residential customers, the business community, large and small, as well as their elected representatives,” said Commissioner Mike Robinson, noting that more than 5,000 public comments were submitted during the process. 

Commissioners often expressed conflicting opinions while debating more than 30 independent items up for consideration in the proposal. 

Nevertheless, on the case’s most decisive factors, the PSC stood firmly together, and concluded deliberations with a clear message that the company’s ask for a general rate increase of 21.6% is all but certain to come up short. 

The biggest question related to Net Power Costs (NPC) — made up primarily of inputs like coal and natural gas — which have jumped in recent years, and constitutes the utility’s primary expense as well as the driving factor behind the rate request. 

The utility seeks approval to establish 2024 calendar year rates based upon a NPC price tag of $354 million on a Wyoming allocated basis. 

The commission resoundingly rejected that figure, and Chair Mary Throne countered with an “aggressive base number” of $298 million. That number was negotiated up to $307 million, which mirrors the recommendation of the Wyoming Industrial Energy Consumers coalition, who intervened in the case. 

One factor resulting in the lower NPC is the commission’s decision to kick out costs associated with carbon emissions taxes on PacifiCorp’s Chehalis natural gas power plant. The taxes stem from the Washington State Climate Control Act, and could add as much as $9.1 million to NPC on a Wyoming allocated basis, according to testimony from representatives of WIEC. 

“I do not want our power costs … to include any cost related to Washington’s Climate Control Act. I believe that any reasonable reading of the MSP would conclude that the Climate Control Act is situs,” said Throne. (“Situs” refers to state-specific liabilities.) 

RMP has argued the Chehalis expense should be carried by all member states because all benefit from the plant’s generation despite the added tax, and because taxes are “system-allocated” according to PacifiCorp’s 2020 Multi State Protocol, a framework designed to insulate the utility’s member states from costs associated with one another’s respective policies. The argument hinges on whether a levy at the power plant in Washington ought to be treated as a “tax” or a “policy,” a slippery semantic argument that underscores the challenges of enforcing the MSP.

“This is clearly not a tax. And this is just my own personal opinion, but this raises real questions on a continuing Multi State Protocol. Those questions cannot be answered here, but that is something we really need to look at,” said Robinson during Wednesday’s deliberations. 

The company, albeit, worries that position creates a double standard and could set the stage for conflicts in the service territory. 

For instance, Wyoming’s own “wind-tax” has been allocated to other PacifiCorp member states. Siloing Washington’s carbon tax, therefore, risks setting a “poor precedent” which may ultimately undermine the economy of scale that’s made the company price competitive in the U.S. utility market, say PacifiCorp representatives in sworn testimony. 

The commission does not dispute the implications.

 “This entire concept invites a ‘tax’ arms race that will challenge the creativity and boldness of the various legislatures,” said Commissioner Chris Petrie, alluding to the possibility of policy recrimination that could drive costs up for all member states. “I don’t think that in the future a mechanism of this sort across the company services territory can be a workable situation.” 

For an industry whose efficiency is closely connected to its economy of scale, the erosion of regional cooperation has big implications. 

Throne added, “Since 2020 the MSP has been on thin ice, and it might fall through the ice here at some point.” 

The commissioners showed less consensus on the topic of the “sharing band,” a cost sharing agreement that divides up between customers and the company expenses that exceed the forecasted NPC. 

The status quo is an 80/20 sharing band, which means when costs are higher than expected the company absorbs 20% of the cost increase. The company sought to eliminate the sharing band and allow itself to recoup 100% of forecast overruns. 

Throne initially proposed a middle ground “sharing band holiday,” a tiered application that would allow the company to recoup full costs up to a smaller figure, closer to $325 million. Deputy Chairman Chris Petrie and Robinson, however, dug in against a compromise. 

“Right off the bat I don’t support going along with the tiered approach to sharing. Part of my problem is that it wasn’t suggested until the final day of public hearings with no opportunity to vet it effectively. So I just don’t feel there’s any due process,” Robinson said. 

Petrie added that the band was needed to encourage prudent policy choices at the utility. 

“I’m uncomfortable with the idea of declaring a sharing band holiday. I think there’s a hazard in that,” said Petrie, arguing that band helps incentivize the company to improve forecast evaluations. “We want the company to aspire to a better job, and that’s part of the function of the structure that’s built into the sharing band mechanism.” 

The commission also declined to permit the company’s request for a 10% return on equity (ROE), and instead voiced approval for a 9.35% ROE, although the case is not yet concluded. 

From here the various parties will take the commission’s suggested numbers for NPC and ROE as well as other figures and run them through economic modeling to compute new figures for the company’s weighted cost of capital, and then the revenue requirements that ultimately decide customer rates. 

The PSC is required to issue a written decision on the ratecase before Dec 31.

This story was published on December 2, 2023.