'Wyoming is watching' as historic electric rate hike hearing begins this week
October 26, 2023
Critics will scrutinize Rocky Mountain Power's proposed 21.6%, $140.2M rate hike as panel faces pressure to reduce request.
A 21.6% electric rate hike request panned by customers and politicians as an unjustified threat to households and the state's economy will be scrutinized beginning Wednesday at a multi-day, court-like hearing before the Wyoming Public Service Commission.
The high-profile and historic rate hike from Rocky Mountain Power - the largest proposed increase in Wyoming in more than 10 years - would tap some 144,000 households and businesses for an extra annual $140.2 million.
Another Rocky Mountain Power electric rate hike - a one-time $50.2 million fuel cost adjustment over 12 months - was temporarily imposed on customers in July but awaits potential modifications and final approval by the commission later this year.
Combined, the average Rocky Mountain Power household would see a monthly increase of $19.94 beginning in 2024, the company estimates. Some critics claim that's a low-ball estimate.
Regardless, the overall 29.2% increase, according to hours of public comment in recent weeks, might force some businesses to close their doors, prevent new businesses from coming to Wyoming, push more households to become reliant on under-funded public utility assistance programs and even threaten the health of residents who can't afford higher utility bills.
The proposal has attracted the ire of lawmakers who doubt the utility's intentions and instead blame its increasing investments and reliance on renewable energy for the rate hike. The Corporations, Elections and Political Subdivisions Committee has proposed a slew of draft bills its members say will help protect Wyoming ratepayers from increasing utility costs. The committee will review seven draft measures when it meets Friday in Cheyenne.
The utility's justification for the increases is primarily mounting costs related to coal and spiking natural gas prices in response to weather extremes likely to continue due to human-caused climate change. Observers note those factors are not necessarily unique to Rocky Mountain Power. The same market conditions, extreme weather implications and an ongoing utility industry shift from fossil fuels to renewables will also factor in myriad rate cases to come.
With so much at stake, the commission faces an unprecedented level of scrutiny and interest from residents and elected officials alike. And much of the public is, for the first time, peering into an obscure corner of a regulatory bureaucracy laden with clunky statutory guidelines and procedures, all carried out in a language of acronyms and wonky utility legalese that, frankly, isn't easy to follow.
"It will be interesting and, at the same time, confusing," Public Service Commission Chief Counsel John Burbridge said of the upcoming hearing. "Honestly, having been doing this for so long, it takes years to figure it out."
At the conclusion of the hearings, the commission will take several days or weeks before convening to publicly deliberate possible modifications regarding the rate hike. Intervening parties may also negotiate an agreement with Rocky Mountain Power to modify aspects of the general rate. The commission is expected to make a final ruling before the end of the year.
In response to the magnitude of the case and the scope of interest, the commission held five public hearings in four towns (you can access audio recordings of those meetings here), in addition to commission members appearing before several legislative panels to answer questions from state lawmakers.
The hearing will take place at the commission's headquarters in the Hansen Building in Cheyenne. It will be open to the public and live-streamed with opportunities for more public comment. (See more details at the end of this story.)
The commission, Rocky Mountain Power and the five intervening parties in the case are mostly relegated to arguing the merits of the proposed 21.6%, $140.2 million "general rate case."
The parties, along with dozens of their witnesses, will rehash the contents of pre-filed evidence, analysis and motions. The utility's claims regarding cost of services and market conditions - past and projected - along with its proposals for how to balance future cost risks between its shareholders and its customers will be scrutinized over several days.
In fact, the commission has set aside eight days for the hearing and it will go for as long as it takes, according to staff.
Shannon Anderson is an attorney for the Sheridan-based landowner advocacy group Powder River Basin Resource Council. Although her organization is not involved in this case, Anderson has taken part in several electric utility rate hearings.
Determining what is the most reliable, inexpensive strategy for providing electrical service is not easy, she said, especially in an industry that is rapidly transforming and responding to a changing natural environment.
"It is a very difficult thing to puzzle out," Anderson said.
Though the hearing process is unfamiliar to the general public and riddled with procedure and legalese, it's designed that way to get at the facts of a case. But the general public shouldn't be discouraged or intimidated, Anderson and several other sources familiar with the process told WyoFile.
Sure, there will be a lot of dense monologues regarding utility costs, system operations and western grid dynamics, along with nitpicking cross-examinations. But there will also be several value judgements that are not so complex and which the commission has broad authority to rule on. Those come down to how to balance cost risks between a regulated, monopolistic utility and its captive Wyoming customers.
"They [utilities] say, 'Oh, these cases are so complicated and involve so many moving parts that the general public just doesn't understand,'" AARP Wyoming Director Sam Shumway said. "What I do understand, and what I think the public understands, is they're asking us to pay to make sure their shareholders get a double-digit rate of return. That's pretty simple."
Reality versus risk
Rocky Mountain Power's continued reliance on coal and natural gas to generate a portion of its electricity is responsible for the bulk of its rising expenses, given recent price volatility in those commodity markets, according to filings by the company.
The company might place significant weight on coal and natural gas prices to justify the temporary 7.6%, $50.2 million cost adjustment to cover a cost overrun beyond what the Public Service Commission approved several years ago for its current "general rate." Also, such year-to-year adjustments are considered a "pass-on" - the utility isn't permitted to earn a profit on that $50.2 million.
But factoring coal and natural gas market volatility into its proposed new general rate - the focus of the upcoming hearings - might be more difficult.
About 90% of the company's proposed $140.2 million general rate hike request for future expenses is based on the same market volatility for coal, natural gas and electrical power it might purchase in coming years, company officials have testified.
Those volatile market realities, however, don't necessarily mean the utility can pass the cost onto ratepayers in a new general rate. By law, the Public Service Commission must provide regulated utilities the "opportunity" to earn a return, even a profit, on investments to meet their mandatory requirement of providing reliable service to Wyoming customers. That opportunity is not a "guarantee," Public Service Commission Chairwoman Mary Throne has repeated in recent months.
For example, the utility's ongoing additions of renewable sources of energy - along with federal production tax credits - have saved Wyoming ratepayers an estimated $85.4 million or more, according to the company. That's $85.4 million that might have otherwise been added to the $140.2 million rate hike request.
The commission, according to insiders, could decide that's an indication that the utility hasn't moved fast enough to replace fossil fuels with renewable sources of energy. Therefore, the utility might not be entitled to tap ratepayers for its full $140.2 million request. Or, the commission may find that the utility is doing a fine job of balancing the risks, rewards and reliability of wind, solar, coal and natural gas resources in its customers' favor.
That's one aspect - albeit complex - of how the commission might weigh Rocky Mountain Power's general rate hike request.
In perhaps more of a fairness determination, according to Wyoming AARP (which is not an intervening party in the case), other aspects of Rocky Mountain Power's request come down to how the utility proposes to share risks and rewards between its shareholders and its Wyoming customers in the future.
Couched within the $140.2 million rate increase is a proposal to eliminate a fuel "cost sharing band." Currently, Rocky Mountain Power is responsible for covering 20% of fuel cost overruns. Its customers in the state are tapped for the rest. The company says it should have zero liability and Wyoming ratepayers should pick up the entire tab.
Rocky Mountain Power is also asking the commission to increase its maximum allowable rate of return - or profit. Currently, Rocky Mountain Power - the state's largest single electric utility, a division of PacifiCorp owned by billionaire Warren Buffet - is allowed a maximum 9.5% rate of return on its investments in Wyoming. It's asking to bump that up to 10.3%, according to the company's filings.
The company claims it might earn a profit of only 1.32% in Wyoming if it isn't allowed the full $140.2 million annual rate hike.
Wyoming AARP's Shumway said he and his 75,000 members - more than 5,000 have submitted written comments in the case, he said - will be watching closely to see how the commission balances those risks and rewards between the utility's shareholders and its customers in the state.
"An almost 30% rate increase is going to be devastating for older Wyomingites and for all Wyomingites," Shumway said. "Wyoming is watching. We want the Public Service Commission to know that we oppose this and we're watching what you do. The Public Service Commission's job is to put the interests of the public first and the interests of the utility are secondary."
How to watch, participate, learn more
The hearing will take place at the Wyoming Public Service Commission's headquarters in the Hansen Building, 2515 Warren Ave., Suite 300, in Cheyenne beginning at 9 a.m. Wednesday. It will continue at 9 a.m. each following work day through Nov. 3, at the commission's discretion.
The hearing is open to the public and will be livestreamed - click here for the livestream link, or dial 1-719-359-4580, meeting ID: 819-2930-6120. There will be opportunities for public comment throughout the hearing.
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This story was published on October 23, 2023.