Mayor: Combined 29% electric rate increase may threaten lives

A historic rate increase proposal could make it difficult for some of Rocky Mountain Power’s 150,000 customers in Wyoming to afford their electric bills as temperatures rise and fall to dangerous levels.

The utility — Wyoming’s largest monopolistic electricity provider — says extreme weather’s impact on power demand and fossil fuel commodity markets are mostly to blame for two rate increases that would add up to more than a 29% hike.

The rate increase requests — the largest Wyoming customers have faced in recent history, according to state regulatory officials — threatens to burden households, businesses and industrial electrical consumers. Oilfield operations, refineries, trona facilities and other industrial users account for more than 70% of the electricity the utility serves in the state, the company said.

Homeowners, though — especially those on fixed incomes and others already struggling to make ends meet — would suffer the most.

“My winter [electricity] bills are $400 a month,” Rock Springs resident Toni Bate said. She rents and has little control over the efficiency dynamics of the home she lives in, leaving her to crank the heat when winter brings frigid temperatures. “I don’t know where I’m gonna get the money to pay for this.”

Extreme summer temperatures are also a concern. The magnitude of the utility’s proposed rate increases is beyond what many residents can afford and could “result, unfortunately, in people being hospitalized and dying from the heat because they just can’t afford to pay that much money,” Rock Springs Mayor Max Mickelson said.

Bate and Mickelson were among about a dozen members of the public who voiced their concerns about the proposed rate increases during a Wyoming Public Service Commission hearing Monday in Rock Springs. Most suspected the ongoing shift from fossil fuels to renewable energy by Rocky Mountain Power and its parent company PacifiCorp is to blame for the proposed rate hikes. But the main culprit is fossil fuels, according to company officials.

“The primary drivers of both the annual net power cost adjustment and the general rate increase request are the increased prices of natural gas and coal to fuel the company’s power plants,” utility spokesman David Eskelsen told WyoFile. “Plus increases in wholesale market power purchased by the company to help balance system demand.”

The company’s shift to more renewable sources of energy — along with federal production tax credits — has saved Wyoming ratepayers an estimated $85.4 million, Eskelsen said.

Double jeopardy

Extreme weather in recent years has delivered a double punch to the cost of generating electricity in the West. Heat waves and cold snaps have temporarily driven up demand for electrical power at the same time those conditions spike prices for fuels — natural gas in particular — burned to generate electricity.

For example, as homes and businesses cranked up the heat to survive a cold snap that settled over much of North America in December, utilities were forced to compete for natural gas, temporarily pushing the market rate for the commodity beyond 400% of what it sold for in previous months, according to the utility. 

The same scenario plays out with “power purchases.” When a utility needs to buy electrical power from another power generating company to meet a spike in demand, that power is sold at a premium.

“Since 2021, natural gas fuel prices have risen 89%, the company’s coal fuel prices have increased 38%, while open market power costs have increased 199%,” Eskelsen said. “The company doesn’t make a profit on these costs; they are a direct pass-through to the customer.”

Rocky Mountain Power isn’t the only utility facing higher fossil fuel prices and passing the cost onto Wyoming customers. 

“We’ve had [natural gas] utilities that spent as much in one week as they normally spend on gas in a whole year,” Public Service Commission Chief Counsel John Burbridge said. “If you have bad weather events two or three years in a row, those problems just pancake on each other. So we keep our fingers crossed every winter.”

Making matters worse, drought has sapped hydroelectric power generation, while the war in Ukraine continues to strain the U.S. natural gas supply, according to the company.

All told, the utility paid about $90 million more than it had forecast it would cost to deliver electrical power to its Wyoming customers in 2022, according to the company. Based on regulatory formulas that account for such fuel cost overruns, the utility wants to tap its customers for $50.3 million. The true-up rate adjustment amounts to about a 7.6% rate increase, according to the Wyoming Public Service Commission, which would be collected over a 12-month period beginning this month.

That request is still subject to review and final approval by the service commission.

The company has also filed a “general rate case” to set prices for the next several years. It says it needs to increase its general rates by 21.6% to collect an extra annual $140.2 million from its Wyoming ratepayers beginning in 2024. That request takes into account what the utility sees as continuing volatility in fossil fuel commodities, increasingly unpredictable extreme weather events, as well as capital investments to generate and move more sources of renewable energy to comply with environmental regulations and lessen its exposure to volatile fossil fuel markets.

Without the annual $140.2 million rate increase, Rocky Mountain Power’s rate of return in Wyoming would be 1.32% — far below the maximum 9.5% currently allowed by the state, the company said. It would like the commission to increase the maximum rate of return to 10.3%.

The proposed 21.6% rate hike is “driven largely by increased market prices for power and natural gas, increased contract prices for coal and coal supply limitations, and thermal generation operational changes due to federal and state environmental compliance requirements, including the Environmental Protection Agency’s Ozone Transport Rule,” the company said in filings to the state.

How the proposed 7.6% temporary true-up increase and 21.6% base rate will affect monthly bills differs between residential, business, agricultural and industrial customers. Combined, the average household customer’s monthly bill would increase by $19.94, the company estimates.

“It certainly is eye-popping,” Burbridge said of the proposed increases. The public service commission will carefully scrutinize the rate increase requests, including more opportunities for public comment. Although he can’t speculate on the final outcome, Burbridge said, the commission typically finds opportunities to justify a lower rate than proposed.

Regulated utility and grid limitations

Rocky Mountain Power and PacifiCorp’s plans to phase out fossil fuels from its power generation mix should help insulate customers from fossil fuel price shocks, Hannah Oakes Dobie said.

Oakes Dobie, staff attorney with Harvard Law School’s Environmental and Energy Law Program, said that while regulated utilities — because they are monopolies — deserve scrutiny for sometimes favoring shareholders over captive customers, they’re also somewhat limited in fixing the fundamental challenge of “decarbonizing” the grid. They typically work only within the confines of their service territory rather than tap cheaper renewable energy resources throughout the grid, she said.

“Utilities could consider whether the most economically efficient generation resources for customers are located outside of their service territories and whether they can work with merchant and other transmission developers to maximize ratepayer benefits through the next decade of fossil fuel retirements and integration of renewable energy,” Oakes Dobie told WyoFile.

One recent example of a merchant investment to integrate more renewable energy on the western grid is the TransWest Express transmission project. The 732-mile high-voltage transmission line will deliver 3,000 megawatts of Wyoming wind energy to several states in the Southwest. But the project might not have happened without the backing of the Anschutz Corporation, owned by billionaire Phil Anschutz. Still, the project took more than 15 years to permit.

The Federal Energy Regulatory Commission should do more to incentivize regulated utilities to join such efforts to better integrate the grid, Oakes Dobie said.

“The Inflation Reduction Act includes many financial incentives to build renewable generation,” she said. “But the benefits will not be maximized if the transmission is not built to interconnect those resources in renewable-rich regions to the grid.”