Power customers asked to foot the bill for ‘extreme weather’

Heat waves, extreme weather and drought spiked Rocky Mountain Power’s fuel costs and wholesale power purchase prices in 2022, prompting it to request a rate increase of $50.3 million for its Wyoming customers, the company said.

The request is part of the utility’s annual energy cost-rate adjustment now pending before the Wyoming Public Service Commission. If approved as proposed, the adjustment would take effect July 1 and result in an increase of about $3.52 per month for the average residential household, according to RMP, Wyoming’s largest electric utility.

“Sharply higher prices in the wholesale power market during the severe summer weather of 2022 are responsible for nearly half of Wyoming’s share of increased power costs,” RMP’s Net Power Cost Specialist Jack Painter said in a prepared statement.

Drought conditions resulted in a 34% reduction of hydroelectric power generation, the company said. Fuel prices for natural gas-fired power generation facilities spiked due to extreme cold weather, as well. Natural gas cost four times as much in December 2022 as in December 2021, the company said.

Changing trends

RMP also cited extreme weather in its April 2022 energy cost adjustment request and was approved for a 3.8% increase in Wyoming, totalling $23.6 million.

Extreme weather was to blame for wholesale electricity price spikes at most major trading hubs across the U.S. in 2022, including the six-state operating region where RMP’s parent company PacifiCorp serves customers, according to the U.S. Energy Information Administration. 

“In addition to higher natural gas prices and severe weather in 2022, railroad and coal mine labor shortages constrained coal supply and delivery to power plants throughout the summer, limiting utility operators’ ability to switch from relatively expensive natural gas to cheaper coal-fired generation,” the EIA stated in January.

Human-caused climate change is expected to continue to drive extreme weather events, exposing ratepayers to volatile energy markets, according to industry and climate experts.

So why do ratepayers end up footing the bill for “unexpected” weather events, particularly in places like Wyoming where weather extremes are the norm in light of climate change?

“Extreme weather is becoming more and more of a consideration on a day-to-day basis,” Wyoming Consumer Advocate Anthony Ornelas said.

Utilities, including those that operate in Wyoming, are taking new weather patterns into consideration, he said. Historically, forecasting such events was based on weather data from, say, the past 30 years. Both utilities and regulatory authorities are refining such analysis taking climate change into consideration.

“[Utilities are] trying to plan their systems with a better understanding of extreme weather events, as well as integration of renewable energy,” Ornelas said.

Rate scrutiny

As a regulated monopoly, utilities are allowed to tap ratepayers for actual expenses on a 1-to-1 ratio, generally speaking, according to Ornelas. Those expense claims are highly scrutinized by not only the Office of Consumer Advocate and the Public Service Commission, but by multiple intervening parties.

Regulated utilities are allowed to earn profits, Ornelas said, but those are also highly scrutinized and regulated.

“We have had a few instances in the last five or six years where [a] company was found to be over-earning and there were investigations and there were some refunds back to customers,” Ornelas said. 

Ratepayers are also sometimes tapped for special surcharges. For example, RMP was recently granted approval to impose a 0.3% “carbon capture compliance” surcharge to cover the cost of complying with Wyoming’s own mandate to consider retrofitting its coal-fired power plants in the state with carbon capture, use and sequestration technologies.