The eye of the Wyoming Legislature these days is fixed upon the Public Service Commission.
Lawmakers, grasping for ways to slow coal’s decline, are increasingly turning to a lever that in better days may have been anathema to free-market Republicans: the regulators.
Last winter, PacifiCorp, the parent company of Rocky Mountain Power, unveiled a study suggesting that closing some of its coal-fired power plant units early — including several in Wyoming — could save its customers hundreds of millions of dollars. The race has been on ever since for officials to minimize the damage to Wyoming’s flagship industry and cushion the blow to local economies. It’s a race in which lawmakers have very few ways of gaining ground.
Coal mining coal is a commodities business dependent on market demand. A dwindling number of power plant customers is decidedly bad for business. Electrical companies, however, are regulated monopolies subject to special regulatory oversight by the state. With little ability to move global commodity markets, some lawmakers see flexing the regulatory might of the PSC to shore up demand close to home and minimize closures as a card they can play.
Some worry about unintended consequences of the sudden political scrutiny of the independent agency.
The PSC is headed by a three-member board appointed by the governor,. The commission regulates the state’s electricity, natural gas and telephone utility companies, as well as intrastate pipelines and some water companies. Unlike the many other boards and commissions in Wyoming government, the PSC is also an independent government agency with around 30 employees who support the commissioners.
In recent months, the Legislature has been applying political pressure on the board. Legislative committees have summoned the commissioners or their agency staff at least four times since the 2019 Legislature adjourned in March. At these encounters, lawmakers have repeatedly asked the body why it’s not doing more to protect coal workers in plants and mines.
In response, PSC representatives have repeatedly cited their existing mission.
Could the PSC stop the closure of a coal-fired power plant, Sen. Bo Biteman (R-Sheridan) asked at a Nov. 5 meeting of the Joint Minerals, Business and Economic Development Committee in Casper.
“The commission evaluates proposals for whatever [utilities] are going to do under the framework of our overall mission, which is to make sure that there’s safe, adequate and reliable service at just and reasonable rates,” PSC chief counsel Chris Petrie said in response.
As has been the case every time the commission has come before lawmakers this summer, Petrie’s answers were not satisfactory to the politicians.
“So does the PSC work on behalf of the citizens of Wyoming or do they work on behalf of the utility company?” Biteman shot back.
New PSC member and a former long-time legislator Mary Throne intervened.
“Like all agencies, we’re governed by a statute and our duty is to do what’s in the public interest,” she said. For the PSC, that means “safe, reliable service at just and reasonable rates,” Throne said, echoing Petrie.
Staff and commissioners have told lawmakers they worry about “unintended consequences” of intervening too bluntly, particularly consequences that might violate the agency’s original charter. Indeed, experts argue that letting a utility company close power plants it no longer considers cost effective counts as serving the citizens of Wyoming.
“It’s unclear why the Legislature wants to increase the amount of money that Wyoming households pay for electricity,” said Joshua Macey, a professor at Cornell University who studies utility law and bankruptcy law.
Low rates have been a part of the agency’s stated mission for a long time. Tinkering with utility economics, experts say, could hurt that mission.
The commission is not feeling undue pressure, Petrie wrote in an email to WyoFile. “I see no danger that the Commission’s focus will be lost,” under the increased political scrutiny, he wrote.
“We’re ancient,” Throne told lawmakers, speaking of the statutes that created the PSC. “We’re 1915 vintage.”
The Legislature created the body that year, joining a wave of state legislatures who were forming regulatory agencies to rein in abuse by the companies developing monopolies over the delivery of water, electricity and other “public services.”
Companies in such fields operated “natural monopolies,” Macey said. Those services “are economies of scale,” he said, and it benefited the public to grant certain businesses monopolies.
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In exchange for that monopoly, however, the government exacts much steeper regulatory oversight than in other industries. Public service commissions monitor each investment, or divestment, a utility company might make, for example, and approve mergers and acquisitions. In electricity, the commission’s ultimate power comes in approving the rates charged to customers. Though the companies are legally entitled to the opportunity to make a profit, commissioners make sure rates don’t rise much higher than what is required to recover the costs of investing in infrastructure — power plants, wind turbines and transmission lines, for example.
Thus, the Wyoming Public Service commission guards safe, reliable service at just and reasonable rates.
Wyoming politicians were incensed by PacifiCorp’s decision to close power plants early. The utility cemented the plan in early October and state officials are in the process of deciding how to respond.
For Wyoming, an electric exporter with a rural economy, the stakes are different than for states that import more energy than they produce. Electricity from coal units at plants outside Kemmerer, Rock Springs or Glenrock can be replaced on the grid with wind, solar or natural gas. Replacing the jobs in those towns is far more daunting.
During a back and forth between Throne, the commissioners’ counsel Petrie and the Joint Corporations, Elections and Political Subdivision in May Rep. Scott Clem (R-Gillette) zeroed in on concerns of “unintended consequences.”
“We’re having unintended consequences right now,” Clem said, referring to the state’s economic concerns. “That’s the new ‘par for the course,’ and it really stinks.”
Part of the frustration comes from a belief among many legislators that changes to the electrical grid aren’t resulting from pure economics, but from the political actions of other states. The states Wyoming is tied to through the grid — Oregon, Washington and other more Democrat or purple parts of the northwest — are passing renewable energy standards out of climate change concerns, accelerating the energy transition.
Those states also have faster growing economies and tax structures that are not deeply dependent on energy development.
Public service commissions in those states are doing more than watching rates, Clem said at the May meeting. They’re “proactive” about shifting the electrical grid. Wyoming, in contrast, is reactive about dealing with it, he said.
“I want Wyoming to flex its muscles,” he told the PSC. “I want you all to flex your muscles. We’re just all along for the ride while, quite frankly, a group of radicals out there are driving public policy, and it’s driving all of us.”
One longtime senator agreed. “It seems to me that the Legislature may need to get involved in this because I think the business of ‘we’re losing ground compared to the other states’ is just plain unacceptable,” said Sen. Charles Scott (R-Casper). “If we get involved we’ll have to use some fairly blunt instruments.”
While other states — and countries — are passing standards to shift to cleaner energy out of climate change concerns, Scott suggested Wyoming should take the opposite track and pass a portfolio standard tied to the burning of fossil fuels. “Should we pass a carbon mandate to offset some of these mandates that the other legislatures are passing?” he asked. “And if we did something like that, what would that do to our rates in this state?”
“There’s a great danger of unintended consequences,” Petrie said in response.
Fighting tide and train
Wyoming is swimming against the tide, Macey said. “Wyoming could pioneer a nonrenewable portfolio standard,” Macey said, but because few if any states appear interested in such an idea, Wyoming ratepayers might carry the costs alone. Without fellowship from other markets, the economy of scale in Wyoming could falter as the rest of the grid moves on.
Other Wyoming lawmakers argue it is PacifiCorp that is making decisions based on politics, not economics. The transition to renewable energy will raise electric rates more than sticking to fossil fuels, they argue.
“Why not deregulate and let the markets figure it out if you’re not going to do anything to protect our citizens?” Biteman asked at the minerals committee meeting.
Biteman did not respond to multiple voicemails requesting comment.
“I’m kind of worried that we’re standing in front of a train,” Sen. Cale Case (R-Lander) told WyoFile.
The reality of a changing grid is more nuanced than the current discussion among lawmakers, Case said. “I think we’re going to have higher rates no matter what happens,” he said. The future of electricity could still incorporate coal plants to keep up baseload power. The Legislature’s wholesale effort to impede the decline of coal, however, aren’t based on a realistic view of the change, he said.
Case, the former senate chairman of the corporations committee, is a longtime observer of Wyoming’s PSC, both as a lawmaker and as an economist. In many states, public service commissioners are elected by districts. Though that’s not the case in Wyoming, the body is supposed to remain an independent regulator.
The minerals committee dropped its most direct move to take control of the body — a bill that would have put two lawmakers on the commission — after their own attorneys found it likely unconstitutional.
Over a century, independence has allowed the agency to develop expertise in its field, Case said, that allows it to protect ratepayers. Regardless of what the Legislature actually passes, the political pressure lawmakers are exerting on the industry could impact that independence, he said.
“Whenever a commission like that is called in front of the legislature repeatedly… It does get their attention. There is no doubt,” he said.
It remains to be seen how far the Legislature could try to go with the PSC. Nor is it clear if the PSC will push back or embrace the change. All agencies, the commission included, are “fundamentally creatures of statute,” Petrie wrote. So far, the legislative changes haven’t raised undue concern, he said.
“Our experience appearing before interim committees has given us no cause to believe the Legislature is inclined to take actions inimical to the Commission’s duty to safeguard the public interest,” he wrote, “and to ensure the availability of safe, adequate and reliable utility service at just and reasonable rates.”
But tinkering with the commission’s purpose is a slippery slope, Case said.
“Every state has their brand of home cooking and meddling, but I’ve never seen it like this,” Case said. “Once you do some meddling you have to do some more meddling to undo the damage you’ve done.”
CORRECTION: This article has been updated to note that monopoly utility companies are entitled to the opportunity to earn a profit. They are not guaranteed a profit as was previously reported. —Ed.
This is one of six pieces in WyoFile’s “Re-regulation” special edition. Click the links below to read more:
‘Re-regulation’: Examining Wyoming’s response to coal’s decline
Old plants, new ideas: Who might buy a retired coal power unit?
Chasing coal-plant longevity, bills open door to deregulation
The great coal transition, an economist’s perspective
Regs helped Wyo’s coal industry. Weakening them won’t save it.
This sounds like a Soviet-style command economy.
Since the grid has no storage capacity and until distributed production and storage slowly become more widespread there will continue to be a significant requirement for existing coal/gas fired generation. This slow but accelerating trend provides an opportunity for Wyoming to take advantage of its position as one of America’s leading energy producers by carefully shifting State economic strategies to reflect the realities of the energy marketplace. If Wyoming intends to remain in the energy business we should be less interested in “where we are” than “where we will need to be” to remain competitive. We have a huge advantage because of our location, population size, natural resources (which happen to include wind & sun) and previous energy business experience. It is clear that the energy companies themselves are diversifying in response to marketplace demands. Someone is going to meet this demand just as Wyoming did when coal became the obvious choice decades ago. We should not miss an opportunity to repeat our success as one of the nation’s leading strategic resource providers because we got too comfortable.