Wyoming and Utah may get what they’ve been pining for in recent years: the breakup of PacifiCorp. The electric utility giant has increasingly struggled to mesh pro-fossil-fuel policies favored by those states with cleaner energy policies preferred in other places it operates like California, Oregon and Washington.
But what a “corporate realignment” — which the company has not yet formally proposed — might look like and what it might mean for Wyoming ratepayers remains unknown. For now, the company will still pursue its existing rate hike proposals and otherwise make investments to continue to serve its customers, according to utility officials.
There’s one thing for certain: It won’t be all roses.
“Just like any breakup of any partnership, or of any business, it’s not cost-free,” PacifiCorp’s Rocky Mountain Power President Dick Garlish told the Utah Legislature’s Public Utilities, Energy and Technology Interim Committee on Wednesday.
Garlish, who took the helm of Rocky Mountain Power earlier this year, was grilled by Utah lawmakers as he discussed PacifiCorp’s corporate realignment report — a preliminary analysis demanded by Utah lawmakers. Nearly two more years are needed to fully develop realignment scenarios — guided by six different states and other stakeholders — that offer estimates for breakup costs, ongoing operational costs and potential benefits, he added.
“This [uncertainty] is the way it’s going to be because this is a big negotiation and a lot of math involved,” Garlish said.
Though each of the six states will help direct the potential reorganization of the utility, Garlish added, no single state or stakeholder can dictate it.
Diverging interests
PacifiCorp is part of billionaire Warren Buffet’s Berkshire Hathaway conglomerate. The regulated monopoly utility operates in six western states, including Wyoming, Utah and Idaho under its Rocky Mountain Power division. Rocky Mountain Power is the largest electrical service provider in Wyoming, where it also operates several wind farms, decades-old coal-fired power plants on the verge of retirement due to escalating costs and has majority ownership of the Jim Bridger coal plant near Rock Springs.
Like pro-fossil fuel officials in Utah, Wyoming lawmakers have berated the company in recent years for its gradual shift from planet-warming coal-fired power generation to cleaner forms of power like wind and solar. The intermittent availability of solar and wind power presents reliability issues, they say, while industrializing landscapes in their states for the benefit of the company’s West Coast customers. Meantime, the company has pressed for a series of double-digit rate increases in recent years — hikes so steep they have shocked both ratepayers and their elected representatives.
Last year, Rocky Mountain Power proposed a historic 29.2% rate increase for its Wyoming customers, which state authorities whittled to 5.5%. Wyoming customers then saw another 9.3% rate hike temporarily imposed in July, and the utility is now seeking an additional 14.7% increase.
The unprecedented rate hikes, in Wyoming and elsewhere, are necessary to recover money the company has already spent to provide electrical services under myriad, monumental energy-market and policy shifts, Garlish said.
“Hundreds of millions of dollars of deferred costs are out there that are unrecovered,” he said, referring to Rocky Mountain Power’s proposed 18% rate hike in Utah. “I have to get those [expenditures] back to maintain the financial health of the utility to be able to get the access to the capital to continue. And it’s hard.”
Though lawmakers in Wyoming and Utah acknowledge PacifiCorp’s advantageous economies-of-scale for operating in six western states, officials in both states remain skeptical of the company’s integrity. Some have suggested its multi-state model provides enough of a shell game to potentially pass on costs imposed by one state to another. In response to those concerns, PacifiCorp appears willing to sunset its “multi-state protocol” — a forum of stakeholders who review system-wide costs and negotiate how PacifiCorp should allocate them among each of the six states, according to those close to the process.
The signal helped set the stage for a potential reorganization of the company into smaller pieces that could be more responsive to local interests, those close to the multi-state protocol process told WyoFile.
Until recently, Garlish said, PacifiCorp’s multi-state operations worked well to provide reliable electrical service at relatively low and stable rates while the company navigated six different state authorities with conflicting energy portfolio priorities and ever-changing environmental standards from the federal government.
“It worked really well,” Garlish said. “That’s not where we are today.”
In fact, the model isn’t working particularly well for PacifiCorp either, Garlish added, describing an untenable “whiplash” from trying to appease all of the divergent authorities over it.
“I get that people are frustrated,” he said. “I get that the [Utah] Legislature is frustrated. I get the customers are frustrated. I am frustrated.”
Mounting pressures
In addition to diverging state climate and energy policies that pull the company in different directions, PacifiCorp — and in turn, its customers — is facing billion-dollar liability lawsuits for its role in devastating West Coast wildfires. It’s not alone. Insurance premiums for utilities are exploding due to the convergence of aging electrical power infrastructure and climate-driven conditions that amplify the intensity of wildfires, and that promise to only make the situation worse.
Acknowledging the practical need to help maintain vital electrical services, Wyoming, like many other states, is considering legislation to restrict wildfire damage claim amounts when electric utilities spark blazes in the state. The alternative, according to some utility representatives, is bankruptcy and blackouts.
Meanwhile, lawmakers in both Wyoming and Utah remain eager to see what benefits their constituents could reap from a PacifiCorp breakup that might result in a smaller regional operation more attuned to their preferred energy policies. Several lawmakers on the Utah legislative panel said they favor a reorganization that results in a single entity that provides services only to Utah, Wyoming and Idaho.
“The House, the Senate, leadership in both bodies and the executive branch would like to see this separation,” Utah state Rep. Carl R. Albrecht (R-Richfield) said, adding that he hopes PacifiCorp would “move this thing forward sooner than later, so we could get a direct answer from you on whether or not you can separate from PacifiCorp.”
Though Wyoming lawmakers have not formally made a similar request of PacifiCorp, many have expressed a desire to somehow disconnect the state from policies elsewhere that drive the utility away from coal.
The Wyoming Public Service Commission, which has rate-making authority over monopoly utilities, will hold a contested rate hearing regarding Rocky Mountain Power’s proposed “energy cost adjustment” in December.
CLARIFICATION: This story was updated to clarify information about a rate hearing before the Wyoming Public Service Commission.
Past time to go back to PUBLICLY-OWNED utilities rather than the ripoffs that are “investor-owned” ripoffs…
It seems to me that future benefits for Wyoming from the move to renewable energy would be lost were Pacific Power to break up into a couple companies, one of which longs for the way it used to be.
Wyoming, Idaho and Utah would become a linked third world economy based on ever decreasing extraction of raw resources.
Wind and solar infrastructure is becoming ever more interconnected, and this network/system doesn’t acknowledge state or political borders. Well, until backwards looking legislatures think there is some wisdom in trying to recreate the 20th century in energy production. Hence PacificCorp figuratively throwing up its hands and saying, “All right, have it your way.”
Don’t forget, PacificCorp’s owner, Buffet’s Berkshire Hathaway, also owns BNSF, a huge beneficiary of Powder River coal transport. But these otherwise (semi) pristine Western states that are addicted to and like carbon Kamikazes, hell-bent on preserving and enabling coal-fired electrical power generation are in for a rude awakening – eventually, maybe sooner.
Divesting from pacific power may be a good idea but for the wrong reasons.
Can’t run away from the future and it’s not coal fired electric power.
This should be an interesting couple of years. Yes it is nearly impossible to really crunch the numbers to determine who is paying for what, especially infrastructure. Regardless of federal regulatory policy the western states need to wise up and understand that power production and distribution are expensive in our vast land mass whether we subsidize energy delivery to others or not. Lets have local control and just keep burning coal and keep the plants open until they crash and burn. Lets see what the replacement cost of those coal plants are when the cost is not shared across many states.
Good morning,
Camouflaged “divide and CONQUER” is still CONQUERED when not realized when accomplished piece by piece or breakup by breakup regardless the synonym used and of course when better to do it but in bitter cold? Americans are what you and I are about to witness “could” be a precedent to weaken the Constitution of these United States of America? This is as if each state has agreed to print their own coinage but in the form of MEGAWATTS aka BARTERING aka devide and conquer and old tactic but the most effective, should I/we continue …? YES an option is to “move on”, move out, get away BUT! The land mass of these United States of America is not endless eventually there will be no place TO RUN and HIDE and the hide required is? Thank you if you have read this far, Semper Fi!
Given the track record of Republican legislatures in dictating energy policy, I expect the ratepayers in the the 3 states will soon really get it good and hard. That’s fine, I’ll sell my WY assets and move on. Sorry for you guys.
How does breaking up PacifiCorp by state solve the problem of federal environmental regulations driving the utility costs through the roof? This falls into the category of “be careful what you ask for”. This utility did a great job of meeting environmental regulations and controlling costs until it was decided by environmental legislation decided to include CO2 in the list of pollutants. This made it impossible to use low cost abundant fuels to generate electricity. We are shooting ourselves in the foot! Environtalism has gone over the top and the result is unaffordable energy prices that drive the cost of everything. We must begin to use common sense.
A “low cost abundant fuel”…hmmm.
How about, FREE fuel? You know, old sol, and the wind that it drives, and the water that it moves around.
Hard to beat that with “fuel” you gotta pay for.
Great pic of the Gateway West transmission line in southern Carbon County!! I get it – Wyoming is in the energy exporting business – coal, oil, natural gas, CBM, uranium, wind energy, solar – that’s our biggest economic endeavor by far and the energy businesses pay most of our state tax revenue. However, the cost of infrastructure is normally passed on to the out-of-state consumers. With PacificCorps situation one would assume that about 80% of the energy they generate in Wyoming is exported to the consuming states – and it follows – that about 80% of infrastructure should be passed along to the out-of-state consumers. But is that the case??? This article clearly indicates that the financial numbers are very difficult to generate – so who knows??? Are the out-of-state consumers paying for the Gateway West transmission line improvements, as they should, or are Wyoming customers of PacificCorp shouldering some of the costs?? Its very confusing – with the multiple rate increases – trying to determine whether our rate increases are proportional to our usage of energy – or whether we will be paying for more than our share. I guess the Public Utility commission is responsible for making that determination but previous public information indicated they were skeptical. Its certainly a complex issue and complicated by the numerous changes in energy generation – the switchover to renewable energy .