PacifiCorp mulls breakup that could align Wyoming with other pro-coal states

FROM WYOFILE:

A reorganization likely won’t come cheap for Wyoming ratepayers, according to the company. But there might be benefits.

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.

WyoFile is an independent nonprofit news organization focused on Wyoming people, places and policy.

This story was posted on November 21, 2024.