Gasoline and diesel prices in Utah been putting the pedal to the metal, but electricity and heating costs have largely stayed home.
That may be ending.
Utah’s residential electricity and natural gas rates probably are not going to shoot up like they have in some areas, but there is general consensus that we’ll be paying more for home energy in the future.
In Utah, there are two main players for residential energy: Dominion Energy provides natural gas to about 90% of the population, and Rocky Mountain Power supplies electricity to more than 80%. The remaining parts of Utah get their electricity from city-owned power companies and a few small rural cooperatives.
“You’re hearing electric market prices are going to be 50% higher this year,” said Michele Beck, director of the Utah Office of Consumer Services, “but a very small portion of our total electric power is served from the market.”
The role of Beck’s office is to advocate for ratepayers when the utilities seek rate increases from the Utah Public Service Commission, and her team works to keep rates low. The PSC sets the rates based on complicated formulas that balance the rights of consumers against the rights of the utilities’ shareholders to make a profit.
“I will predict that we’ll see rate increases at a higher rate,” Beck said, but it’s hard to forecast when and how much. She believes the picture will get clearer in the coming years as technology like batteries matures.
(Christopher Cherrington | The Salt Lake Tribune)
Rocky Mountain Power, a division of PacifiCorp, which is owned by Warren Buffett’s Berkshire Hathaway Energy, is a vertically integrated public utility, meaning it owns production, transmission and distribution assets. It can directly sell and deliver its own power. As a result, it has been more insulated from the price pressures of electricity markets.
David Eskelsen, senior communications specialist at RMP, credits his company’s “fiscal and operational discipline” for keeping down rates, but he acknowledges that federal tax incentives also have allowed PacifiCorp to add renewable energy at a lower cost, including a $3.1 billion investment in Wyoming wind projects.
Eskelsen also said that it is “a valid expectation” that rates will rise to fund needed new transmission lines and storage, but it’s hard to say how much. “There’s a whole lot of moving parts.”
He noted that the company has 11 pumped storage projects in the works. Those use water like a battery, pumping it uphill when solar energy is available so it can flow down through a hydro turbine to generate power when the sun isn’t shining. Beck said RMP hasn’t put the costs of those projects into its filings yet, so it’s hard to know what their impact will be.
“Dominion Energy is focused on (and has delivered) affordable and reliable energy,” said Jorgan Hofeling, the gas company’s communications strategic adviser.
“Furthermore, Utah policymakers, regulators, and gas and electric utility companies have done a great job keeping utility costs low,” Hofeling said, “both on absolute terms as well as a percentage of average resident incomes (which we view as a key affordability metric).”
She said 60% to 65% of the rates are driven by the cost of buying, transporting and storing natural gas. The remainder is company expenses for employees, depreciation on investments, taxes and financing costs.
Dominion is also somewhat vertically integrated. It buys about half its gas from an affiliated company called Wexpro. More than 40 years ago, a Dominion predecessor, Mountain Fuel Supply Co., settled a court case that locked in Wexpro rate calculation based on a cost of service, which over the years has kept residential gas rates below market in Utah.
The other half of Dominion’s gas is more market-dependent and that helped fuel a big boost in residential rates between this year and last. “By Office of Consumer Services calculations,” Beck said, “average monthly bills were 18% to 19% higher in winter 2021-2022 as compared to last year.”
Hofeling said the Ukraine war, challenges in getting pipeline permits and a growing demand for U.S. gas are all driving higher natural gas prices.
“As a result, in June 2022,” she said, “we filed with the [Public Service Commission] for approval to increase customer rates by around $57 per year (for a typical residential customer) to reflect the higher market cost of gas.”
In May, Dominion also filed for a general rate increase that would add another $40 a year to the typical bill. She said the jump reflects a $700 million investment the company will make, including a new facility in Magna to store liquefied natural gas to improve reliability on the coldest days of winter.
As for electricity costs outside of Rocky Mountain’s service area, Utah Associated Municipal Power Systems provides power to a number of city-owned systems in the state, but UAMPS spokesman LaVarr Webb said each city sets its own rates based on its mix of energy sources.
Webb said most UAMPS members have diversified sources; some also have long-term energy contracts. “Thus, the actual impact on rates has been minimal to this point, and most members don’t anticipate significant rate increases in the short term. It’s hard to predict what might happen over the long term.”