A scathing audit blasts Utah Office of Energy Development as adrift at a crucial moment

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The Utah Office of Energy Development lacks defined goals and internal governance and should be doing more to implement state energy policy, according to a blistering audit released today from the Utah Legislative Auditor General.

The energy office, which has had five directors and seven mission statements in its 12 years of existence, is not providing sufficient guidance in a crucial period of transition for the electric power industry, auditors said.

“Despite great uncertainty within the industry, we found the state’s planning for the energy future by the Office of Energy Development (OED) to be limited,” auditors said in their report delivered to the Utah Legislative Audit Committee Tuesday.

Auditors recommended a top-to-bottom overhaul of the office, including updated job descriptions and “standard operating procedures,” to become more data-driven and future-focused.

In their response, Natural Resources Department Director Joel Ferry and OED Director Greg Todd essentially said the overhaul is already underway.

“We recognize there have been inconsistencies and uncertainty due to the transitory nature of OED’s directors and structure, but the current administration is committed to establishing standards of operations to formalize processes that will create long-term stability,” Ferry and Todd wrote.

Reliability drops

Legislators noted with concern a report that Utah’s ranking for reliability of electricity had dropped from 15th place to 30th in one year.

“Utah’s reliability ranking dropped 15 positions in one year according to a 2022 report by the Citizens Utility Board, which produces one of the only comparative analyses of state utilities. While Utah’s electricity has remained affordable, its reliability has decreased compared with other states due to increased outages and disruptions,” the audit stated.

“That’s a significant drop in one year,” noted Senate President Stuart Adams.

“That is terrible,” added House Majority Leader Mike Schultz.

Both men wanted to put the blame on the federal government’s aggressive push for clean energy.

“The thing that concerns me is we’re making a transition to new energy sources. Is it being forced or is it being done in a methodical way?” asked Adams.

But House Minority Leader Angela Romero, D-Salt Lake City, noted that auditors made comparisons to other states’ energy policies that showed Utah is lacking. “A lot of this is not just looking at the federal government.”

Ferre said the reliability assessment is based on the future, and that is getting hard to predict. Natural gas prices have become more volatile, and hydropower has become less reliable in the drought era.

Big players call the shots

Auditors said that carrying out a state-level energy policy has gotten harder, in large part because energy production and distribution is driven by regional and national factors. They noted that the state’s largest electricity provider, Rocky Mountain Power, is part of a six-state PacifiCorp system.

With electricity becoming more dominant as both electric vehicles and electric building heating spread, Utah has to work with PacifiCorp’s regional planning priorities, including the recent decision to shut down its Emery County coal plants years before their original end dates.

“Electricity planning in this environment is challenging, and Utah’s ‘any of the above’ policy does not garner strong sway in the planning process,” the audit said.

The auditors also acknowledge that federal policy is fundamentally changing the energy market.

“Despite the legislative desire for the market to drive energy, we found there is disagreement among state energy stakeholders on whether the state’s policies are market-driven or not,” the audit states. " … Government policies, and not just economics, appear to be the primary drivers of the energy transition. Understanding these forces, which may not be concerned with Utah’s priorities or economy, is critical as the state moves to keep energy in Utah affordable, reliable, and sustainable.”

No talk of climate change

But the auditors, like the legislators they work for, were loathe to acknowledge the underlying reason behind the federal policies and PacifiCorp’s coal plant closures: the need to reduce greenhouse gas emissions to counter global climate devastation. The word “climate” appears only once in the 40-page audit, and that is in reference to the federal Inflation Reduction Act.

The auditors called on legislators to amend the state energy policy to require data-driven modeling at a statewide level. “From our observation, OED does not utilize any form of modeling for predicting the impacts of energy sources on economic development and energy prices. However, other states have demonstrated the advantages of modeling for understanding and mitigating future risks.”

The audit also called out OED for a lack of long-term planning, including risk assessment. “While Utah Code requires OED to provide an annual report, it does not require specific content about energy risk. We believe, given the crucial energy period we are now in, that it is important for the Legislature to be adequately informed of the risks and benefits of energy resources for the state.”

Auditors criticized the most recent state energy plan, released last year before Todd took over the office, for its lack of specific goals and deadlines. “Utah’s plan does not follow best practices for strategic planning, including those identified by the National Association of State Energy Officials. Compared with other state energy plans, we found Utah’s current plan to lack essential goals and actions necessary to meet the stated vision and provide direction.”

An office overhaul

Finally, auditors recommended an update of all office policies, job descriptions, grant selection criteria and standard operating procedures “to better fulfill its mandate” and provide continuity in the face of employee turnover. “Only one current employee has been employed at the office for more than two years,” the audit said.

Since 2021, the office has been part of the Department of Natural Resources, but it still hasn’t fully assimilated, the audit said. “Recently, OED failed to identify risks of the office as part of an internal audit risk assessment process, the only office of nine DNR divisions that failed to do so.”

With regard to federal grants, “we found that OED maintains several extensive metrics required by federal grants,” auditors noted. “However, when asked about the selection mechanism for choosing federal grants, the current administration produced one based on how they thought grants aligned with the state energy policy but did not include specific criteria or assessment measures. Criteria for grant selection were not documented or handed down from a previous administration.”

Federal legislation during the Biden era has made billions in federal grants available for energy-related projects, but the audit didn’t address whether the state has pursued and received an adequate portion of those billions.

Despite all the issues, auditors were still optimistic that current OED leadership is willing to address them. “We recognize that the current administration of OED has inherited many issues highlighted in this report that have plagued the office since its inception. This administration has demonstrated a desire to address the concerns and recommendations identified in this audit.”