Legislative leaders blister power agency for denying access to their auditors

Utah legislative leaders came down hard on the Intermountain Power Agency Tuesday after legislative auditors said the state-created entity refused to grant them access to their closed meetings.

IPA, which operates the Intermountain Power Plant outside of Delta, is owned by 23 Utah cities, and it is managed through an interlocal entity created by the Legislature almost 40 years ago. It is overseen by a board of directors who come from the 23 cities, but it also answers to its biggest customer, the Los Angeles Department of Water and Power.

In their audit presented Tuesday, legislative auditors questioned whether California had too much control over a Utah entity, which echoed the Utah legislators who ordered the audit. The auditors recommended changes to IPA’s governance structure.

But it was the auditors’ statements that they weren’t able to get into closed meetings of IPA’s board or get minutes from those meetings that brought the wrath of leaders from both houses. Only the minutes from one meeting over a five-year period were provided, auditors said.

”Why the cloak and dagger? Why are we not sharing information about a public entity that has been set up by the state?” asked House Speaker Brad Wilson, R-Kaysville. “We’ve never had anything like this before. I’m baffled about this.”

“It bothers me greatly that they would not let our auditors audit,” added Senate President Stuart Adams, R-Layton.

IPA’s general manager, Cameron Cowan, told legislators the auditors were denied because of attorney-client privilege. The closed meetings included discussions of legal strategies for ongoing litigation.

House Majority Leader Mike Shultz, R-Hooper, noted that legislative auditors were given full access to the closed meetings of the Inland Port Authority when it was deep in litigation, but are denied in this case. “I find that a little disturbing.”

House Minority Leader Angela Romero, D-Salt Lake City, said she understands auditors’ concerns, but she also noted that in her history on legislative committees she has seen many legislators, particularly those from coal country, be hostile to IPA because it is burning less Utah coal. “I’ve seen how IPA has been treated.”

IPA does not take any Utah tax money, and it never has. But it has relied on its status as a state entity to sell municipal bonds to finance construction. All the bond payments are paid from the rates it charges customers for the power, meaning that Californians cover the vast majority of those payments.

When IPA was first conceived in the 1980s, the benefits to Utah included a new power source for the 23 cities and a commitment to fuel the plant with Utah coal. Legislators later let IPA out of that commitment to buy only Utah coal, but Cowan maintains the vast majority of coal it burns still comes from Utah sources.

IPA plans to shut down the coal plant in two years when it goes to a new gas-fired power plant under construction next to the current plant. The new “IPP Renewed” plant will be fueled by a combination of natural gas and hydrogen. The hydrogen will be created from renewable sources and stored in gigantic underground salt caverns under the power plant. The caverns and hydrogen production are owned by a separate company, ACES, which is owned by Mitsubishi and petroleum giant Chevron, which is trying to gain a foothold in renewable fuels. IPA hopes to run completely on hydrogen by 2045, making it a carbon-free energy source by then, as required by California law.

The auditors also noted that the number of Utahns that IPA employs has declined from a high of 600 people to about 320 now. When IPA Renewed is built out and operational, it will employ 160 people. During construction, employment will peak around 1,100 as IPA builds out the $2 billion plant.

Deputy Auditor General Brian Dean said IPA’s benefits to the state have diminished because of that lower employment and the decision to stop burning Utah coal. “IPA governance is not typical of what we see in Utah government entities,” Dean said. “Is the state benefit being watched out for?”

Wilson essentially promised the Legislature will be changing the governance structure after seeing the audit. “We can’t do nothing.”

Auditors did acknowledge that the Utah cities that own the plant – which include Bountiful, Logan, Lehi, Murray and St. George – are still fully supportive of the transition and view it as an insurance policy. While they only use 2% of the power produced, they have the option to pull more if needed. In a world where reliable 24/7 power sources have gotten harder to find, that is a big advantage.

And they don’t have to take the power. Their arrangement with the California entities allows them to decline if they can find cheaper sources elsewhere. It’s a no-risk option.

While Cowan acknowledges that the benefits of IPP have diminished, the alternative to IPP Renewed would have been to shut down the coal plants and turn it back into a flat piece of land that produced no economic benefit. The California customers were committed to leaving coal power, and the Utah cities couldn’t buy enough power to keep it going by themselves.

In essence, the coal plant is dying because it couldn’t get customers. Even Utah’s largest electricity provider, Rocky Mountain Power, had no interest in acquiring more coal power and is making plans to close their own coal plants in Utah within 10 years.

And the new plant will be considerably smaller than the coal plant (860 megawatts vs. 1400), but that is because of the diversity of power sources that have emerged in the past couple of decades.

Adams wondered if IPA objects to someone else continuing to run the coal plants. Cowan said IPA wouldn’t object to that — or to changes in the governance structure — as long as it doesn’t interfere with any contracts and bondholder rights -- or importantly -- its agreement with EPA. The coal plants have had ongoing issues with managing coal ash, and IPA settled with EPA by agreeing to shut down the coal plant by 2025. Any attempt to keep the plant going would require a renegotiation with EPA.

To date, there has been one offer to buy the coal plant, but IPA turned it down over concerns it would interfere with its EPA agreement and was not in the best interest of the cities that own it.