Utah Lawmakers punish Intermountain Power, allege the utility’s interests no longer align with the state

Legislature passes bill that would strip IPA of its exemptions to transparency laws that apply to most interlocal entities.

Steve Griffin | The Salt Lake Tribune The Intermountain Power Plant near Delta, Utah Friday April 12, 2013. The coal-fired plant, which will convert to natural gas and hydrogen in 2025, has fallen out of favor with rural lawmakers who are seeking to strip Intermountain Power Authority of exemptions it has long enjoyed to Utah's transparency laws.

Millard County’s long-simmering beef with its largest employer and taxpayer, Intermountain Power Agency, spilled out into the open during the Utah Legislature’s special session, where lawmakers fielded and passed a “surprise bill” that would strip IPA of the exemptions it has enjoyed to state transparency laws.

With only two days advance notice, Sen. Derrin Owens, R-Fountain Green, unveiled SB2002, what he characterized as an urgent step needed to curb a California-controlled entity whose interests have diverged sharply from those of Utah.

“Rural Utah, but especially Millard County, has had a long-standing challenge with Intermountain Power Agency. [County] commissioners feel that the power plant, which is controlled and owned and by the Los Angeles Department of Water and Power, has evolved into its own state or country,” Owens told the Business and Labor Interim Committee on Tuesday. He alleged that IPA is “on the cusp of two critical decisions that will negatively impact Utah, especially rural Utah, for several decades,” but didn’t identifying what those decisions were.

It’s safe to assume he was referring to decisions involving the plant’s planned conversion from coal to natural gas, but Owens specifically denied his bill was intended to block the conversion, which would represent a multibillion-dollar investment in Utah.

IPA is not owned by the Los Angeles Department of Water and Power, as Owens claimed, but rather it is a political subdivision of the state of Utah. The agency is governed by 23 Utah municipalities that receive a tiny portion of its power, although 98% is dispatched to Southern California.

Owens said the reasons previous Legislatures gave IPA broad latitude are no longer valid.

“What was intended to create Utah jobs and energy has evolved into a large public entity without oversight,” he said.

Owens’ bill would rollback some of the “special treatment” IPA has received from the Legislature since 2002, which amounts to 71 amendments to state law governing interlocal entities like IPA.

For example, IPA is exempt from public meeting and procurement laws, Owens said. His bill would open up IPA records to review by the Legislative auditor, bar it from setting up “segment” entities that enjoy the same protections as IPA and restrict its authority to secure private property through eminent domain.

“IPA is going in a new direction,” said House sponsor, Rep. Carl Albrecht, R-Richfield, shortly before the House passed the bill Wednesday on a 44-27 vote. “It’s a logical time to open the books and see what’s going on.”

IPA officials and other stakeholders were dismayed that they were informed of the legislation only two days before the Special Session. Attorney Eric Bawden suggested these provisions could derail IPA’s conversion, resulting in the loss of hundreds of jobs.

“The impact of this bill would have to be figured out,” said IPA spokesman John Ward in an interview. “We remain opposed both on the policy and the process. It is fundamentally not fair to pass a bill that affects the basic structure of an entity without even consulting that entity.”

To comply with California’s carbon emission standards, IPA will convert the plant to natural gas by 2025 and will increasingly burn emission-free hydrogen, produced with energy from solar farms under development nearby.

IPA is about to issue $2 billion in bonds to finance the conversion, and Owens wants the law changed first.

IPA’s transition needs to be taken with accountability, transparency and consideration of the needs and interests of Utah, putting Utah first,” he said.

While the plant has employed at least 400 people, not to mention hundreds of coal miners and truckers in Sevier and Emery counties, IPA’s relationship with Millard County officials has been rocky in recent years. Exacerbating tensions is IPA’s occasional use of Colorado coal and bids to reduce its local tax burden.

The county spends $500,000 a year litigating against IPA, according to Owens. Most of that legal wrangling has to do with IPA property tax assessments, which are the subject of two lawsuits pending in 3rd District Court, where Judge Todd Shaughnessy has issued a broad protective order sealing the entire court record.

According to IPA’s financial disclosures, IPA contends the plant’s value is far lower than what the Utah State Tax Commission has assessed, while the county claims it should be much higher. At stake are millions in property tax revenues that support Millard County governmental services and schools.

But the tax dispute was never mentioned during Tuesday’s hearing, where the discussion was largely framed as a southern California county of 12 million imposing its will on a rural Utah county of 12,000.

Despite the bill’s complexity, IPA officials and other stakeholders were given just three minutes each to address the committee, which was racing through its agenda to get to business associated with COVID-19 vaccines.

Bawden told lawmakers the bill would change critical rules just as IPA is securing huge loads of debt needed to finance the plant’s conversion.

“There are contracts that they’re in the middle of. And if you’re telling IPA that they have to be subject to the procurement code, which is a significant risk of this bill, they then have to go back to square one,” Bawden said. “IPA is on a critical path to be able to make this project work, and this will derail, and potentially just imperil, the entire project.”

The committee cut off Bawden before he could develop his argument, but that didn’t stop chairman Sen. Curtis Bramble, R-Provo, from ridiculing it.

“So you’re saying that IPA, because they have certain policies, it’s inappropriate for us to even consider changing the law,” Bramble interjected in a blatant distortion of what the lawyer said. “We appreciate your testimony. Next.”

Magnum Development, the company developing underground fuel storage caverns in the salt formations near the plant, fears the bill could jeopardize its own plans since they’re being developed in tandem with IPA’s proposed use of hydrogen, according to Magnum chief executive Craig Broussard.

“We’ve spent tens of millions of dollars in anticipation of moving that initiative forward,” Broussard said. “We will be affected as these new rules are contemplated.”

He and several others asked the committee to hold the bill until it can be fully vetted in the general session early next year.

The request was ignored, and a few hours later, the Senate passed the bill along largely party lines.