This bill shifts costs to Utahns for wildfire insurance claims and keeping coal plants running

Opponents warn that SB224 would raise costs for Rocky Mountain Power ratepayers.

(Rick Egan | The Salt Lake Tribune) The Huntington coal-fired power plant in Emery County is shown in 2022. The Utah Legislature is considering a bill to keep it and the nearby Hunter plant running by shifting more costs and risk to Utah customers of Rocky Mountain Power.

A bill moving through the Utah Legislature would give Rocky Mountain Power a powerful incentive to keep its coal plants in the state running: Utah customers would assume the costs and risks.

SB224, from Sen. Scott Sandall, R-Tremonton, would direct the Utah Public Service Commission to use a specific new criteria when evaluating costs of “proven dispatchable generation assets” such as the two Emery County coal plants.

It gives Rocky Mountain greater latitude to pass on costs of maintaining and fueling the plants, even if keeping them running is more expensive than other sources. It even allows the utility to put legal costs on Utah ratepayers if it fights in court to keep the plants open.

In recent testimony before a Senate committee, Sandall said it was a necessary incentive to keep the power company in the coal game.

The measure “makes it clear when utilities take actions necessary to acquire, operate, construct and maintain dispatchable resources that their reasonable costs are recoverable,” Sandall said. “This is an important investment and incentive necessary to draw it to drive implementation of the state’s policy.”

Surcharge for wildfire claims

The bill also allows Rocky Mountain to create a “Utah fire fund” to address the rising number of wildfire claims as climate change swells the number and intensity of Western blazes.

Last year, Rocky Mountain and its parent company, PacifiCorp, saw its insurance shoot go up twelvefold from $10 million to $125 million, and utilities across the West are finding it harder to even buy liability coverage. Fire victims in Oregon and California have won multibillion-dollar lawsuits that hold the utilities responsible for not maintaining or shutting off power lines in fire-prone areas.

The fund is a self-insurance plan for the company funded by its Utah customers. Money for it would come from a surcharge on Utah customers. The bill’s language would give the company 10 years to raise an amount equal to half the company’s annual revenue from Utah. That would be approximately $1 billion. An amendment would cap the monthly charge for the average household customer at $3.70 a month. The company could use the fund only to pay Utah fire claims, not those from other states.

“That fund then could be kind of the overarching insurance policy,” Sandall explained, “after other insurances are exhausted, to pay out claims in a catastrophic event.”

Sandall said his bill, called “Energy Independence Amendments,” is needed to ensure Utah has adequate “dispatchable” power when Rocky Mountain closes the plants. Legislators are motivated by concerns that closing coal-fired power plants has left the Western grid more vulnerable.

Last year, Rocky Mountain announced in its “Integrated Resource Plan” that it intends to shutter the coal plants and replace them with smaller nuclear plants in the early 2030s. That plan also includes 20 gigawatts of renewable energy from solar and wind and more than 7 gigawatts of energy storage, which is intended to provide the on-demand “dispatchable” power legislators fear will be lost.

By comparison, the maximum capacity of the two coal plants is less than 2½ gigawatts.

Changing the rules

Advocates for both residential and business customers of Rocky Mountain say the bill is a departure from the “least cost/least risk” protocol that has kept Utah’s power rates among the lowest in the nation.

Under current law, Rocky Mountain must prove it has found the lowest priced, lowest risk power source. Under this revision, ratepayers must prove coal plants aren’t the least cost/least risk option.

“We are concerned that this bill … will have the impact of raising rates, and the burden of proof shifts from utility to ratepayers,” said Justin Farr, lobbyist for the Utah Association of Energy Users. “And that is a big concern. It upends decades of the way regulation in ratemaking is done.”

“This legislation does change the standards of regulation, and in my opinion, moves away from least cost/least risk,” added Michele Beck, executive director of the Utah Office of Consumer Services, which advocates for household and small business customers. “It removes risk from Rocky Mountain Power shareholders. And it removes the burden of proof from Rocky Mountain Power in a wide variety of regulatory filings.”

Lower risk for its shareholders and a state-mandated fund to pay wildfire claims would appear to be a double win for Rocky Mountain and PacifiCorp, which has seen its bottom line hammered by accruals for wildfire lawsuits in Oregon.

Still, Rocky Mountain Power spokesperson Jonathan Whitesides declined to say whether Rocky Mountain supports SB224. Asked if the company was involved in negotiating the bill, he gave this response:

“One of the Utah Legislature’s top priorities this session is setting energy policy and priorities for the state. Consistent with our long-standing practice to provide information to lawmakers who are considering energy policy legislation that could impact the utility and our customers, we provided comments and answered questions on a number of proposed energy policy bills this session, including SB224.”

Public or private money?

State Treasurer Marlo Oaks also raised concerns over the fire fund, which would be held as an asset of PacifiCorp but required to be managed in accordance with the Utah Money Management Act like state accounts the treasurer’s office manages.

“My office of legal counsel believes these may be private monies,” Oaks said. “But if they are public monies, we just need to ensure that the state doesn’t take on unnecessary liability, as this could potentially impact the state’s credit rating.”

Sandall pledged to work with Oaks to address that concern.

Clean energy advocates echoed others that favoring coal would make power more expensive and put more risk on Utahns.

“This bill changes the rules of the game and eliminates some of the tools regulators and advocates have to keep rates just and reasonable,” said Sophie Hayes, senior attorney for Western Resource Advocates, which has participated in Rocky Mountain rate cases at the PSC for decades. “Additionally, this bill undermines years of cost allocation negotiations between the regular regulatory community and PacifiCorp.”

“We agree with the intent of this bill, that we all want an affordable, reliable electricity system with enough dispatchable resources,” said Sarah Wright, CEO of Utah Clean Energy. “This bill goes in the wrong direction, taking away consumer protections and Public Service Commission oversight that ensures we meet our energy needs. We can protect ratepayers and achieve the intent of the Legislature’s goals if we take the time to refine SB224 in the coming interim session. There is no reason to rush this bill through.”

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