In 2021, a number of significant regulatory issues arose that could have had a significant impact on large energy users. The Utah Association of Energy Users (UAE) was actively involved in several key issues that included Rocky Mountain Power’s (RMP) Major Plant Addition (MPA) and Pension Deferral cases, All-Source RFP, and a stakeholder working group on RMP cost-of-service and rate design issues. UAE also remained actively involved in RMP’s Multi-State Process (MSP), Integrated Resource Planning (IRP) process, and Demand-Side Management (DSM) activities, the Energy Balancing Account (EBA) and REC Balancing Account (REC) filings, and other dockets.
On the natural gas side, UAE participated in a Dominion Energy Utah (DEU) cost-of-service task force ordered by the Utah Public Service Commission (Commission) and in DEU’s proposed carbon-offset program, IRP and other gas-related dockets and issues.
On the national environmental front, UAE monitored the reversal or change to several energy-related rules under the new Biden administration, including the Affordable Clean Energy Act (ACE), which was vacated in January 2021, methane-emission reporting, greenhouse gas emissions, regional haze, and others, as well as continued interest in carbon capture and nuclear energy. Regionally, UAE continued to participate in the California Independent System Operator (CAISO) energy imbalance market after it had been slowed down due to Covid-19.
UAE also actively participated in legislative matters that arose in the 2021 Utah General Session, supporting or helping refine the language on 12 bills that impacted energy issues.
Additional details on the major activities and accomplishments of the UAE Intervention Group and the UAE Legislative Group in 2021 are provided below.
RMP Major Plant Additions
On August 3, 2021, RMP filed an Application for Alternative Cost Recovery pursuant to the Utah statute for Major Plant Additions, seeking to increase cost recovery for investments in two wind projects, Pryor Mountain and TB Flats.
Both wind projects had been approved in prior dockets before the Commission (PSC) and investments in those projects were included in the rate base calculation during RMP’s 2020 general rate case (2020 GRC).
In its MPA application, RMP sought to increase the amount of plant revenue requirement included in rates by $6.73 million, which RMP proposed to begin collecting in 2022. A “major plant addition” is defined in Utah Code Section 54-7-13.4 as “any single capital investment project of . . . an electrical corporation that in total exceeds 1% of the …electrical corporation’s rate base, based on the . . . electrical corporation’s most recent general case determination.”
UAE believed that the MPA statute could not and should not be used by RMP to increase rates for projects already included in rate base. UAE reached out the Division of Public Utilities (DPU) and the Office of Consumer Services (OCS) to develop a joint legal strategy to respond to the filing. UAE ultimately took the lead in drafting and filing a joint Motion for Summary Judgment requesting that the Commission dismiss RMP’s MPA application.
UAE, DPU, and OCS argued in the joint filing that the MPA Statute does not permit RMP to receive relief for the two projects because the entire amount of plant-in-service for both TB Flats and Pryor Mountain had already been fully included in the average-of-period rate base calculation utilized in RMP’s most recent GRC to set current customer rates.
Also, the parties argued that even if either of these projects could be properly considered a “major plant addition” under the Statute, the incremental rate base measurement for each plant does not exceed one percent of RMP’s rate base. Thus, RMP does not qualify under either of the MPA Statute requirements and its request must be denied “as a matter of law”.
In its December 15, 2021, Order, the PSC denied RMP’s application to increase cost recovery for the Pryor Mountain and TB Flats wind projects. The PSC reasoned that in the Legislature’s development of the MPA statute, it recognized that a utility’s investment in a “single capital investment project” may be so significant that it moves the utility to file an otherwise unnecessary rate case. Where stakeholders only recently litigated the multitude of issues attendant to a GRC, a single investment might thereby prompt an unnecessary, redundant, and expensive proceeding.
However, the Commission noted that “nothing indicates the Legislature intended to create a broad license to engage in single-issue ratemaking whenever a utility makes an investment soon after a rate case.”
RMP Pension Settlement Loss Balancing Account
In its order in the 2020 GRC, the PSC directed RMP to file a docket to establish a pension settlement adjustment balancing account (PSABA). RMP filed an application to establish the PSABA on March of 2021.
RMP asserted in the GRC that it anticipated that it would have to include $11.9 million in losses associated with the application of certain accounting rules to RMP’s pension settlement accounts. RMP sought to recover those losses annually in rates.
The Commission agreed, but determined that pension settlement losses are particularly volatile and directed that a balancing account be established to track the actual pension settlement losses incurred by RMP compared with the level of pension settlement losses included in rates.
In its GRC testimony and in its Petition for Rehearing, UAE pointed out that RMP proposed to capitalize 33.35% of the pension settlement losses (along with other wages and benefits) and that it would expense only $7.9 million during the test year. This raised the question as to what the initial amount in the balancing account should be. RMP argued in the GRC that it would recover $11.9 million of pension settlement losses in rates and that the initial amount in the balancing account should also be $11.9 million.
All parties to the PSABA docket agreed that any balance in the balancing account should be held as a regulatory asset or liability and, unless the balance gets too large, used to adjust the revenue requirement amount in the next GRC.
The main points of dispute were about the initial amount to be included in the balancing account. Contrary to its statements in the GRC, RMP asserted in the PSABA docket that—just as UAE had said in the GRC—a portion of the $11.9 million in pension settlement losses had been capitalized and that the initial amount in the balancing account should be limited to the $7.9 million that was proposed to be included in rates as expense. RMP asserted that it made an error in the GRC by assuming it would capitalize a portion of the pension settlement loss.
A 2018 change in accounting rules prevented such capitalization. RMP admitted that it knew this capitalization assumption was an error during the GRC but elected not to correct that error during the GRC.
The DPU and OCS proposed that the initial amount of the balancing account be $11.9 million, as RMP proposed in the GRC. UAE proposed imposing the capitalization assumption throughout the period of the balancing account, both on the initial amount (to match the way in which RMP collects pension settlement loss in rates) and to the actual pension settlement loss RMP incurs in any given year, if any.
The Commission issued its order on November 3, 2021, asserting that because RMP failed to notify the PSC of the error during the GRC, it was not inclined to “rescue” the Company from its own misinterpretation that was identified by UAE and other agencies during the GRC. The Commission concluded that the PSABA Total Company Pension Base will be $11.9 million, benefiting Utah customers.
UAE has been active in the multi-state cost allocation process (MSP) among PacifiCorp’s six states since the utility was created and is typically the only active participant representing large Utah energy users. In 2020 the MSP stakeholders reached an interim MSP agreement that continues the cost allocation protocol that has been used for several years. That interim agreement will expire in 2023.
MSP meetings continued in 2021. The protocol relies upon dynamic, rolled-in allocations and a 75/25 demand/energy split for transmission and generation resources.
The MSP process is significantly complicated by legislation and goals in Oregon and Washington that mandate elimination of coal resources from their resource mixes. Laws passed in each state effectively require that the rate base in those states cannot include coal assets after 2029 in Oregon, and 2025 in Washington.
In 2022, PacifiCorp will address a number of proposals to allocate costs among the various states it serves while continuing to make resource planning decisions on a system-wide basis. These proposals include the development of a nodal pricing model, coal-plant assignments, and the need for resource adequacy to be developed be each state.
Integrated Resource Plan
The IRP process is designed to identify costs and risks of alternative available resources to allow selection of an optimal mix of resources to be acquired by the utility. Numerous organizations from many states participate in the IRP process, including regulatory agencies, resource developers, public interest/environmental organizations, and parties representing Wyoming coal mining interests.
UAE is one of the few representatives of large energy users active in the IRP process, and typically the only representative of large Utah energy users.
UAE’s primary goal in participating in the IRP is to ensure that PacifiCorp develops a reasonable process to select a resource plan that is the least-cost, lest-risk portfolio for consumers, including by ensuring reasonable consideration of all practicable resource options, promoting competition in generation resources, and identifying and minimizing undue biases of PacifiCorp and other IRP participants..
PacifiCorp’s 2021 IRP filing was delayed as the result of significant problems experienced with a new modeling platform (PLEXOS) that PacifiCorp acquired for this IRP cycle. PLEXOS, a third-party modeling platform utilized by many utilities, will ultimately allow PacifiCorp to do more complicated modeling as it diversifies its generation resources.
PacifiCorp ultimately filed its 2021 IRP on September 1, 2021.
UAE is a charter member of the DSM Steering Committee and the DSM Advisory Group and regularly participates in meetings and efforts to evaluate proposed DSM programs and surcharges.
New DSM programs were introduced in 2021, including Wattsmart battery storage programs for residents and industrial energy users. In its final 2021 filing with the PSC, RMP noted that in years 2021-2024 the Company projects the DSM surcharge rate is projected to remain at 3.56%.
But in 2025 PacifiCorp forecasts that the surcharge will need to increase to 3.73% because the current surcharge won’t cover the increases of the amortization and carrying charges for the accelerated coal depreciation.
This year RMP has issued demand response RFPs in all six states.
It received some promising proposals for commercial and industrial programs and the model they use shows significant potential for those programs and also that they would be cost effective.
Based on projections from recent IRP meetings, we anticipate that DSM programs may need to increase to address the loss of generation from early coal plant retirements and the development of battery storage. UAE remains the only representative of large Utah energy users that actively monitors and participates in DSM activities.
Cost of Service and Rate Design Working Group
During the GRC, several parties objected to various proposals as having insufficient factual and analytical support.
RMP and others suggested that a working group be formed to more fully discuss these proposals after the conclusion of this GRC and before the filing of the next rate case.
The Commission approved this recommendation and ordered the creation of such a working group.
UAE has represented large energy users in the meetings that have been held to identify the topics to be addressed by the working group, which will include Advanced Metering Infrastructure, advanced rate design, grid modernization, classification and allocation of costs associated with transmission and generation plant, etc. The work is ongoing.
UAE is the only industrial energy representative that plays an active role each year at the Utah Legislature on issues of relevance to large energy users. During the 2021 Session we followed and participated in 12 energy bills. UAE worked on supporting/opposing or shaping the language of several energy bills this year.
The preferred portfolio includes all resources identified in the final shortlist of the 2020 RFP, which include 1,302 MW of new solar, 1,792 MW of new wind, and 697 MW of battery storage capacity, most of which will be co-located with the solar resources. These wind resources also depend on the construction of the Gateway South transmission project, which is included in the preferred portfolio.
In addition to these resources identified in the 2020 RFP, the 2021 IRP preferred portfolio indicates that PacifiCorp will in the next five years seek to A) acquire and repower the Rock River 1 (49 MW) and Foote Creek II-IV (43 MW) wind projects; B) add 745 MW of additional new wind resources by 2026; C) add 600 MW of new solar resources co-located with battery storage resources by 2026; D) construct the Natrium nuclear project (500 MW plus storage) by 2028; and E) construct 500 kV Boardman to Hemingway transmission project by 2026.
Following its September 1 IRP filing, PacifiCorp has filed supplemental sensitivity studies. In connection with a technical conference held in January 2022, UAE submitted questions regarding nuclear plant transmission connections and transmission modeling for storage assets. UAE will participate in all IRP work in 2022.
Service Quality Working Group
In its June 23, 2020, Order in Docket No. 20-035-22, the Commission directed the DPU to establish and convene a working group to examine RMP’s reliability baseline standards.
The DPU filed comments with the PSC suggesting that the parameters be adjusted. Industrial customer groups, including UAE, requested that they be allowed to participate in the discussions and to work with RMP and the regulatory parties to develop a specific metric for large energy users when they lose power altogether or experience energy sags or bumps that can still significantly impact their business or organization’s energy costs and impact their air quality permit requirements. Developing a reporting process would help identify trends in specific areas.
UAE and other parties met several times during the year, discussing options that could provide a benchmark for reporting industrial customer outages. RMP provided a strawman report in December that parties discussed. Although exact metrics could not be designed, the report will set a baseline for future years so that service quality can be improved for industrial customers.
DEU General Rate Case Wkrong Group
As a result of the DEU general rate case in 2019, a cost-of-service work group emerged to address questions regarding alleged “subsidies” between the small and large Transportation Service (TS) classes.
Several parties proposed in the rate case to break up the TS class, but the Commission agreed with UAE’s position that there was insufficient data to support the proposals. The Commission ordered a separate proceeding to effectively study the TS rate design issues before the next general rate case.
This workshop is addressing the disputes among UAE, the DPU and OCS regarding whether, and how, the classes should be divided up and at what level of gas usage. Two key issues are:
What is the future of the TS class?
Should interruptible customers be assigned peak day costs?
The Commission will take no action on the results of the working group. The issues will be addressed in the next GRC filed by DEU in 2022 and UAE will intervene on behalf of its members.
DEU Carbon Offsets
UAE participated in discussions regarding DEU’s carbon offset filing made in July of 2021. DEU filed an application requesting approval for a subscription-based carbon offset program for customers. In the filing, DEU identified projects that had been selected in a carbon offset RFP: a landfill project in Utah, a landfill in Missouri, and a reforestation project in Minnesota.
The PSC ultimately approved the application. The carbon offset program allows customers to purchase a carbon offset to reduce methane and carbon emissions from natural gas usage. Each block costs $5.00 per month and would offset 100% of the natural gas emissions of a typical customer using 80 DThs over a 12-month subscription period.
UAE monitors and evaluates greenhouse gas (GHG) issues and represents industrial interests in regional and statewide GHG related initiatives.
At the regional level, UAE tracked developments and actions taken by the EPA on carbon issues as they evolved under the Trump administration, replacing the Clean Power Plan with the Affordable Clean Air Act, as well as rulings on methane, ozone designations, regional haze, and in other areas, and how they might impact Utah industries.
UAE intends to continue to monitor and comment on EPA and regional rules as they evolve.