2020

ACCOMPLISHMENTS

The year 2020 was a challenging one in that ratepayers were faced with unique utility and market issues that will have a significant impact on them.  The Utah Association of Energy Users was actively involved in several key issues that included a Rocky Mountain Power (RMP) general rate case (GRC), depreciation study, request for Deferred Accounting Order (DAO) and all-source Request For Proposals (RFP).  UAE has also remained actively involved in RMP’s Multi-State Protocol (MSP), Integrated Resource Planning (IRP) process, Demand-Side Management (DSM) activities, and other dockets.

        On the natural gas side, UAE participated in the Dominion Energy Utah (DEU) GRC and challenged the Commission’s order imposing a more aggressive three-year phase-in plan than recommended by the utility, UAE or regulatory staff.  As an extension of that GRC, UAE also participated in a DEU cost-of -service task force ordered by the Public Service Commission of Utah (Commission). UAE also monitored DEU’s 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 Trump administration, including the Clean Power Plan Rule 111(d), methane-emission reporting, greenhouse gas emissions, regional haze, and others, as well as the attempt to develop federal support for carbon capture, nuclear energy and coal plants.  Regionally, UAE participated and provided key comments to the Northern Tier Transmission Group (now NorthernGrid) as part of its transmission study, as well as commenting on PacifiCorp’s generator interconnection reform straw proposal.

UAE actively participated in the 2020 Utah General Session, supporting or helping refine the language in bills that impact energy issues. 

      Additional details on the major activities and accomplishments of the UAE Intervention Group and the UAE Legislative Group in 2020 are provided below. 

    Our strong, diverse membership makes UAE a recognized and effective representative of large energy users. For information about current regulatory activity that impacts your company, contact Kelly Francone at kfrancone@energystrat.com or 801-355-4365.

ELECTRICITY

RMP General Rate Case

RMP filed a GRC on May 8, 2020, with new rates effective January 1, 2021. The company sought a revenue requirement increase of $95.8 million based on a Return on Equity of 10.2%.

 

The major drivers of the GRC filing were $4.9 billion in capital investments for new infrastructure on a total-company basis that would be placed into service between January 1, 2020, and December 31, 2021.  RMP proposed to increase base rates for Schedules 6, 8 and 9 by 3.9%, 3.9% and 4.9%, respectively. 

The utility’s filing proposed to mitigate the rate increases by allocating the remaining Tax Cuts & Job Act (TCJA) funds of $62.7 million over a three-year phase in period.  RMP’s filing also included several ratemaking proposals with changes to residential and non-residential rate design that included unbundled rates, two pilot programs for large non-residential customers, and changes to Schedule 32. 

In its revenue requirement testimony, UAE recommended a revenue requirement increase of $14.89 million.  UAE’s revenue requirement recommendations included nearly a dozen adjustments that were ultimately accepted by RMP and adopted by the Commission, including its recommendation to update forecasted plant-in-service balances for TB Flat and Prior Wind projects, Advanced Meter Infrastructure Projects, transmission projects, etc.     

UAE also prevailed in preventing RMP from subtracting Deer Creek recovery royalties from the Accumulated Deferred Income Taxes (ADIT) owed to customers.  UAE also successfully prevented RMP from including in rates the balance of its pre-paid pension asset.  The Commission also adopted UAE’s recommended modification to RMP’s time-of-use periods the company allow for a full eight-hour night-time off-peak shift.  UAE also opposed RMP’s efforts to increase the Schedule 32 Delivery Facilities Charge by 38%, arguing that it imposed an unfair burden on the large energy users on this schedule. 

The Commission issued its order on December 30, 2020, approving a $31.41 million increase, effective January 1, 2021.  Overall, UAE’s recommended adjustments for the 2021 test year had an impact of $18 million in reduced revenue requirement.  The Commission approved a rate mitigation strategy to return $46.3 million in ADIT to customers in 2021, and $23.1 million in 2022.  The resulting increases to Schedules 6, 8 and 9 are 0.71%, 1.07% and 2.65%, respectively.[1]   

 

[1] The increases do not reflect the expiration of the 3.18% TCJA sur-credit that will also occur in 2021.

RMP Accounting Treatment for Retired Wind Plant

In Phase II of the GRC, RMP proposed an accounting treatment of retired wind plant to depreciate retired wind assets from the wind repowering projects over the course of the remaining lives of the repowered projects, which is approximately 30 years.  UAE strongly supported RMP’s proposal. 

The Division of Public Utilities (DPU) recommended that RMP recover retired wind plant balances over ten years, which would have resulted in increased rates over that period.  The Commission agreed with UAE that the DPU method would require customers over the next decade to bear the full costs of plant that will be used to provide service to customers for many additional years.

Demand-Side Management

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. 

DSM budgets have been reduced to about $60-$65 million annually over the last five years.  In previous years, the budgets had climbed to approximately $80-$90 million annually. The actual expenses for 2020 have been less than projected. 

 

DSM staff asserts that the reduced budget is a result of the low cost of renewable energy, which makes it difficult for incremental energy efficiency programs to compete economically. 

 

The Schedule 193 account had an excess in funds of almost $3 million at the end 2020.  RMP expects the account to have approximately $6.7 million in excess funds by the end of 2021 if no changes are made to the 3.54% surcharge and the Commission does not order a refund to customers.

RMP did not propose any change to the DSM surcharge at the end of 2020, although it has indicated the company may propose an adjustment in the 4th quarter of 2020 if excess funds are higher than expected.

The Company filed a proposal in mid-August for a Schedule 114 Wattsmart Batteries Program, which would create load management programs for both residential and non-residential customers.

Some UAE members may benefit from participating in this program if it is approved by the Commission in 2021.

UAE remains the only representative of large Utah energy users that actively monitors and participates in DSM activities.

Multi-State Protocol

UAE has been active in the multi-state cost allocation process (MSP) among PacifiCorp’s six states since the utility was created.  The 2010 MSP Protocol expired in 2016 but was effectively extended as the 2017 MSP Protocol through 2019.

MSP meetings continued throughout 2020 following the December 31, 2019, expiration date of the “2017 Protocol.”  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 requires that the rate base in those states cannot include coal assets after 2029 in Oregon, and 2025 in Washington. 

UAE participated in the agreement reached among the six-state parties. 

1)  The 2017 Protocol was extended for an interim period through 2023 while the parties continue to negotiate new MSP arrangements.

 2)  The parties agreed that PacifiCorp should continue to operate an integrated system, but each state should be assigned a “fixed slice” of PacifiCorp’s existing generation resources, using locational marginal pricing to determine charges and credits for each state when other states use resources assigned to it, using a model being developed by the California Independent System Operator. 

3)  The parties must still determine how the utility will perform system planning and planning for each state, how new resources will be divided among the states, how locational marginal pricing will work, and myriad other consequential issues.  

The outcome of the MSP negotiations will significantly impact Utah commercial and industrial customers. UAE is the only entity representing large Utah power users that participates actively in all MSP meetings and negotiations.  UAE participation is critical to determine and mitigate impacts of proposed cost allocation changes for large Utah energy users. 

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.  The 2010 MSP Protocol expired in 2016 but was effectively extended as the 2017 MSP Protocol through 2019.

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 and public interest/environmental organizations.  

 

RMP Depreciation Case

Consistent with the Commission’s requirement that RMP file a new depreciation study every five years,  RMP filed an application on September 11, 2018, with a new depreciation study that sought to increase Utah rates by approximately $128 million, effective January 1, 2021. 

 

UAE, the DPU, and Office of Consumer Services (OCS) negotiated with RMP and ultimately reached a settlement and presented proposed depreciation rates to the Commission in a stipulation that was approved by the Commission on April 20, 2020.  The agreement reduced the requested Utah-allocated $128 million increase to $61.6 million, to go into effect with the RMP GRC.     

Service Quality Working Group 

Pursuant to Commission orders in Docket Nos. 08-035-55, 13-035-01, and 15-035-72 as well as the requirements of Utah Administrative Code R746-313 (Electrical Service Reliability Reporting Requirements), RMP filed its January 1 through December 31, 2019, Service Quality Review Report on May 1, 2020.

 

On June 1, 2020, the DPU filed comments in which it recommended the Commission establish a work group to review RMP’s reliability baseline standards and make recommendations due to requests by industrial energy groups—including UAE, Utah Petroleum Association (UPA), and the Utah Mining Association (UMA)— to consider establishing a baseline for power quality issues for large energy users and the impact on air quality when back-up power must be used at their facilities.  The Commission approved the working group in its June 23, 2020, order.

The working group kicked off in August with the DPU, RMP, OCS, UAE, UPA, and UMA participating.  This work will continue into 2021.

 

NATURAL GAS 

DEU General Rate Case Working Group

As a result of the DEU general rate case in 2019, a cost-of-service work group emerged to address the controversy regarding the alleged “subsidies” between small and large customers within the Transportation Service (TS) class.

Although several parties proposed to break up the TS class in the GRC, the Commission agreed with UAE’s position that there was insufficient data to support splitting up the TS class. The Commission ordered a separate proceeding to effectively study the TS rate design issues before the next general rate case.

IRP Cont.

As RMP’s resource portfolio trends away from coal plants and adopts more renewable resources and battery storage options, Wyoming state and local interests have joined the IRP process to raise concerns about the economic impacts of the IRP process.

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 goals are to ensure reasonable consideration of all practicable resource options, promote competition in generation resources, and identify and minimize undue biases of PacifiCorp and other IRP participants.

PacifiCorp’s 2019 IRP identified a potential need for significant new generation and transmission resources, including about 1,900 MW of new gas-fired capacity, 3,000 MW of new wind re-sources, 5,700 MW of solar resources and storage, 1,300 MW of stand-alone battery storage, 2,300 MW of incremental energy efficiency, and 450 MW of new direct load control resources. 

In comments filed with the Commission, UAE recommended that the Commission decline to acknowledge the IRP because PacifiCorp did not compare potential portfolios against a “status quo” benchmark for existing operations and, therefore, failed to properly evaluate resources on a consistent and comparable basis. 

 

Other parties also expressed concerns about the lack of modeling to achieve a least-cost, least-risk portfolio, as well as the lack of exploring alternatives for the planned Gateway South transmission project. 

On May 13, 2020, the Commission declined to acknowledge the 2019 IRP and Action Plan based on several factors, including those identified by UAE: 1) PacifiCorp’s modeling of transmission and failure to evaluate non-Gateway South alternatives; 2) PacifiCorp’s modeling of the Preferred Portfolio with the yet-to-be built Gateway South as a presumed component, 3) PacifiCorp’s claimed need for transmission upgrades to meet OATT interconnection requirements is insufficient to justify its failure to provide a case without Gateway South, and 4) PacifiCorp’s failure to evaluate the alternative transmission configuration found to be reliable as a result of a special economic study, proposed in 2020 by UAE in conjunction with other consumer parties, through the NTTG regional planning process.

UAE is participating in the 2021 IRP cycle which began in June of 2020.

DEU General Rate Case Wkrong Group Cont.

This workshop addresses disputes among UAE, the DPU and OCS regarding whether, and how, the classes should be divided.  Two key issues are:

  1. What is the future of the TS class?

  2. 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

LEGISLATIVE

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 2020 Session we followed and participated in 15 energy bills. UAE worked on supporting/opposing or shaping the language of several energy bills this year. 

ENVIRONMENTAL

Environmental Issues

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 will continue to monitor and comment on EPA and regional rules as they evolve.