Why did Rocky Mountain Power request two rate hikes?
Rocky Mountain Power serves about 144,000 customers in the state – it’s the largest public utility in Wyoming. And earlier this year it requested two rate hikes to its customers – one of which has been partially approved by the Wyoming Public Service Commission, the state entity in charge of regulating utilities.
This interview has been edited for brevity and clarity.
Dustin Bleizeffer: So there's two main rate filings by Rocky Mountain Power this year. And the first is referred to as an energy cost adjustment. And what that is, is the utility predicts how much it'll have to spend each year on fuel, things like coal and natural gas. These markets are always in flux – so sometimes they end up spending less, sometimes they end up spending more. If they end up spending less, then that results in a rebate to ratepayers. But in 2022, they ended up spending a lot more on coal, and especially natural gas because of some extreme weather events. So what that resulted in is Rocky Mountain Power asking permission to true up those costs. That ends up being about $50 million more for ratepayers. So the commission tentatively agreed to that. Those were rolled into ratepayers' bills beginning in July. However, the Public Service Commission still must finalize that.
But the really big one is what's referred to as a general rate case. Every two or three years, a utility goes back to the Wyoming Public Service Commission, and says, “Okay, the cost of providing electrical services in Wyoming has changed. And so we need to change our base rate to match that.” The last time Rocky Mountain Power did that was in 2020. A lot has changed in the utility market since then. So this past spring, Rocky Mountain Power filed a general rate case, saying that it needs to tap its Wyoming ratepayers for an increase of $140 million. That was a 21.6 percent increase that they're proposing, on top of their energy cost adjustment. All that comes to more than a 29 percent increase that ratepayers were looking at. And that's quite a sticker shock.
Caitlin Tan: It seemed like it received so much public outcry and people were genuinely really concerned. There were several town hall meetings about the issue over the summer. I just want to look back at what some people had to say. Tony Bate spoke at the Rock Springs meeting this summer.
“My electric bill will raise by $86 a month. I have hardly any money. I don't know where I’m going to get the money,” Bate said in tears.
CT: So really an emotional response and high stakes for a lot of people. We also heard from Sam Shumway this fall with Wyoming's AARP. He was speaking to the Wyoming Public Service Commission trying to kind of summarize all of this.
“Folks who are dealing with hyperinflation, folks are dealing with how they're going to pay for increases in gas prices, the cost of healthcare, the cost of medicine, the cost of groceries, the cost of property taxes are now being faced with a 30 percent increase in their power bills,” Shumway said.
CT: So there's that $50 million rate hike that still is going to be finalized here in the next few weeks. But we do actually have somewhat of a decision on that bigger rate hike request. What do people need to know?
DB: So the Public Service Commission deliberated this week. It was a very complicated case with hundreds of filings. So they trimmed Rocky Mountain Power’s request. A large part of that had to do with some of the modeling that the company used to come up with what is fair and reasonable to pass on to ratepayers. The commissioners in this case said that they were not convinced of the utility's use of that model, that all of those numbers were fair and reasonable. So that resulted in a pretty major reduction. There were a number of these other kinds of reductions along the way that the Public Service Commission plugs into a matrix to calculate a final number. They didn't have a final number at the end of the day – they're still calculating that. But some folks that I talked to who are in the know, follow this math and were penciling this out, think that instead of $140 million, ratepayers are probably going to end up paying something more on the order of $80 million. That's an unofficial estimate.
CT: I'm assuming we're going to know the details of all of this in the next few weeks?
DB: Right. Now again, just to summarize – the $50 million energy cost adjustment that's still being decided. And whatever they decide on if they adjust that up or down, that'll be a temporary increase in ratepayers bills that will be implemented for 12 months beginning July 2023 to July 2024. Now the bigger one, the general rate case, Rocky Mountain Power asked for $140 million, that would be a permanent increase. And that is going to be a lot less, maybe on the order of $80 million. We just don't know exactly.
CT: Whatever that final number is, they'll see it reflected starting in January. Now, what was interesting to me during the deliberations this week was Wyoming Public Service Commission Chair Mary Throne spoke about how they're bound to certain rules.
“Some elected officials suggested that we just deny the application or negotiate a better deal for the ratepayers,” Throne said. “In simple terms, when the evidence supports a rate increase, the commission lacks the authority to deny the application for such rate increase.”
CT: So could that mean more permanent rate hikes if a company like Rocky Mountain Power could justify it?
DB: Yeah, there is an expectation that more rate hike requests are coming. And that has to do with changes in the utility market. Our grid and the way we generate electricity is changing. A lot of the traditional coal fired power plants are scheduled to come offline. Utilities are trying to prepare by adding renewable sources of energy. Along with that comes a lot of expensive, necessary additions and transmission lines to take that new power.
So I think what the commission chair was referring to is this relationship between government regulation and a monopolistic utility. What that means is if you're a homeowner in Casper, for example, you don't get to choose which utility provides you electrical service. In Casper, that's mostly Rocky Mountain Power. So in exchange for having that captive consumer market, the state is allowed to scrutinize how much that utility charges its ratepayers. They have to defend their numbers, but also in return, that utility is legally allowed to earn a return on its investments and the services that it provides. And it's in the state's interest that that utility is financially healthy.
CT: Is there anything else you want to add – that an everyday Wyomingite should know at this point?
DB: When it comes to the Public Service Commission, and these large utilities, they tend to speak this really technical language. They don't make it easy for the public to follow. And that also leads to a lot of distrust in the utility and even distrust in the Public Service Commission. Like, “What's really going on here?” Sam Shumway, from AARP, addressed this and said, “We can follow the math. And one thing we do understand is that Rocky Mountain Power is also asking for an increase on its rate of return for its investors and its shareholders. They're looking out for their shareholders, they need to be looking out for their customers.” And that really falls on the Public Service Commission to make sure that happens.