Fresh off a regulatory defeat, and amid ongoing legal battles and skyrocketing wildfire liability costs, Rocky Mountain Power is once again asking to charge its Wyoming customers more for electricity.
Rocky Mountain Power, Wyoming’s largest electricity provider, filed a new rate request with state regulators on Friday asking for an increase of $123.5 million, or an overall 14.7% hike, citing renewable energy investments and skyrocketing insurance costs for wildfire liability.
If the Wyoming Public Service Commission approves the rate hike request, it would increase monthly bills by $17.17 for the average Rocky Mountain Power customer in the state using 700 kilowatt hours per month, according to the company.
The request includes $52.7 million to cover Wyoming’s share of the Gateway South and Gateway West interstate transmission lines connecting new wind energy in the state to markets in the southwest, as well as Wyoming’s share of the company’s Rock Creek and Rock Creek II wind energy projects, which span Albany and Carbon counties north of Laramie.
Liability insurance for utilities is also rising due to the increasing potential for power lines and other electrical equipment to spark wildfires. Hotter and drier conditions due to human-caused climate change have increased the frequency and intensity of wildfires across the West — an existential financial threat to utilities and their ratepayers alike, according to industry analysts.
Rocky Mountain Power’s wildfire liability insurance in Wyoming has risen 1,888% over the past five years, according to a press statement. The increases “are far beyond anything the company has experienced before,” it said.
The rate increase, which the Wyoming Public Service Commission is expected to rule on early next year, is in addition to an $86.4 million, one-time fuel cost adjustment that was added to ratepayer bills in July — a 9.3% increase that is “subject to refund” because regulators may retroactively adjust it up or down later this year or in January.
Rocky Mountain Power’s 144,000 Wyoming customers also saw a 5.5% general rate increase in January. The company sued state regulators in May regarding that rate adjustment claiming they wrongly reduced the company’s higher request by disregarding federal requirements resulting in $23 million in losses. The case remains before U.S. District Court Judge Kelly H. Rankin.
“We recognize the impact that the rising costs of providing electric service has on customers,” Rocky Mountain Power president Dick Garlish said in a prepared statement. “We work hard to control the costs within our control, and the company’s prudent actions historically are demonstrated by the fact that we have been consistently among the lowest-cost electric utilities in the U.S.”
“Intervenors are currently reviewing the merits of this request,” Wyoming Office of Consumer Advocate Administrator Anthony Ornelas told WyoFile. “Responsive testimony will be filed in September, rebuttal testimony filed by the company in October, and a public hearing will be held in December.”
Rocky Mountain Power is in the process of scheduling a series of open-house meetings with customers across the state to discuss the rate increases and what’s driving them, Garlish told WyoFile.
General v. temporary rate adjustments
It’s important to distinguish between continuing “general rates” and myriad other one-time charges that regulators — including in Wyoming — consider “reasonable and prudent” to tack onto customers’ bills.
General rates, or “base” rates, are what utilities are allowed to charge customers for continuing infrastructure costs for delivering electricity. These rates are set based on the utility’s expenses to operate system-wide infrastructure — power plants, power lines and all that comes with them. Utilities that operate sprawling physical systems that cross state borders and serve customers in multiple states are required to apportion those system-wide costs state-by-state, depending on how much customers in each state benefit from the system.
For Rocky Mountain Power and its parent company PacifiCorp, which serves six western states, the company typically applies about 14% of systemwide costs to Wyoming, according to the company. That’s how RMP came up with its current request for a $123.5 million increase in Wyoming, according to the company.
Other rate adjustments are for things that are considered beyond a utility’s control. For example, Rocky Mountain Power filed a request in April seeking permission to cancel a ratepayer credit derived from the then-President Donald Trump-era Tax Cuts and Jobs Act because it is set to expire, resulting in a 4.2% increase to base rates, or about $29.9 million. The tax credit ultimately saved Wyoming ratepayers $85 million, according to Garlish.
Utilities are also allowed to true-up the difference between what they’ve budgeted for fuel purchases and what they actually end up paying for things like coal, natural gas and power market purchases, which can swing wildly up or down due to drivers beyond a utility’s control. That annual adjustment may result in a rebate to customers, or a temporary increase.
Rocky Mountain Power says Wyoming’s portion of fuel cost overruns in 2023 was $86.4 million, which was temporarily added to customer bills in July.
Wildfire liability
Increasingly hot and dry conditions have intensified wildfires across the West, a growing liability for large utilities like PacifiCorp that operate thousands of miles of power lines that can spark a fire.
Hawaiian Electric faces billions of dollars in settlement payments for its role in the August 2023 wildfires that devastated Maui. Similarly, PacifiCorp could end up paying billions of dollars in various settlements for its liability in 2020 wildfires in Oregon. Those settlements, as well as skyrocketing insurance costs for utilities, could potentially be passed on to ratepayers, a situation that could bankrupt some utilities and throw economies into disarray.
“I think it’s fair to say, and not an overstatement, that wildfires and the impacts of wildfires, have become almost an existential threat to the way electric utilities operate in the Western United States.”
Thor Nelson, Holland and Hart attorney
“Utilities also are increasingly unable to insure against the risk of wildfires because of limited availability and high cost of coverage,” according to an analysis by Stanford University industry experts.
Warren Buffet said his Berkshire Hathaway conglomerate — which owns PacifiCorp and Rocky Mountain Power — may sell off some of its electric utilities unless states place limits on such liabilities, according to E&E News.
“As an industry, we’re in this really tough position right now where, because of that risk, we’re being forced into this position of being insurance companies of last resort,” Garlish told WyoFile, because utilities — not insurance companies — end up paying for damages and lost homes.
“Electricity is still an essential service, right? Affordable, reliable energy has been the backbone of economic activity and a quality of life for all of us for a long time,” Garlish said. “But if utilities are forced to be their last resort, we won’t be able to have access to capital or be able to borrow or be able to make the investments to provide services, because we won’t be financially healthy.”
Rocky Mountain Power has joined several other regulated utilities in Wyoming, as well as rural electric co-ops, in drafting legislation in coordination with the Minerals, Business and Economic Development Committee to create “wildfire mitigation accounts.” The utility accounts would be funded by ratepayers and managed by the state to potentially cap payouts related to utility-caused wildfire damages.
The committee discussed the draft Wyoming energy independence-fire funds measure in Casper last week, but directed a group of Wyoming utility representatives to coordinate with state regulators on a new draft to consider in October.
Holland and Hart attorney Thor Nelson, who represents the Wyoming Industrial Energy Consumers — a group of Rocky Mountain Power’s largest electrical customers in the state — told the committee the situation is only getting worse, and there are few good options.
“I think it’s fair to say, and not an overstatement, that wildfires and the impacts of wildfires, have become almost an existential threat to the way electric utilities operate in the Western United States,” Nelson said.
However, he added, the group has major concerns about remedies that might tap customers for liabilities that are beyond their control.
“From [Wyoming Industrial Energy Consumers’s] perspective, this violates a fundamental principle in electric utility ratemaking that has operated for as long as I’ve been doing this business, which is that if the utility is negligent or engages in these tortious actions, they and their shareholders are responsible for the implications of that. Not customers.”
Committee member Sen. Chris Rothfuss (D-Laramie) said he supports some measure to address the issue, but has serious concerns.
“Letting the utility off the hook but not the taxpayers off the hook isn’t fair,” he said.
The wildfire liability threat is particularly worrisome for co-ops, so it’s in Wyoming’s best interest to come up with some sort of “reasonable” approach, Wyoming Rural Electric Association Director Shawn Taylor told the committee.
“We say this often in the co-op world: ‘We’re all one wildfire away from going bankrupt. And if we go bankrupt, what happens to those members that we serve?’ I don’t know,” Taylor said.
CORRECTION: This story was updated to include correct timelines for regulatory review of rate hearings and potential regulatory decisions. —Ed
