Why are Utahns’ electrical bills so high? Market adjustment sends costs soaring

Power transmission lines near the Lake Side natural gas power plant in Vineyard are pictured on Sunday, Feb. 4, 2024. Photo: Spenser Heaps for Utah News Dispatch

By Alixel Cabrera, Utah News Dispatch

Those summer electricity bills hitting Utahns are not only soaring because of the heat. There has been an increase in Rocky Mountain Power’s Energy Balancing Account rate, shooting electric prices up, even before a proposed rate increase from the utility is reviewed.

As residents await a decision on Rocky Mountain Power’s proposed 30.5% rate increase for their homes, the utility’s Energy Balancing Account rates — a price adjustment that either credits or debits users for differences between power prices and the other market costs that are somewhat outside the control of the utility — went exorbitantly up.

To recover about $455 million in deferred costs over 24 months, the Public Service Commission approved an overall 11.6% increase in the Energy Balancing Account rates, and 9.6% for residences, said David Eskelsen, a Rocky Mountain Power spokesperson.

“It covers the cost the company has spent over the preceding year to deliver power to customers,” Eskelsen said. “These costs are specifically for fuel, for power plants, that’s primarily coal and natural gas, and also for the cost of wholesale purchased power.”

The Energy Balancing Account rate went into effect on July 1, with an interim rate. Now, the Division of Public Utilities is set to start an audit, studying Rocky Mountain Power’s books to determine whether its actions have been prudent.

“These are expenditures that the company has already made and we can demonstrate that these are the actual expenditures, and that they were higher than what is currently recovered in rates,” Eskelsen said.

Next year, the rate adjustment will include 2024’s costs in addition to any offsets found by the audit.

The rate is high, but it is routine, said Michele Beck, director of the Utah Office of Consumer Services. There’s usually an annual adjustment. This year’s increase, though, has been substantial. For reference, according to Eskelsen, in 2023, the Energy Balancing Account had an overall increase of 4.6% and 3.8% for residential.

In theory, the adjustment could mean money credited to users’ accounts. But, that hasn’t been the case in a while.

The Office of Consumer Services has hired experts to analyze the rate, and it’s scheduled to give a first testimony to the Public Service Commission on Oct. 17, Beck said.

“We’re looking at everything. There are a lot of legitimate cost drivers, but I’ve never been in a case where we agree entirely with the (proposed) case,” she said.

Unaffordable Rates

Many Utahns flooded the Public Service Commission with comments complaining about the rates. Some users said they expected a heftier bill because of the heat. However, they saw their bills double, compared with last year.

“My bill this time last year was only about $80 which is now projected to be $300 with fewer people living in the home and therefore using less power. This is unacceptable, my electric bill is no longer affordable the way it once was,” a user said in a public comment.

Some called their electric bill “unaffordable,” describing how the unexpected costs have taken food from their tables.

“Price adjustments are never welcome, but these do represent the actual cost of providing the service,” Eskelsen said about those comments.

He directed customers who experience difficulties paying their bills to speak with Rocky Mountain Power customer service representatives, who are knowledgeable in state and federal assistance programs.

“We recognize the difficulty and we’re doing everything we can to keep our rates fair and reasonable. I would note that the rates that customers in Utah pay for electricity are still among the lowest in the nation,” Eskelsen added, arguing that the company believes it will keep that ranking, as inflationary pressures are also affecting other utility companies.

Fewer Tools

Before SB115, a 2016 bill, the Energy Balancing Account included a sharing band, with customers covering 70% of the adjustment and shareholders absorbing 30%. However, the legislation allowed electrical corporations to recover 100% of their “prudently incurred costs in an energy balancing account.”

The 70-30 sharing band was an incentive for Rocky Mountain Power and its parent company, Pacificorp, to manage costs, since the business risk was shared with the customers, the Division of Public Utilities said in a 2018 memo.

“And so here we are,” said Beck, of the Office of Consumer Services. “And now it is truly a period of high increases in electric costs that’s happening everywhere in the country. It’s not like we’re facing something everyone else isn’t. It’s just that we don’t have all the tools that we used to have to manage it.”

Though the company is working within the laws that were passed, Beck said, “I think it might be time for us to take another look at that.”

As of now, Beck explained, customers are paying for 2023 market costs through the Energy Balancing Account. But, next year, if Rocky Mountain Power is successful in its case for a double-digit rate increase, that base rate hike — based on 2025 forecasts — will be in addition to 2024’s market costs through the Energy Balancing Account.

“It feels like we’re going to be paying kind of the same cost for different years at the same time, which is really hard right now, when costs are going up so much,” Beck said.

The way the utility has designed this process is incorrect, Beck said, because the increases keep growing each year.

“To have this big increase now on the true up at the very same time that they filed requesting 30% increase of overall rates, that is outrageous,” Beck said.

However, Eskelsen said, the future of the Energy Balancing Account rate will depend on whether the Rocky Mountain Power proposed base rate increase is closer to reality.

According to Eskelsen, the last time the utility did a general rate case in Utah was in 2020 and “conditions have changed quite a bit.” With the reset of the rates, the gap between the base rates and power costs may close a little, he said.