Rocky Mountain Power, Wyoming’s largest electricity provider, has agreed to reduce a temporary rate increase for its 144,000 customers, Uinta County Herald reports.
The adjustment comes after negotiations with the Wyoming Office of Consumer Advocate and the Wyoming Industrial Energy Consumers (WIEC), a powerful coalition that accounts for about 70% of the company’s electricity consumption in the state.
The Wyoming Public Service Commission (PSC) approved a settlement agreement on Monday that finalizes the temporary rate hike at $80.6 million — roughly 7% lower than the utility’s initial request of $86.4 million. Rocky Mountain Power later acknowledged that its original figure contained errors, marking the latest in a series of miscalculations that initially favored the utility.
The rate increase is tied to a mechanism known as the Energy Cost Adjustment Mechanism (ECAM), which allows utilities to recover costs when fuel and power prices rise unexpectedly. As part of the settlement, Rocky Mountain Power also agreed to “compromises” on certain expenses linked to unplanned outages at its power generation facilities.
While the reduction offers some relief to customers, it follows a string of price increases that have raised energy bills across the state.
Rocky Mountain Power customers have been paying the increased rates since July 2023 as part of the ECAM “true-up” process. This temporary rate adjustment is set to expire at the end of June 2024. For the average residential customer, this change adds approximately $11.95 to their monthly electricity bill, according to utility spokesperson David Eskelsen.
The settlement agreement reduces, but does not eliminate, the cost burden on customers. The ECAM adjustment allows the utility to account for the difference between what it predicted fuel and power costs would be for the prior year and what the actual costs turned out to be. As energy prices fluctuated in 2023, the company sought to pass on those costs to consumers.
Rocky Mountain Power attributes the fuel-cost increase to several factors, including surging coal and natural gas prices. Global events such as the war in Ukraine have disrupted coal exports, driving up costs for US utilities. As European countries sought alternative sources of coal, US suppliers redirected their coal exports overseas, leaving domestic utilities with limited supply and higher costs.
To manage these supply issues, Rocky Mountain Power had to purchase more coal at premium prices and rely more heavily on natural gas-fueled power generation and short-term power purchases on the open market, which are often more expensive.
Another factor in the company’s higher costs was the decision to convert two of the four coal-fired units at the Jim Bridger Power Plant near Rock Springs, Wyoming, to run on natural gas. While natural gas is generally cheaper than coal and requires less pollution control equipment, the conversion process itself comes with short-term costs.
“The company will no longer be dealing with certain coal costs for those units, which include not only the cost of the fuel itself, but also costs of certain emission controls, which are less with natural gas fuel,” said utility spokesman David Eskelsen.
Despite these efforts to stabilize costs, the volatility of fuel markets and fluctuating energy demand continues to challenge utilities like Rocky Mountain Power. According to the US Energy Information Administration (EIA), coal and natural gas stockpiles in the US are currently at multi-year highs, which could help ease energy costs in the future. However, utility officials caution that market unpredictability remains a risk.
The recently approved settlement is not the only rate hike affecting Wyoming customers. In August 2023, Rocky Mountain Power proposed a permanent 14.7% rate increase. This proposal, which would significantly impact customer bills, is currently under review by the Wyoming Public Service Commission and faces pushback from consumer advocates and the WIEC. A final decision is expected in March 2024.
The proposal follows a contentious rate increase in 2022, when Rocky Mountain Power sought a 29.2% hike. State regulators ultimately scaled it back to 5.5%, criticizing the utility for inaccurate calculations and for failing to communicate adequately with customers.
These repeated rate hikes have prompted growing scrutiny from consumer advocacy groups and industry watchdogs.
“In some cases, [coal companies] are calling force majeure on current contracts, forcing negotiations and higher prices — so there are real struggles in the coal market,” said Wyoming Office of Consumer Advocate Administrator Anthony Ornelas.
In Utah, lawmakers have questioned whether Rocky Mountain Power’s structure within parent company PacifiCorp serves the best interests of its customers. PacifiCorp serves multiple Western states, including Wyoming, Utah, and Idaho, but its energy strategy has been at odds with West Coast states like California, which prioritize renewable energy over coal. Lawmakers have raised concerns about how this policy clash affects customers in coal-dependent regions like Wyoming.
For now, the $80.6 million increase will remain in place through June 2024. The upcoming March 2024 decision on Rocky Mountain Power’s proposal for a 14.7% permanent rate hike could bring further changes to Wyoming customers’ bills.
With natural gas and coal stockpiles currently high, there is some hope that the market conditions that drove the latest increases could stabilize, potentially easing pressure on future utility rates.
However, long-term challenges remain, especially as global energy markets and supply chains continue to face disruptions. Rocky Mountain Power’s ongoing transition from coal-fired to natural gas and renewable energy sources is another wildcard that could impact future costs.
While Rocky Mountain Power claims its rate hikes are necessary to cover rising fuel costs, consumer advocates argue that customers should not bear the brunt of utility errors or poor planning. The Wyoming Public Service Commission’s recent decision to reduce the requested rate hike by 7% reflects efforts to balance the utility’s need for cost recovery with customer protection.
Key Takeaways:
- Settlement reached: The Wyoming PSC approved an $80.6M rate increase for Rocky Mountain Power customers, down from an initial $86.4M request.
- Customer impact: Average residential bills will rise by about $11.95 per month.
- Driving factors: Volatile coal and natural gas prices, reduced coal production, and reliance on market power purchases drove the increase.
- More hikes ahead? A proposed 14.7% permanent rate increase will be considered by the Wyoming PSC in March 2024.
