In a last-minute vote shuffle, Utah lawmakers passed a major piece of energy legislation last week that introduces several new clean energy programs and restructures how utility Rocky Mountain Power recuperates costs.
Among its provisions, the Sustainable Transportation and Energy Plan (STEP) establishes a five-year pilot program, under which regulators will authorize Rocky Mountain Power (RMP) to spend up to $2 million per year on electric-vehicle infrastructure and an average of $1 million per year on clean coal technology.
The utility will also spend $3.4 million on various innovation programs, including a battery storage project, asolargeneration incentive, an economic development incentive and a program to curb emissions from a natural gas plant.
Another major component of the bill (SB 115) is that it allows RMP to recuperate 100 percent of its variable costs. In the past, the utility would project its expenditures, and if it overspent, RMP was responsible for 30 percent of the excess charges. Under the new arrangement, ratepayers will cover all additional costs.
According to RMP spokesperson Paul Murphy, Utah’s natural gas provider and utilities in 42 other states have the same recuperation arrangement. He added that the Utah Public Service Commission (PSC) has the authority to implement STEP and report to the legislature on whether or not the spending is in the public interest.
Yet another aspect of SB 115 is that it allows RMP to capitalize on money raised from demand-side management charges and put those dollars into a “rainy day” fund for environmental controls. The idea is to use the fund to protect consumers from sticker shock in the event the utility needs to invest in technologies to extend the life of its coal plants, said Murphy.
The accounting change will cost each RMP customer just under $1 per year, but if the funds aren’t used, they will be returned to consumers, he said.
“Our customers have told us that they want reasonably priced electricity, but they also want clean energy options,” said Rocky Mountain Power President and CEO Cindy Crane, in a statement. “We worked with legislators and community leaders to refine the STEP bill so we could accomplish that goal.”
Fears of a Nevada-style outcome
But not all stakeholders are enthusiastic about the bill.
Matt Pacenza, executive director of the environmental group HEAL Utah, said he has “mixed feelings.” The pilot projects sound promising for the advancement of clean energy, but the “rainy day” fund seemingly translates into extending the life of dirty, aging coal plants when the utility should arguably be moving away from coal resources, he said.
It is estimated that the accounting change will create around $50 million for environmental controls, Pacenza added. The fact that this change was enshrined in legislation means that stakeholders can’t debate whether this is a bad investment.
Solar advocates also have specific critiques of STEP.
One issue is that it ends one solar incentive program a year early, in order to free up $10 million for utility pilot programs that have yet to be evaluated, said Sophie Hayes, staff attorney at Utah Clean Energy. Hayes said she’s also uncomfortable with that fact that many of the changes are mandated, when they could have been fully explored in a rate case. However, she admits things could have been much worse.
Up until the final vote on Friday, solar advocates were fighting to remove potentially damaging language on net metering, she said. At one point, language was added to a senate version of the bill that would have allowed the utility to address net metering outside of a general rate case -- which solar advocates say takes net metering out of context -- and instructed the PSC to evaluate the “cost of solar,” making no reference to solar’s benefits.
“That very much alarmed the solar industry, because it was very similar to the language in Nevada that led to a lot of job losses and ultimately the collapse of the solar industry there,” said Hayes. Like NV Energy, RMP is owned by Berkshire Hathaway. And in NV Energy's case, net metering changes were enabled by a piece of legislation.
Utah Clean Energy and solar industry groups called for an emergency negotiation session with RMP and sponsors of the bill and succeeded in removing controversial provisions on net metering. In exchange, renewable energy groups agreed not to actively oppose the bill and instead promised to take a neutral position.
Utah Clean Energy looks forward to working with RMP on its electric-vehicle program and clean air initiatives, said Hayes. “But I don’t think any of us feel comfortable supporting the bill,” she added.
RMP’s Murphy said he was surprised by the pushback, given that the bill offers significant new incentives for clean energy and ways to improve air quality in Utah.
As SB 115 heads to the desk of Governor Gary Herbert, who is expected to sign it, continued discussions over net metering will move to a regulatory proceeding.
The PSC recently adopted an analytical framework for evaluating the costs and benefits of the policy. It’s anticipated the issue will now be raised as part of RMP’s next rate case, which the utility could call later this year.
“Everyone assumes the utility will come back and ask for fees [on solar customers] and [seek] to change nature of the net metering credit,” said Pacenza. “We all think something Nevada-style is coming, but it’s about a year way.”