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Sun Block

Critics say Rocky Mountain Power’s coal addiction makes the utility hell-bent on stalling clean energy in Utah

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In a 1995 episode of The Simpsons, Mr. Burns stares grimly out the window of the office of his nuclear power plant as he explains to his assistant Waylon Smithers that he cannot yet be proud of his company’s success, “not while my greatest nemesis still provides our customers with free light, heat and energy. I call this enemy ... the sun.”

Burns then shows his assistant his latest plan to corner the Springfield energy market: a giant metallic fan that would block out the sun and cast the town in perpetual darkness. “Since the beginning of time, man has yearned to destroy the sun. I will do the next best thing—block it out!” Burns says proudly, ignoring Smithers’ concerns that the project will destroy all plant life, make the town sundial useless and that “owls will deafen us with their ceaseless hooting.”

Literally blocking out the sun may be possible only in a cartoon, but clean-energy advocates say that in real life, Rocky Mountain Power, a utility that in Utah operates as a regulated monopoly, can block the development of renewable energy projects in the state—and without having to spend a fortune building a giant sun shield.

Rocky Mountain Power has to ask the Public Service Commission to approve increased rates and fees, such as when RMP recently attempted to impose a $4.25 net metering fee on the 2,000-plus Utahns who have solar panels installed on their homes. The fee was rejected in August by the Public Service Commission, but supporters of clean energy in Utah have more battles to fight.

RMP is involved in multiple skirmishes with clean-energy advocates over proposals to set the amount RMP would be required to pay renewable-energy producers who want to use RMP’s grid to transmit clean power. If RMP can convince the Public Service Commission to set those costs low enough, it could effectively stall the development of renewable-energy projects by making them too costly to develop.

“We probably have close to 450 or 500 megawatts [of renewables]—which is close to the capacity of a coal plant—in contracts that have been signed,” says Sarah Wright, head of the advocacy group Utah Clean Energy. Though the contracts have been signed, the projects are in a holding pattern, she says, while the group waits to see what price they will get for their energy before they can be developed.

“If the changes that Rocky Mountain Power is proposing take place, it will basically stop all that development,” Wright says.

David Eskelsen, a spokesman for RMP, challenges the idea that solar will be stopped. He cites the company’s ownership of 1,000 megawatts of wind power and 800 megawatts purchased from other developers as proof that RMP cares about clean energy.

“I can’t think of an organization that has done more to bring renewable energy to Utah customers than Rocky Mountain Power,” Eskelsen writes via e-mail.

But, he adds, customers need reliable power, no matter the source.

“We agree that many customers want renewable options,” Eskelsen says. “Customer opinion is also clear that high reliability and reasonable price are still very important, so renewable sources must be competitively priced.”

And though clean air is becoming more of a priority for average Utahns, economic development remains a greater concern for Utah’s government officials.

RMP has a government-regulated monopoly on power production in Utah, and advocates say the company’s clout among coal-friendly politicos also gives it a near monopoly of political power when it comes to ensuring Utah continues to be fired up by fossil fuels.

In other states, RMP and its parent company, PacifiCorp, has had to meet requirements such as setting standards for providing a certain amount of renewable energy in its portfolios. In California, the company’s portfolio must be 33 percent renewable by 2020. But in Utah, where the bottom line is jobs and economic development, RMP simply has a renewable portfolio “goal” of 20 percent by 2025. When the goal was set in 2008, the state allowed the utility to retroactively count renewable energy produced by a hydropower project going back to 1995 as part of that 20 percent. The goal also includes a caveat: The 20 percent must be “cost effective,” meaning the utility can look forward to kudos from the state if it meets that goal, and shrug its shoulders if it doesn’t.

Critics say that in addition to the state deciding not to tie down the free market by requiring RMP to clean up its portfolio, few in the government are concerned that RMP may be blocking development of renewable, profitable energy here in Utah, one chunk of coal at a time.

Sun Rush
Ros “Rocco” Vrba has been in the clean energy business since 2006, working on six windfarms for RMP and on more than 50 renewable energy projects across the country, eight of which are now fully operational and providing electricity to utilities from coast to coast. He’s currently working to develop renewable projects in Utah, and says the state could be the site of a potential clean-energy bonanza.

“We have an amazing solar opportunity in Utah,” Vrba says. “Absolutely amazing.”

Vrba says there’s plenty of potential profit in solar energy, since Utah’s geography blesses the state with high temperatures, a dry climate and clear skies. More than once, he says, he’s seen a windmill on a barren patch of dirt give a hardscrabble community an economic shot in the arm. Much like traditional energy sources, Vrba says, solar and other clean-energy projects present the greatest opportunities to rural communities that may be lacking in jobs and economic development.

It’s not just green believers like Vrba who see a sun rush on the horizon. In March 2014, the investment behemoth Citigroup released a report heralding the beginning of the “Age of Renewables.” The report says the market is primed for renewables because their costs are coming down and, in the long run, the resources provide stability for ratepayers and investors that carbon can’t keep up with, given increasing regulations and the immense volatility of fossil-fuel commodities.

The report says that renewable costs “continue to decline and are increasingly competitive with natural gas peakers,” in reference to the natural-gas plants that switch on during periods of high energy demand. The report lauded a decrease in the price of photovoltaic solar panels and a longer, more stable life cycle of energy produced by renewables.

According to a July 1, 2014, report by Bloomberg Energy News Finance, “Solar power will top clean energy installations in every region over the next decade and a half.” And it won’t be because of government assistance propping up the industry; public incentives actually have been scaled back. Instead, a “glut of solar and wind manufacturing capacity” and other innovations will help provide an estimated 800 gigawatts of rooftop and utility-scale energy by the year 2030. “This will be driven by economics, not subsidies, as our analysis suggests that solar will be fully competitive with other power sources by 2020,” the Bloomberg report states.

While the Bloomberg report credits Asia as having the largest private-sector commitment to renewables, it also sees a similar trend in the United States.

Vrba says it’s an opportunity not to be missed; Utah needs to wake up and see the sunshine.

“I think it’s important we continue to create a revenue base in our home state, and this is one of the forms of natural resources that is available to us,” Vrba says. “I think it’s not different than oil and gas may have been at the early part of the century. Renewables has its time now, and it’s becoming more and more sought after. It just makes simple sense.”

Sarah Wright of Utah Clean Energy says ratepayers are hungry for renewable projects because they’re a safe and stable bet going into the future. After the cost of steel in the ground and panels pointed at the sky or windmill blades in the air, they have no “fuel” costs, and maintenance costs are relatively flat compared to fossil fuels, providing rate stability for the energy customer.

“It’s like having a bond in your investment portfolio,” Wright says. “You build solar and you know what it’s going to cost today and you know what it’s going to cost 20 years from today.”

While that may keep coins in the pockets of average homeowners, it doesn’t exactly profit a utility like Rocky Mountain Power, which has almost all of its eggs in the carbon basket. RMP’s current energy mix—the energy it sells its customers—is 65 percent coal and 10 percent natural gas, and that doesn’t count the market purchases it makes, which are often natural gas as well.

“Rocky Mountain Power is the gatekeeper. So if they don’t want to play in that arena, we all suffer as a consequence.” - –Christopher Thomas, director of HEAL Utah - NIKI CHAN
  • NIKI CHAN
  • “Rocky Mountain Power is the gatekeeper. So if they don’t want to play in that arena, we all suffer as a consequence.”–Christopher Thomas, director of HEAL Utah

Power Plays
As new renewables are breaking the energy mold, energy regulations are rooted in the past just as much as the businesses that have relied on fossil fuels for generations to produce power for customers and profits for shareholders.

“Things are changing dramatically right now, and our regulatory framework has not caught up,” Wright says. “So we don’t have the tools in the toolbox to drive more renewable-energy development.”

In Utah, RMP has to get the green light from the Public Service Commission before the company can change rates. It’s before this body that RMP is currently engaged in a few key disputes that advocates for alternative energy say could block renewable development in the state.

For a layperson, the ins and outs of the regulatory proceedings that affect RMP are as complex as wires in an electrical box. And Utah Clean Energy, the nonprofit advocacy group that keeps a close watch on RMP, worries that because the issues are so complicated, the public doesn’t appreciate the importance of what’s at stake, especially in the matters currently before the PSC: the two “avoided cost” dockets regarding pricing for small and large renewable-energy facilities.

To understand that, one needs to back up to 1973—a year in which the United States felt the stinging blow of an oil embargo placed on the country by the Organization of Arab Petroleum Exporting Countries in retaliation for America supplying Israel with weapons following conflicts between the nation and Egypt. The price of oil jumped from $3 to $12 a barrel by the embargo’s end, and the U.S. economy was dealt a long-term blow.

In 1978, Congress decided to pass the Public Utility Regulatory Policies Act to encourage energy efficiency and the development of renewable energy inside the nation’s borders. PURPA essentially requires existing utilities to purchase renewable energy produced by small independent energy developers and transmit that energy through their existing grids and infrastructures.

But there’s a catch: The price the utility pays for this clean energy has to be equivalent to the price of the traditional energy resource. So, hypothetically, if a solar farm wants to sell energy that’s worth $100 a megawatt hour, but RMP pays $50 a megawatt hour for primarily coal-based energy, RMP would have to pay only $50 for the renewable energy.

Figuring out how much its traditional resources will cost in the future gets into the utility’s Integrated Resource Plan, a roadmap that looks two decades into the future at where the utility will acquire its resources during that time.

Rocky Mountain Power’s 2013 Integrated Resource Plan goes through a variety of projections of what the future will look like for the resources needed to keep the lights on for customers in the next 20 years.

One of the scenarios imagines a world in which there are no carbon restraints—a wildly alternate universe where there’s stability and peace in the Middle East and hunky-dory relations with Russia, the world’s largest extractor of natural gas. In RMP’s projections for this world, the Environmental Protection Agency is no longer requiring power plants across the country to cut carbon-dioxide emissions roughly 30 percent below 2005 levels by 2030, and has halted plans to finalize coal-ash regulations that would also affect RMP, as City Weekly wrote about in the May 21 cover story “Ashes to Ashes.”

RMP used this bizarro-world scenario as the basis for the dollar amount it proposes to pay to renewable developers for the “avoided cost” of not using RMP’s traditional resources. Utah Clean Energy says that by using this estimate, RMP is setting the bar so low that clean-energy developers can’t financially afford to develop their projects.

There are realistic assumptions in Rocky Mountain Power’s IRP that anticipate carbon constraints and new regulations, but Sophie Hayes, Utah Clean Energy’s attorney, says the company doesn’t use these regulations in calculations of how much it should pay renewables for their power.

“So they’re saying, ‘We’re planning with these assumptions, but when calculating avoided-cost prices, we’re just going to take out all of these assumptions,’ ” Hayes says. “The effect is they are incrementally ratcheting down the price they’re willing to pay for renewable energy.”

RMP’s Eskelsen, however, defers to the judgment of the PSC and says that the negotiated price will not block solar development.

“The purpose of the PSC hearing and determination is to ensure a fair price for customers, who must pay electric rates,” Eskelsen writes. “We disagree that it makes it ‘impossible’ for renewable developers to operate. In fact, the company has recently signed several power-purchase agreements from qualifying facilities and has requests for pricing on many others.”

Advocates like Wright say that RMP can sign as many power purchase agreements as they like, but if the price the utility will pay for clean energy is too low, then solar projects will never be able to get up and running.

The commission will likely issue an order on Schedule 37—which deals with avoided costs for smaller renewable facilities with a capacity of 3 megawatts or less—by the end of October. Changes to Schedule 38—dealing with costs for renewable facilities with a capacity of more than 3 megawatts—will be evaluated again this winter, but an order may not be finalized until 2015.

“I think it’s not different than oil and gas may have been at the early part of the century. Renewables has its time now, and it’s becoming more and more sought after. It just makes simple sense.” - –clean-energy developer Ros Vrba - NIKI CHAN
  • NIKI CHAN
  • “I think it’s not different than oil and gas may have been at the early part of the century. Renewables has its time now, and it’s becoming more and more sought after. It just makes simple sense.”–clean-energy developer Ros Vrba

Power Transfer
Another dispute will be decided by the PSC on Oct. 29 over proposed fees applicable to 2012 legislation sponsored by Sen. Mark Madsen, R-Eagle Mountain, that’s been dubbed the “eBay bill.” Thanks to economic incentives, eBay built a 240,000-square-foot facility in Draper that has brought hundreds of jobs to the area. But eBay has corporation-wide sustainability goals that encourage its facilities to use green energy for their operations, and Draper’s facility was in a bind since it couldn’t purchase green power through RMP. After two years of work, Madsen was able to pass a bill allowing large facilities like eBay’s to purchase clean energy through a third party that would then be transmitted to them using RMPs infrastructure.

That has left the PSC to decide what is fair for RMP to charge for acting as a go-between for a clean-energy provider and a large business or facility that wants the energy. Currently, RMP is proposing multiple charges, including a monthly administrative fee of $260 per meter for the arrangement.

The fee is an improvement from RMP’s earlier proposal of $450, but it’s still burdensome, advocates say, especially when one considers that it’s comparable to the customer charges in RMP’s Schedule 9 tier, such as the $247 charge for refineries that might be running 24 hours a day.

And customer charges are charged only once, whereas RMP’s administrative fee would be $260 per month per meter. If a university wanted to use clean energy through the proposal and had 10 meters on its campus, it would pay $2,600 per month in administrative fees alone.

In general, Hayes says, Utah Clean Energy worries that RMP’s proposal doesn’t appropriately value what renewable energy provides to RMP’s system. And the administrative fees, she says, could also make it just too costly for customers to be able to afford the clean energy contracts.

“It’s still questionable whether this is going to create a workable solution for customers wanting to take advantage of the eBay bill,” Hayes says.

Eskelsen says the charge is designed to cover the “labor intensive” task of ensuring these customers’ costs aren’t spread to regular ratepayers. He points out that the Division of Public Utilities, a branch within the Governor’s Department of Commerce, has supported RMP’s fee calculation.

Blue Skies Over Coal Country
Though their go-to fuel is burned dark and dirty, RMP and PacifiCorp have nevertheless received national recognition for dedication to renewable efforts through their Blue Sky program. In 2013, Rocky Mountain Power won an award for Best Marketing Campaign by the Green Power Leadership Awards, which is sponsored by the Center for Resource Solutions and the EPA.

The program allows RMP’s utility customers to voluntarily pay extra on their bills to support clean energy. For $1.95, customers can support the purchase of a 100-kilowatt-hour block of clean energy—again produced by outside companies and used by utilities that have nothing to do with RMP—who then sell the credit to RMP.

The program has been touted by the company at farmers markets, parades and festivals, and has garnered enormous support as a result. As of Aug. 31, there were 39,917 Blue Sky participants in Utah, with 45,296 total participants across Utah, Idaho and Wyoming, where RMP operates.

RMP’s Eskelsen says that cash grants from the program have helped develop 101 small-scale solar projects in Utah that, combined, produce about 3,657 megawatt hours per year (the average residential home uses about 9 megawatt hours per year). These projects have brought nice shiny solar panels to schools and churches across the state.

One of these solar projects was at the church that Christopher Thomas, director of HEAL Utah, attends. While Thomas is a proud supporter of the Blue Sky program, he’s not ecstatic about the spin that he says RMP gives it.

“RMP comes out to do this press event and says, ‘We’re giving you this money to do solar,’ ” Thomas says. “Rocky Mountain Power is writing the check, but it’s not their money; it’s [customers’] money,” Thomas says.

As for the 3,657 megawatt hours of renewables, Thomas points out that while that may seem like a big number, that as a percent of the total megawatt-hours that PacifiCorp sells, its actually less than half of a thousandth of a percent.

And if Blue Sky is so popular, Thomas asks, wouldn’t that give RMP the hint that its customers want more renewables, and ones that are actually generated here in Utah? After all, RMP could profit from renewables similar to the way it profits from its fossil-fuel facilities.

According to energy regulations, any infrastructure RMP builds for power—whether dirty energy or clean—authorizes 10 percent return on the investment for the utility, depending on the energy sold, over a set period of time. Basically, if the utility builds its own facilities, it should see steady return over time on that investment.

Eskelsen says that it’s incorrect to say that RMP is only devoted to coal and fossil fuels, given the Wyoming wind farm it owns and the fact that in 1984, it invested in a geothermal plant in Milford, Utah, that was expanded as recently as 2007. In 2013, the company also announced a $50 million commitment to its solar-incentive program over five years. The program pays cash incentives for the installation of small-scale solar panels on the roofs of the homes and businesses of applicants based on an annual lottery.

But as for why RMP isn’t building its own renewable projects and reaping the authorized return on investments, Eskelsen says it’s a matter of need. The company doesn’t need another facility, he says, and to build one would result in unnecessary rate increases for customers.

“The company’s long-range planning does not indicate a need for a new power plant of any type for about the next 10 years,” Eskelsen says, adding that the company expects to be able to meet customer demands through market purchases and new energy efficiencies.

Meanwhile, RMP’s parent company PacifiCorp has decided to spend billions upgrading its existing coal-fired plants. While Utah’s Public Service Commission did not find fault in these decisions, in July, Oregon’s Public Utility Commission criticized PacifiCorp for moving ahead with upgrades to two of the units at its Jim Bridger coal plant in Wyoming and one unit at the Hunter coal plant in Utah.

The Oregon commission saw the company’s decision to upgrade its coal plants in the face of spiking carbon costs likely to result from looming federal regulations as unfair to the utility’s customers.

In the case of the units in Wyoming, the Oregon commission found that the utility failed to consider that retiring the units could be preferable to adding costly selective catalytic reduction (SCR) upgrades. The commission pointed out that one study showed “that it is more economical to retire Bridger 3 and 4 than to install the SCR equipment.”

Eskelsen points out that utility regulators in Utah and Wyoming, however, approved the upgrade decisions as being in the public interest and vital to the plants that are “existing, low-cost resources, absolutely needed to provide service to customers.”

Vrba says that RMP and PacifiCorp can’t quit coal because they’ve made major investments into the resource and don’t want to give up on it while realizing their investments in the coal infrastructure—whether that’s coal plants, mines or even railroads carrying the commodity. And if they own all the infrastructure, then they can only make profit off of it.

But that doesn’t change the fact that ratepayers will be on the hook for increased prices when renewables are needed and the price of fossil-fuels go up. But in a regulated monopoly like RMP has in Utah, where else are customers going to get their power?

Eskelsen says RMP is committed to keeping prices reasonable for customers and points out that in 2008, the company decided against building any future coal plants.

Though the battles in the market come down to dollars and cents, in the long run, HEAL’s Thomas says, it comes down to the quality of the air and the health of all Utahns who breathe it, with the grit in the air directly affected by the polluting effects of RMP’s favored fossil fuels. RMP, he says, has outsized power to decide what energy projects can use their grid and, in essence, what clean-energy projects get built—or not.

“Rocky Mountain Power is the gatekeeper,” Thomas says. “So if they don’t want to play in that arena, we all suffer as a consequence.”