Rocky Mountain Power is unlike most businesses in that they aren’t subject to competition. They are a monopoly that serves over 1 million customers in the West. In order to prevent the utility from abusing this monopoly, Utah’s Public Service Commission must approve any and all changes to the utility’s rates. For the first time in more than five years, Rocky Mountain Power proposed to revise its rates for Utah customers, thereby launching a mammoth proceeding, “The Rate Case” that recently wrapped up. The results have a broad range of impacts that we can’t begin to cover in their entirety, but particular issues of interested to UCE include not only electricity rates, but also EV charging, the Subscriber Solar program, and energy conservation.
Be warned, there is no easy or quick way to unpack all of the details. But, for those ambitious readers eager to dive into the weeds, read on for the outcome of the 2020 Rate Case!
Increase Approved for Return on Investments
In order to receive reimbursement for the expenses incurred to build and maintain the grid and serve customers, the utility must demonstrate that their costs are prudently incurred and spent on resources that are used and useful. RMP requested to increase the amount of money they can spend and be reimbursed for annually by $95.8 million dollars. The PSC did approve an increase, albeit a much smaller amount of $31.41 million. In approving a lower revenue requirement, the PSC did not include certain costs that RMP requested, including the costs of installing Advanced Metering Infrastructure.
Commission Reduces Rocky Mountain Power’s Return on Equity
A utilities’ rate of return on equity is what drives their profitability. Expenses incurred by the utility are passed through to customers, so having a set rate of return is a way to ensure the utility earns a return on their investment without over-charging customers for electricity.
While Rocky Mountain Power requested an increase in their rate of return from 9.8% up to 10.2%, the PSC decreased their rate of return to 9.65%. To put that in context, even though the PSC approved higher electricity rates overall, a smaller percentage of the money RMP collects will go into shareholder’s pockets.
Opportunity to Expand Subscriber Solar
Rocky Mountain Power proposed to create a new rate schedule that would allow for additional rounds of Subscriber Solar, the popular program that allows customers to subscribe to shares of energy from a solar farm. In concept, we support the expansion of this program, which has been sold out since its creation in 2017. However more information is needed to evaluate whether Rocky Mountain Power’s proposed new rate schedule is fair to both Subscriber Solar customers and non-participating customers. Ultimately, we, and other stakeholders, recommended that changes to Subscriber Solar be addressed through a separate, standalone proceeding so that we can take the time to focus on this program. We would also like to see Subscriber Solar create opportunities to expand access to solar among low-income households, who face significant barriers to installing solar.
Based on our testimony and the testimony of other stakeholders, Rocky Mountain Power withdrew their proposed changes to the Subscriber Solar program. Read our direct and surrebuttal testimony on this topic. Utah Clean Energy looks forward to working with stakeholders and the utility to develop a new program structure for this important program soon.
Promoting Electric Vehicle Charging Through Fair Rates for Commercial Customers
Electric vehicles are great for air quality. In an effort to incentivize EV charging at businesses, RMP proposed to redesign a rate schedule (Schedule 6A) that is intended to protect customers with low energy “load factors” from experiencing unreasonably high utility bills. At a very basic level, customers with low energy “load factors” generally don’t use a lot of energy throughout the month, but occasionally high have spikes of energy use. This type of energy use can be caused when a business installs EV chargers—the business uses little energy throughout the day and only spikes when a customer plugs in to the EV charger. Historically, electricity rates have been designed to disincentivize low energy load factors, so RMP’s old rates unreasonably punished these customers with higher energy costs. By changing this rate schedule, more businesses will be able to cost-effectively install EV changing stations.
We supported RMP’s changes to Schedule 6A, because to the changes will encourage the build-out of EV charging at more businesses. As adoption of electric vehicles continues to grow, it’s important to continue developing rates that both encourage EV charging and maximize grid benefits. However, we also recommended that the PSC keep the current Schedule 6A as well as add RMP’s new proposal. Part of our justification for this is that Utah doesn’t have an EV specific rate yet, and allowing customers more options would increase the likelihood that more businesses could choose a rate that allowed them to cost effectively install EV chargers.
We also supported a recommendation from Western Resource Advocates to require Rocky Mountain Power to develop an EV-specific rate design by 2023 including two stakeholder meetings to gather feedback in developing the rate. The PSC ended up choosing to replace the current Schedule 6A with the new rate design and get rid of the old Schedule 6A, and declined to adopt the EV-specific rate design recommendation.
Incentivizing Energy Conservation While Encouraging EV Charging
Currently, electricity rates are tiered based on energy use. Residential customers who use more than 1,000 kWh a month must pay 14.4 cents for each additional kilowatt-hour in the summer, compared to 8.8 or 11.5 cents for lower energy users. This encourages energy conservation, but as electric vehicles become more popular, it could potentially discourage customers from adopting EVs. RMP proposed removing the highest-priced tier of electricity for residential customers to account for added EV charging, and the PSC approved this change.
Commission Declined Request to Recover Costs for Upgrading to Smart Meters
RMP requested approval to recover $77.9 million for the cost of “Advanced Metering Infrastructure,” or AMI, associated with the Company’s AMI Project. The entire AMI Project includes the replacement of 175,000 existing customer meters with new “smart meters” and a field network that will enable remote reading for 790,000 existing meters.
Smart meters provide customers with detailed data that can help you save energy. In this case, AMI meters will allow customers to have access to hourly meter data to evaluate their own electricity usage. Smart meters are also a first step towards more sophisticated “time of use” rates that allow customers to save energy by using energy during off-peak times. Ultimately, the PSC determined that RMP cannot collect the cost of the AMI projects in base rates because the AMI meters will not be installed until 2022. When implemented well, AMI can deliver significant benefits to customers and we hope to work with RMP and other stakeholders to continue developing a plan to roll out smart meters to the benefit of all customers.
Renewable Energy for Large Energy Users
Schedule 32 allows large energy users like data centers to power their facilities by purchasing clean energy directly from an off-site renewable energy project and having the energy delivered through RMP’s system. RMP proposed to increase the amount Schedule 32 customers are charged for use of RMP’s electricity lines and infrastructure, and multiple parties countered with alternative proposals. The PSC determined that an overall increase in Schedule 32 rates is necessary for these customers to fully cover the cost of providing them with electricity but did not adopt any parties’ initial proposal. Instead, the PSC attempted to strike a balance, and approved an increase to the overall costs Schedule 32 customers pay but did not increase the proportion of charges that are derived from use of electricity lines and infrastructure. This ensures that Schedule 32 customers pay their fair share but still derive the benefits of avoiding energy charges from RMP when they purchase power from clean energy facilities instead.
The PSC also approved an increase in the residential single-family customer charge from $6 to $8 and elimination of the minimum bill. The multi-family customer charge will remain at $6. Per-kWh energy costs will decrease accordingly. The customer charges for single-family and multi-family residential customers will increase to $8 and $10, respectively, in 2022.
The PSC also asked stakeholders for comments on the scope and format of a collaborative stakeholder process meant to address several issues that were not approved in the rate case. Issues such as a plan to leverage the full benefits of AMI, new time of use rates for residential customers, and rate unbundling to name a few. This collaborative process could provide an invaluable opportunity to help reshape electricity rate design in Utah and help facilitate the transition to clean energy.