Electrical Deregulation and Customer Choice Task Force
Members Present:
Sen. Leonard M. Blackham, Chair
Rep. Christine R. Fox, Chair
Sen. Lorin V. Jones
Sen. Millie M. Peterson
Sen. Michael G. Waddoups
Rep. Ralph Becker
Rep. Beverly Ann Evans
Rep. Kevin S. Garn
Rep. J. Brent Haymond
Members Excused:
Sen. Eddie "Ed" P. Mayne
Rep. Judy Ann Buffmire
Rep. David Ure
Staff Present:
Brian Allred,
Research Analyst
Mark Andrews,
Research Analyst
Patricia Owen,
Associate General Counsel
Bob Rees,
Associate General Counsel
Beverlee LeCheminant
Legislative Secretary
Note: Copies of information distributed during the meeting are on file in the Office of Legislative Research and General Counsel
1. Welcome - Approval of Minutes of June 12, 1997
Rep. Fox called the meeting to order at 9:10 a.m.
MOTION: Representative Haymond moved to approve the minutes of June 12, 1997. The motion passed unanimously.
2. Overview of the Physics of Electricity
Steven Walton, Manager of Transmission Pricing, Pacific Corporation, presented an overview of the physics of generating, transmitting, and distributing electricity. He provided task force members with printed copies of his slide presentation.
3. Impact on Utah of Restructuring in the Electrical Industry
Henry Eyring, President, Monitor Institute, discussed the following principles of deregulation:
. Once begun, the process of deregulation tends to proceed inevitably to conclusion
. The pace of deregulation has high impact on shareholder value, product quality, and customer satisfaction.
. On average, deregulation has resulted in retail price reductions of roughly 30 percent.
. Deregulation tends to reduce the number of competitors in an industry in the long run.
. In the case of electric power, the difference between the regulated price and the deregulated market price will vary from state-to-state.
. UP&L is among the more cost-competitive producers of power in the Western U.S.
. Companies in deregulating industries inevitably find ways to reduce costs of service.
. Calculating the true value of "stranded assets" requires sophisticated analysis of two factors.
. Deregulation tends to produce lower costs and higher product quality, but there are important tradeoffs to be managed in the process.
A written copy of Mr. Eyring's remarks was distributed to the task force.
4. Impact on Utah of Restructuring in the Electrical Industry
Jeffrey Burks, Director, Office of Energy and Resource Planning, reviewed his handout of how restructuring in the electrical industry will impact Utah. He addressed six possible outcomes or impacts that could come about by a transition to a more competitive electric industry:
. Reliability
. Market Power
. State and Local Taxation
. Public Benefit Programs
. Consumer Education
. Consumer Information
5. Utah Power & Light Overview
Doug Larsen and Roger Weaver, Utah Power & Light, and Steve Walton, Pacificorp, presented an overview concerning the operations of Utah Power & Light within Utah. They provided task force members with printed copies of their slide presentation.
6. Regulation of Utah Power & Light
Commissioner Stephen F. Mecham, Public Service Commission (PSC) explained the jurisdiction and activities of PSC regarding Utah Power & Light.
. It sets the rates, terms, and conditions for the provision of electric service in the state.
. It establishes just and reasonable rates and tries to minimize rates over the long term.
. It tries to ensure that the service that is provided is good quality service while it remains concerned about the financial integrity of the utility.
. It doesn't manage the utility and doesn't tell UP&L where to invest, although it does try to ensure that the utility adequately serves its customers in conformance with its obligation to serve in its service territory.
. It has an opportunity to review UP&L's investment and challenge its prudence.
. It performs regular audits of UP&L operations and earnings.
. It has jurisdiction over how costs are allocated among customer classes in the state and over how costs are allocated among the states.
. It has jurisdiction over the special contracts for large customers.
Commissioner Mecham further stated that two other things PSC deals with that affect UP&L and its customers are line extension policies and customer complaints.
7. Introduction to Strandable Costs
Because of the time limitation, Chair Fox told the task force that this issue will be discussed at the July 10th meeting.
8. Adjourn
MOTION: Sen. Peterson moved to adjourn. The meeting adjourned at 1:15 p.m.
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