Electrical Deregulation and Customer Choice Task Force
Members Present:
Sen. Leonard M. Blackham, Chair
Rep. Christine R. Fox, Chair
Sen. Lorin V. Jones
Sen. Eddie "Ed" P. Mayne
Sen. Millie M. Peterson
Sen. Michael G. Waddoups
Rep. Ralph Becker
Rep. Beverly Ann Evans
Rep. Kevin S. Garn
Rep. J. Brent Haymond
Rep. David Ure
Members Absent:
Rep. Judy Ann Buffmire
Staff Present:
Brian Allred,
Research Analyst
Patricia Owen,
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 October 9, 1997 - Rep. Fox called the meeting to order at 8:55 a.m.
MOTION: Rep. Evans moved to approve the minutes of October 9, 1997. The motion passed unanimously. Sen. Waddoups was absent for the vote.
2. Task Force Business -
3. Impact of Electric Industry Restructuring on Electric Industry Employees - Mr. Blaine Newman, International Brotherhood of Electrical Workers Local 57, said that the question has been asked, "Will deregulation short circuit America's electric power supply?" He stated that electric power is one of the nation's greatest assets, America's rates are among the lowest in the world, and the service is highly reliable. Congress and states are considering legislation to deregulate the industry in a manner that could undermine rather than improve its operation. Mr. Newman addressed some concerns that the members of the International Brotherhood of Electrical Workers Local 57 have raised including: reliability; cost to the consumers; universal service; tax revenues; stranded costs; stranded workers; mergers and market dominance; environment; worker safety; and public safety. He told the task force that electrical workers feel a deregulation plan that does not deal responsibly with these issues should be rejected or there should be enough time to study this issue to be able to make the right decisions of what would be in the best interest of consumers and rate payers. Mr. Newman showed a video that summarized his remarks.
4. Municipal Stranded Costs -
A. Utah Associated Municipal Power Systems
Mr. Ted Rampton, UAMPS, said stranded cost calculations are based on assumptions and UAMPS believes stranded costs cannot be reduced to a formula. He indicated that one of the big assumptions the task force needs to make is what the market price of power is going to be in the future. As a consequence, UAMPS has taken a different approach in its analysis. He stated that the numbers in its analysis are not a stranded cost value for UAMPS, but are remaining obligations. He indicated that if things continue the way they are. UAMPS will be able to handle those costs, but under restructuring, it is not sure how those costs will be mitigated. He provided task force members with a copy of UAMPS' analysis.
Mr. Dave Tuttle, UAMPS, told the task force that the approach UAMPS took regarding the net present value from 1998 to 2025 is the current minimum contracted obligations. It excludes UAMPS A&G costs, out-of-pocket transmission costs, and renewals and replacements on existing facilities. It does include debt service, O&M property taxes, take or pay purchased capacity and San Juan take or pay coal. He reiterated that UAMPS' analysis is the current minimum contracted obligation and is subject to all manner of mitigation.
Sen. Blackham suggested that UAMPS break down each of the categories in their analysis by years and the kilowatt cost related to each of the categories for the task force's information.
B. Utah Municipal Power Agency
Mr. Richard Judd, UMPA, distributed UMPA's "Analysis of At Risk Costs" and told the task force that its numbers are exclusive of everything its members have. He indicated that UMPA is not- for-profit and that it adjusts its rates on a monthly basis and transfers money back to each city to reflect its actual cost of operation. All of the resources that UMPA's member cities own have been dedicated and are UMPA's responsibility to pay the debt. He stated that what UMPA has presented in its analysis is that if a customer leaves the system, the stranded costs are born by the rest of the community. If it is decided that strandable costs are to be recoverable, UMPA feels that a mechanism needs to be put in place to recover them.
Mr. Leon Pexton, UMPA, said that UMPA omitted certain resources and contracts from its estimates of stranded costs. He indicated that UMPA's estimates show the amount it has yet to recover and that there are no stranded costs unless someone leaves the system.
C. Division
Mr. Lowell Alt, Manager, Energy Section, Division of Public Utilities (Division), said the Public Service Commission does not regulate municipality rates and so the Division has little interaction on a regular basis with municipalities which limits its ability to look at municipalities' stranded costs.
Mr. Artie Powell, Economist, Energy Section, Division of Public Utilities, presented an overview of a stranded cost analysis of Utah's municipalities. He indicated that what UAMPS and
UMPA have presented to the task force is their future obligations or what they believe they are at
risk for. The Division's conclusion, at this point, is that UAMPS and UMPA have taken a reasonable
approach to the stranded costs issue. He provided task force members with printed copies of his
slide presentation.
5. Rural Electric Cooperative Stranded Costs -
A. Representatives of Rural Cooperatives
Mr. Grant Earl, General Manager, Moon Lake Electric Association (Moon Lake), informed
the task force that Utah rural electric cooperatives continue to support the objective of the task force
which is to preserve and enhance Utah's low electric rates. If the task force considers changes to the
system, the Moon Lake would suggest caution in going forward in order to ensure that any program
of customer choice truly benefits all customers over the long run and does not enhance the profit of
a few. To preserve the precepts chosen by owners of Utah rural electric cooperatives, Mr. Earl
suggested the following guidelines in the task force's deliberations: 1) the concept of exclusive
service area and service area boundaries must be maintained with respect to distribution services;
2) electric cooperatives should be permitted to determine, when a power supplier is initiated, what
additional services, if any, will be competitive; 3) competitive service should be limited only to
power supply; 4) minimum protection of customers must be provided in choosing not to change
power suppliers; 5) safety and reliability; 6) electric cooperatives should be allowed to continue to
set their rates for distribution and meter billing services; and 7) electric cooperatives should be given
the opportunity to recover costs from any customer choosing an alternative power supplier so there
is no adverse effect on the rates to the remaining customers. He indicated that the Moon Lake
believes stranded costs eligible for recovery should include the following areas: 1) generation
facilities; 2) power contracts; 3) certain transmission distribution facilities that are bypassed by large
customers; and 4) transition costs of preparing for and implementing consumer choice. The
Association also believes that stranded costs eligible for recovery should first be offset by every
reasonable effort to mitigate such costs and the specific form of and time period for recovery of
eligible stranded costs should be left to the discretion of electric cooperatives.
Mr. Carl R. Albrecht, General Manager, GarKane Power Association (GarKane), indicated
that GarKane has specific costs which could become stranded under deregulation: 1) all-
requirements contract with Deseret Generation and Transmission ("Deseret"); 2) a participation loan
with Deseret; 3) an IPP contract; 4) Garkane Hydroelectric Plants; 5) federal power contracts; and
6) data processing investment. These costs are the numbers for which Garkane's ratepayers are
responsible for. He stated that under deregulation, as customers choose new generation suppliers,
the rest of the customers are left with higher rates to pay the bills which remain under contractual
obligations. In the rural area, competition does not mean freezing rates to accumulate dollars to be
ready when competition comes. He encouraged the task force to remember the distinct difference
between public power entities and investor-owned utilities and the fact that they operate differently.
He provided task force members with printed copies of his remarks.
Mr. Curt Winterfeld, Deseret Generation and Transmission Cooperative ("Deseret"),
presented an overview of Deseret's loads and resources; a description of treatment of cooperatives
and publicly-owned utilities in other Western states; Deseret's financial obligations; an analysis of
Deseret's potential stranded cost; special concerns of cooperatives; and recommendations for
treatment of cooperatives' stranded cost issues. He provided task force members with printed copies
of his slide presentation.
B. Division
Mr. Lowell Alt, Division of Public Utilities, said the regulation of electric cooperatives ("co- ops") is different than the investor-owned utilities. The Public Service Commission (PSC) has
regulation authority over the co-ops, but it is limited by the statute that basically exempts the co-ops
from rate regulation. He indicated that co-ops do not have rate cases; they raise their rates whenever
they want as long as they follow some guidelines of notification, keep their tariff on file with the
PSC, and keep their members informed.
Mr. Artie Powell, Division of Public Utilities, presented an overview of the RDI's report of
Deseret Generation and Transmission and selected co-ops. He indicated that some of the Division's
observations are: 1) Garkane and Moon Lake present at-risk numbers; 2) market price is the key
factor; and 3) cost projections. He stated that the Division's conclusions are: 1) stranded cost
estimates are sensitive to assumptions and unreliable; 2) settling on estimates at this point unfairly
shifts risk to customers; and 3) it is possible to move forward without strandable cost numbers. He
presented task force members with printed copies of his slide presentation.
6. Selected Municipal and Industrial Electricity Usage Data - Sen. Blackham distributed some information on the aggregation issue indicating the kilowatts per year usage on selected
industries and municipalities. He indicated that this information will help the task force members
see the possibility of entities aggregating together to increase their buying power.
Sen. Peterson asked if the information indicating the kilowatts per year usage on the selected
industries and municipalities could be figured for the past five years so the task force members could
see historical trends in the amount of usage.
7. Task Force Discussion -
Rep. Ure indicated that there have been some motions made at the Utah League of Cities and Towns' Board meetings that directly affect issues regarding aggregation and the task force needs to
take those motions into consideration when discussing the aggregation issue. Rep. Evans requested
that the task force ask someone from the Utah League of Cities and Towns to come to one of its
meetings to explain what those motions have been.
8. Adjourn - Rep. Ure moved to adjourn the meeting at 1:00 p.m. The motion passed unanimously. Reps. Becker and Haymond were absent for the vote.
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