Washington State Carbon Tax Contributes to Significant Portion of Electricity Rate Hike

During the first day of testimony regarding Rocky Mountain Power’s proposed electricity rate increases of nearly 30%, the Chehalis Generation Facility in Washington state was a significant topic of discussion. The facility’s impact on the proposed rates was a central theme throughout the day’s proceedings, which are set to continue for at least eight days.

The focus of the inquiries was on whether the citizens of Wyoming have been made responsible for a carbon-capture obligation in a different state, where the cost of the mandate is not being evenly shared.

Rocky Mountain Power’s recent proposal to increase rates by $137.2 million has sparked a lot of controversy and attracted a great deal of attention. Five intervenors, including Sen. Cale Case, R-Lander, have stepped in to question the necessity of the rate increase. Furthermore, the public has expressed their concerns through over 3,330 comments, indicating that they have many questions and reservations about the proposed rate hike.

One of the most prominent concerns revolving around the recent electricity rate increase is whether or not renewable energy sources are to blame. However, the spotlight on Wednesday was focused on the Chehalis power plant in Washington, which raised new questions.

According to Adam Lowney, the attorney representing Rocky Mountain Power, the company’s request for a rate increase may appear overwhelming, but it’s important to note that this is the first time the company has made such a request since 2020.

According to the spokesperson, even with the proposed rate increase, the company’s residential rates will remain 35% lower than the average rates for other Wyoming investor-owned utilities. It’s worth noting that the company has a track record of aggressively controlling costs, which is important to consider in the context of their request. In the past, the company has filed three rate cases which resulted in a 2.9% increase in 2014, a 2.3% increase in 2015, and a 3.5% decrease in 2002.

According to one of the intervenors, the decrease in rates was due to an order from the Public Service Commission. During a line of questioning, the intervenor sought to confirm this detail on the record.

According to Lowney, a whopping 95% of the rate increase can be attributed to the rise in energy costs.

According to the speaker, the cost of electricity and gas in the Pacific Northwest has risen by a staggering 232% and 85% respectively, compared to the predicted cost baseline. The Southwest has also seen an increase, with electricity prices jumping by 175% and gas prices by 70%. These numbers are quite concerning and indicate a significant shift in the energy market.

As per Lowney, price hikes have affected even the coal industry, showing that no commodity is safe from such fluctuations.

According to him, the cost of coal has been on the rise, increasing by almost 30% every year. This rise in market prices has resulted in a direct increase in the actual costs of power.

According to a forecast conducted in 2021 for the test year, power costs in 2022 have increased by 42% compared to the baseline set in 2020. Additionally, the forecast predicts an 82% increase in power costs in 2023.

According to Lowney, the 2024 forecast does not offer any respite as there are “substantial operational restrictions” that will hinder power generation and require more dependence on the market.

There are certain limitations that are currently affecting the generation of power in various plants. For instance, there has been a temporary shutdown of the Jim Bridger facility for several months to convert 700 MW of its capacity to natural gas. Additionally, the hydroelectric capacity has been reduced due to drought, and there are coal supply constraints that are hampering the generation of power in other coal plants.

The Renewables Elephant In The Room

Numerous customers of Rocky Mountain Power have been curious about the expenses associated with renewable resources.

In anticipation of the rate increase hearing, Rocky Mountain Power customer Steve Kahn asked the company, “To what extent will the rate increase be utilized to finance the seemingly endless wind and solar power projects?”

According to Kahne, Rocky Mountain Power replied to him and clarified that the addition of their new wind resources did not result in increased costs for the people of Wyoming. In fact, these resources helped in reducing energy costs for the residents.

Miranda from Rocky Mountain Power emphasized the crucial role of new wind resources and repowering projects in preventing a 60% increase in rates in Wyoming. If you take away the wind power and transmission capital investments from the current rate case, it would result in a reduction of $8.5 million from the rate increase request.

“If we do not make these investments, the cost of power will rise significantly. We would need to spend at least $6 million on buying energy from the market to replace the generation we would have received from the wind energy projects.”

According to Miranda, customers in Wyoming would be deprived of $1 million in federal production tax credits, and they would also be missing out on the long-term cost savings that wind generation would bring in the future.

According to Kahne, his main concern lies in the costs that may arise once the tax credits have been exhausted.

In a recent conversation, he expressed his frustration towards private enterprises relying on the federal government instead of being self-sufficient in a capitalist economy. He highlighted that eventually, the tax credits would run out, and the users, including himself, would have to bear the brunt of the increased prices. He strongly believes that accepting federal tax credits is a form of socialism that enslaves companies like RMP. He further added, “It’s either pay now or pay later.”

During his testimony, Lowney stated that the renewable investments made by the company were crucial in keeping their 2024 net power costs at a manageable level. According to him, without these investments, the net power costs would have been $85.4 million higher.

According to the spokesperson, despite the negative perceptions surrounding the rate increase, it is not being driven by policies that conflict with Wyoming.

About That Carbon Tax

During Wednesday’s hearing, the focus was primarily on the fairness of the carbon tax imposed on the Chehalis facility in Washington and whether people in Wyoming are bearing an unjust burden. Although renewable energy has been a topic of debate regarding the recent rate increase, it was not the main point of discussion.

According to Rocky Mountain Power, the carbon tax is viewed as a cost of operation for a power source utilized by all six states that PacificCorp serves, including the Rocky Mountain Power operating division.

The sharing of power among these assets is now taking place regardless of the operating division, and historically, the costs of these combined assets have been distributed in proportion to the usage of a particular state.

According to Lowney, the generation tax imposed on this generation is quite similar to the Wyoming Wind Tax. This tax is levied at a rate of $1 per megawatt hour of wind energy produced in Wyoming.

MBS Staff
MBS Staff
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