Prudent capital investments in infrastructure projects that will serve Wyoming customers are driving a request filed Friday with the Wyoming Public Service Commission for an increase in general rates.
The significant capital investments in this request include the Gateway South and Gateway West Segment D.1 projects, and the Rock Creek I and II wind projects. In addition, increasing insurance premiums relating to rising wildfire risks are also a major contributor to the need for the proposed increase.
Rocky Mountain Power customer rates have been among the lowest-cost electric utilities in the U.S.
The company is requesting an overall increase of $123.5 million, which would yield an overall percentage increase of 14.7%. The request reflects two rate mitigation proposals to ease the impact on customers.
- The capital investments in transmission and generation infrastructure account for nearly half of the request, which is Wyoming’s share for these investments based on Wyoming’s use of Rocky Mountain Power’s system.
- Increasing costs for commercial excess liability insurance are far beyond anything the company has experienced before. Excess liability insurance costs were up 270% in one year, and the 2023-24 policy year represents a 1,888% increase over the last five years.
For the typical residential customer using 700 kilowatt-hours per month, the increase would be $17.17 per month. A customer who uses 1,400 kilowatt-hours per month would see a monthly increase of $31.34.
“We recognize the impact that the rising costs of providing electric service has on customers,” said Dick Garlish, Rocky Mountain Power president. “The dynamic economic conditions we face are similar to those challenging all other electric providers in the nation. We work hard to control the costs within our control, and the company’s prudent actions historically are demonstrated by the fact that we have been consistently among the lowest-cost electric utilities in the U.S. We believe we can maintain this position because these cost pressures are affecting the entire electric utility industry.”
The rate mitigation proposals are intended to recognize the significant rate pressures affecting customers and balance the impact on customers with the need for the company to recover the prudent investments it must make to continue providing safe, reliable service.
The first proposal is to hold net power costs at the same level as in current rates, as set by the commission in the 2023 general rate case. Net power costs are the costs of coal and natural gas for thermal power plants and costs of power purchased on the wholesale market in the interests of customers, with any revenue from wholesale sales later credited to customers. The company is holding its net power costs in base rates at the level established in 2023 while the commission reviews the company’s forecasting model, which was new to Wyoming in 2023.
The second mitigation proposal is for a modest increase to the company’s allowed rate of return from 7.13% to 7.45%. This increase is driven by higher costs to borrow money, which the company needs to fund its operations. Also proposed is a small increase in the return on equity from 9.35% to 9.65%. The requested increase in the return on equity is less than the authorized level for the other investor-owned utilities in Wyoming. It is also less than the company’s independent expert witness on this subject supports through her financial analysis of the risks faced by similar utility companies nationwide, which supports a reasonable return of 10.25% to 11.25%. The return on equity is not a guarantee, but rather a level set to give the company a reasonable opportunity to make a fair return on the investments made to serve customers.
The increase will be reviewed by the Wyoming Public Service Commission and other intervening parties over a period of 10 months, with rates to be effective June 1, 2025. Rocky Mountain Power plans to again hold customer open houses throughout the state to answer questions and address customer concerns regarding the request.
Major investments made in the best interests of Wyoming customers include Wyoming’s share of the Gateway South and Gateway West Segment D.1 transmission lines, and the Rock Creek wind project, all of which will go into service in 2024. A portion of these investments were approved by the commission in the 2023 general rate request. The new request also includes Wyoming’s share of the Rock Creek II wind project, which will go into service in September 2025. Together, these investments amount to $52.7 million of the total $123.5 million increase proposed for retail rates.
Wyoming benefits from Rocky Mountain Power’s access to a vast regional generation and transmission network that results in lower costs and higher reliability because of economies of scale in both planning and operation of the system. Wyoming customers pay only for their proportional use of this system – 13.8% of the total cost – according to a formula agreed to by state public utility commissions, including Wyoming.
Transmission additions will improve reliability and allow for the interconnection of cost-effective new resources to serve Wyoming customers, as well as customers in other states the company serves. Increased transmission capacity will also reduce exposure to expensive wholesale power market prices when demand for energy peaks in the summer and winter months.
This rate request, and its drivers, underscore the significant challenges currently facing Rocky Mountain Power and other utilities in the West. We want to be clear and transparent about the current financial environment, what we’re doing to navigate it and how we remain committed to delivering reliable and low-cost electric service for our customers.