Wyoming Office of Consumer Advocate (OCA)

Wyoming Office of Consumer Advocate (OCA) 2019-2020 Biennium Strategic Plan Results Statement Wyoming has a diverse economy that provides a livable income and ensures wage equality. Wyoming natural resources are managed to maximize the economic, environmental and social prosperity of current and future generations. Advanced technologies and a quality workforce allow Wyoming business and communities to adapt and thrive Wyoming state government is a responsible steward of State assets and effectively responds to the needs of residents and guests Our Contribution to Wyoming Quality of Life Provide evidence and analysis to the Wyoming Public Service Commission (WPSC) regarding the prudent level of utility rates necessary in order for all Wyoming ratepayers to have access to safe, reliable and adequate utility services at just and reasonable prices. Provide evidence and support policies before the WPSC and the state legislature that ensure that utilities are stable and able to provide adequate, safe, reliable utility service to residential, commercial and industrial consumers; thereby promoting economic stability and consumer welfare. Participate in the review of utility resource planning to ensure that future utility infrastructure investments, including investments in energy conservation and demand management, are the least cost, least risk alternatives reasonably available to serve new demands, consistent with the provision of safe, adequate and reliable utility service. Provide the WPSC with analysis and review of new and emerging complex regulatory policy issues such as decoupling, rate design and cost of service, emerging wholesale markets, utility owned commodities, and smart grid proposals. Investigate utility proposals for alternative regulatory mechanisms to determine if such proposals are consistent with Wyoming law and Commission rules, and that any such mechanism provides benefits to Wyoming utility ratepayers and the citizens of the State. Engage in regional dialog related to the development of multi-state utility infrastructure projects to ensure that the proportion of the cost of such facilities born by Wyoming ratepayers is equitable and consistent with the provision of safe, adequate, reliable and affordable service to all Wyoming utility consumers. Support the adoption of cost effective advanced utility and customer technologies that enhance service quality and reduce the cost of utility service. Maximize the value of staff and budget resources through structured training and development and through the use of outside consultants when appropriate. Basic Facts: Statutory Authority: Title 37 of the Wyoming Statutes OCA Strategic Plan 2017-2018 biennium Page 1 of 7

Funding: The OCA 2019-2020 Biennium Budget appropriation is $2,010,266. The OCA s budget is derived entirely from an assessment on gross intrastate retail sales of utility providers and when combined with the budget of the WPSC, cannot exceed 3 mills by statute. For administrative and budget purposes the OCA is an independent division within the WPSC. W.S. 37-2-404 (a). The OCA has six authorized full time positions; Administrator, Deputy Administrator, two attorneys and two rate analyst/accountants. The Director and Deputy Director function as working rate analysts for the purpose of litigating cases before the WPSC. Primary Functions: Contested Cases Advocacy Public Outreach Provide formal recommendations and supporting evidence, as well as informal comments to the WPSC for consideration in its determination of just and reasonable utility rates and adequate service in contested proceedings; enter into settlement agreements with utility companies that serve the interests of ratepayers as well as utilities. Represent the interests of Wyoming utility consumers in matters involving utility and energy policy at the state, regional and national levels. Promote increased public awareness of utility issues and their impact on Wyoming utility consumers; support and promote the efficient use of energy resources by Wyoming utility customers; respond to customer inquiries regarding rate setting and rate design issues. The OCA represents the interests of Wyoming citizens and all classes of utility customers in matters involving public utilities. (W.S. 37-2-401) Performance Objectives for FY2019-2021: Objective 1: Multi-State, Multi-Year Proceedings Story Behind the Objective Over the next three to four years the OCA will be engaged in multiple proceedings involving engagement with regulatory authorities, consumer advocates and other interested stakeholders in several states throughout the west. These multi-state proceedings will be interrelated and extend over multiple years. In June of 2017, Rocky Mountain Power (RMP) filed two separate applications, the first seeking approval to repower approximately 900 megawatts (MW) of existing wind power generation in Wyoming, and the second to build an additional 1,100 MWs of new wind generation as well as 140 miles of new 500 kilovolt (kv) transmission in Wyoming. The estimated investment to complete both projects is $3.5 billion. In its applications, RMP asserts that these investments represent a time limited opportunity to acquire new generation resources that will, over time, result in lower customer rates than would otherwise be the case under a business as usual scenario. This opportunity is time limited, as OCA Strategic Plan 2017-2018 biennium Page 2 of 7

proposed by RMP, since the projected benefits to customers are entirely dependent on RMP being able to capture the federal production tax credit allowed for new renewable generation investments. This federal tax credit will begin to phase out in 2020 under current law. As such, the wind repowering, new wind generation and the new transmission line must be in service by December 31, 2019 in order to be eligible to receive the tax credit. In order to meet this extremely aggressive time schedule, RMP states that it must begin acquiring right-of-way for the transmission line in October of 2017 with construction of the transmission line to begin in the second quarter of 2018. RMP also states that it must begin construction of the new wind generation sometime in the second half of 2018. Failure to meet the December 31, 2019 deadline for completion will result in the loss of 20% of the anticipated production tax credits and would make the projects uneconomic compared to available alternatives. Both of the applications include a proposed rate mechanism that will allow RMP to begin recovering the cost of these new investments when they go into commercial service, even though RMP does not anticipate filing its next rate case until at least January 1, 2020. RMP argues that when the projects reach commercial service they will be producing zero cost energy for customers and customers will not be paying rates that reflect the cost to build these new facilities. Therefore, RMP argues, a special rate mechanism is required to keep RMP whole. When these projects are complete, and assuming that they qualify for the full production tax credit, they will become system resources. System resources are defined as generation and transmission facilities that serve customers in PacifiCorp s six state service territory; Wyoming, Utah, Idaho, Oregon, Washington and California. The cost of these investments are apportioned to each of the six states according to an agreed upon multi-state cost allocation protocol (MSP) negotiated among interested parties in each of the states and approved by each state public service commission. The current protocol was negotiated on an interim basis in 2010 and updated in 2015. Negotiations are currently underway regarding a more permanent solution to the multi-state cost allocation problem and the OCA is an active participant in those negotiations as it has in past negotiations for many years. Under terms of the current MSP those negotiations must be completed by December 31, 2019. The new wind and transmission investments, and their timing, have the potential to profoundly impact the ongoing MSP negotiations. Under the current MSP agreement Wyoming customers are allocated approximately 17% of PacifiCorp s system costs. A related proceeding, PacifiCorp s initiative to combine its transmission and generation assets with those of the California Independent System Operator (CAISO) to form a regional transmission organization and wholesale power market operator (RTO) promise to have equally profound impacts on RMP s Wyoming ratepayers, if the RTO is successfully implemented. Under an RTO, rather than providing customers energy from its own generation resources as it does today, RMP would instead sell its generation into a wholesale market and buy energy from that same market to serve its customers. In theory, PacifiCorp could take advantage of market power to serve its customers if that power is less costly than generating the same amount of power from its own generation resources. However, there are obvious risks involved in turning operational control of PacifiCorp s transmission and generation resources to a regional authority. The risks and costs of such an arrangement must be carefully weighed OCA Strategic Plan 2017-2018 biennium Page 3 of 7

against the prospective but uncertain benefits that may be conferred on Wyoming ratepayers. This initiative has been in development for more than a year and to date the risks, costs and benefits remain nebulous and relatively unquantified. The OCA has been engaged in the CAISO/PacifiCorp initiative since it was announced. We have participated in several meetings and submitted comments on several aspects of the initiative including governance, cost allocation and resource adequacy requirements. Our position has been that until PacifiCorp and CAISO can demonstrate that the governance of the new RTO is independent and free from control by the California Governor and Legislature, there is no merit in further discussion of the initiative. The current status of the initiative is indefinite. An unrelated multi-state, multi-year proceeding also involves the formation of an RTO and implicates the Black Hills Corporation family of companies that provide electric service to customers in Wyoming. The Mountain West Transmission Group (MWTG), which includes Black Hills (BH), Public Service Company of Colorado (PSCO) Tri-State Generation and Transmission Cooperative (TSG&T) and Western Area Power Administration (WAPA), and perhaps others, has been studying the feasibility of developing an RTO in parts of Wyoming, Montana, Colorado and New Mexico. After an initial solicitation of proposals for interested parties to operate the market and manage transmission, the subject companies have selected the Southwest Power Pool (SPP) as the market operator if the initiative moves forward. A decision by the companies on whether to move forward or not is expected in summer 2017. If the initiative moves forward then both BH and its subsidiary, Cheyenne Light, Fuel & Power, would turn over operational control of transmission assets to SPP and would begin buying and selling wholesale power through the market operated by SPP. It is anticipated that full integration of the new systems into the SPP market would not be complete until late 2019. All of these multi-state, multi-year proceedings have potentially profound impacts on the retail electric service that Wyoming electric utility ratepayers receive. In theory, there are potentially significant benefits to customers in the form of access to lower cost energy, more efficient dispatch of existing generation resources over a larger footprint, and lower costs associated with carrying required reserves. There are also potentially substantial costs related to integrating the new systems into the market, investments in telemetry and other data gathering and processing infrastructure necessary to facilitate the market, and others. The OCA will need to conduct its own research, possibly including the retention of qualified consultants to assist it and engage with regulators and consumer advocates in other states to determine whether the utility proposals outlined above are in the best interest of Wyoming citizens and ratepayers. Ultimately, the OCA will seek to ensure that investments made by utilities are prudent, that any utility proposals adopted by the Commission will not hinder the utility s ability to provide safe and reliable service, that the Commission s jurisdictional authority to ensure the same will not be unduly impinged, and that the benefits of any multi-state agreements are equitably apportioned among the various states. Performance Proposal for the Next Two Years Actively engage in all multi-state forums where system investments, cost allocation procedures and regional energy and capacity markets are discussed. Provide written and OCA Strategic Plan 2017-2018 biennium Page 4 of 7

oral comments on such proposals as necessary and appropriate to ensure the interests of Wyoming ratepayers are represented. Critically analyze the design, development, operational and financial aspects of such proposals to ensure that they are feasible, prudent and cost effective. Investigate and compare such proposals and projects to similar projects and proposals around the country to determine lessons learned and identify mistakes to avoid. Closely monitor progress of projects or proposals over multiple years to identify where and to what extent aspects and elements of one proceeding may impact the evaluation of a related proceeding. Actively seek out other formal and informal training opportunities for OCA staff to bring better scope, clarity and focus to the complex issues that are raised in these multi-state, multi-year proceedings. Objective 2: Rate Cases and Other Proceedings Story Behind the Objective The OCA reviews all utility applications that are filed with the Commission to determine whether or not a public interest issue is raised that merits involvement of the OCA. In the context of contested utility filings, the function of the OCA is to develop independent public interest positions regarding utility requests for changes in the rates, terms and conditions of utility services. The OCA presents these public interest positions to the WPSC for its consideration in making determinations in contested cases. The OCA intervenes in many cases filed before the Commission and is often the only intervening party. Without the involvement of the OCA in these proceedings, the WPSC would have no independent public interest analysis representing the broadest possible public interest upon which to base its determination. However, it should also be understood that the OCA can only intervene in cases filed by jurisdictional utilities or proceedings initiated by the Commission on its own motion. The OCA has no independent authority to initiate proceedings before the Commission on its own motion. Cases in which the OCA intervenes most often involve weighty public interest issues that bear directly on the rates paid by Wyoming utility consumers, and/or on the quality and reliability of service. These cases can set significant precedence regarding the resolution of future utility applications before the WPSC. Most, if not all of the proceedings discussed in Performance Objective 1 above will result in utility filings before the Commission. In the case of PacifiCorp s proposed wind and transmission investments, some of those filings have already been made but more are expected in the future. In addition, the OCA expects to intervene in seven to ten additional utility proceedings over the next two years that will be more conventional in nature but will likely still include some innovative and non-traditional elements, as allowed under W.S. 37-15-121. For example, the OCA anticipates that at least one of Black Hills Energy s divisions (formerly Source Gas) will OCA Strategic Plan 2017-2018 biennium Page 5 of 7

be filing a rate case sometime in the next two years. Although that application has not yet been filed the OCA has discussed with the Company some of the elements that may be included in the filing to begin preparing research, analysis and data requests on a preliminary basis. Several other cases in which the OCA is a party are currently pending before the Commission, including the Power Cost Adjustment (PCA) filing of Cheyenne Light, Fuel & Power (CLF&P, a division of Black Hills Corporation). In that proceeding the OCA determined that CLF&P is currently earning returns substantially above that allowed in its most recent rate case and recommended that the Commission either not allow the recovery of additional power costs, or if the Commission allows recovery of the power costs, to direct CLF&P to file a rate case and show cause as to why its base rates should not be reduced to reflect a more reasonable return. Performance Proposal for the Next Two Years Continue to review each utility filing made with the Commission to determine if any public interest issues exist that rise to a level meriting involvement of the OCA. Continue to seek out and examine other sources of data and information, including utility annual reports to the Commission, SEC filings, FERC filings, and others, to better identify and understand the public interest issues presented by utility applications. Develop data sources and analytical techniques that allow OCA analysts to accurately quantify the impacts of utility applications to Wyoming ratepayers, including rate impacts and impacts to the reliability and quality of utility services provided in the State. Develop evidence based alternatives for the Commission s consideration that more equitably balance the risks inherent in utility service between ratepayers and utility shareholders. When appropriate, such alternatives may be non-traditional and innovative solutions to unique rate setting challenges. Continue to seek agreement among the OCA, the utility, and other parties on contested issues in proceedings before the Commission. To the extent that a common understanding and agreement on these issues can be reached by the parties that reflects an equitable balance of the interests of the parties and the utility, the weaknesses of the adversarial process are minimized, the quality of the resulting decisions are improved, and the cost of regulation is minimized. Objective 3: Participation in regional and national regulatory forums Story Behind the Objective In addition to formal proceedings in which the OCA appears as a party before the Commission, the OCA participates in regional and national regulatory forums that could potentially have a profound impact on the quality, availability and prices of utility services provided to Wyoming citizens. Beyond the multi-state proceedings cited in Objective 1 above, the OCA also participates in PacifiCorp s regional public process related to the development of PacifiCorp s regional Integrated Resource Plan (IRP). The OCA also participates in: the National Association of State Utility Consumer Advocates (NSUCA) and its various subcommittees; the OCA Strategic Plan 2017-2018 biennium Page 6 of 7

Western Electricity Coordinating Council (WECC) including the Reliability Assessment Committee (RAC); the Committee on Regional Electric Power Cooperation (CREPC), Northern Tier Transmission Group (NTTG) both on the Steering Committee and the Cost Allocation Committee (CAC). Many of these groups are engaged in evaluating and planning for an evolving utility industry in which utility services are delivered in a much different way than they are today. Such issues as an electric generation resource portfolio (locally, regionally and nationally) that incorporates increasing amounts of renewable generation, the advent of electric vehicles, rapidly increasing (in some states and locales) deployment of customer owned generation such as roof top solar, and others, will all ultimately impact the reliability of the bulk power system and the affordability of wholesale and retail electricity. These trends will eventually make their way to Wyoming; PacifiCorp s proposed Wyoming wind investment outlined in Objective 1 is only a harbinger of the coming changes. The forums that the OCA participates in on behalf of Wyoming ratepayers provide a collaborative setting in which the merits and impacts of new technologies, new methods and increased customer engagement in the provision of utility services can be weighed and debated in an academic setting. It is critically important that Wyoming utility ratepayers continue to be represented in these regional dialogs. Performance Proposal for the Next Two Years Continue to participate in regional and national regulatory forums to the greatest extent that time and resources will allow. When possible, provide fact based evidence and analysis that supports the interests of Wyoming and its citizens, including white papers, studies, financial analyses and other research. Continue to remind other stakeholders of Wyoming s unique situation including its large coal fleet, its outsized industrial load, its relatively small and geographically dispersed population and its role as a large energy exporter, both regionally and nationally. Continue to remind other stakeholders that the interests of Wyoming ratepayers and citizens are no less important than the interests of other ratepayers throughout the region and the nation. Develop and support metrics and methods designed to ensure that regional dialogs result in proposals that are cost effective and that equitably apportion both costs and benefits among the various regional interests. OCA Strategic Plan 2017-2018 biennium Page 7 of 7