Utah's Public Service Commission approved a $15 million rate decrease for Utah Power & Light Co. customers but not before giving credit where it believes credit is due.
The PSC said the rate cut was due to the state's watchdog regulators and not the utility's cost-cutting campaign.UP&L's president and chief executive officer Frank N. Davis announced the rate reduction Monday, saying the utility's efficient coal mining operations contributed to the drop.
But Thursday's hearing to approve the rate change revealed a different reason for cutting electric bills.
"While we compliment the company for reducing its coal costs, the reason for this reduction is because of accounting errors in the EBA (Energy Balancing Account)," Commissioner James Byrne said.
Byrne and Commission chairman Brent Cameron praised rate engineer Margo Hovingh, of the Committee of Consumer Services, for finding the miscalculations that resulted in the $15 million refund and further hearings on how UP&L and regulators should treat the EBA.
The EBA tracks the utility's fuel costs, which are a component in a customer's overall electric rate.
Regulators had discovered last February, after UP&L had agreed to a $6 million rate cut to compensate for a federal tax windfall, that the utility had not put enough money from its special power sales into the EBA to offset fuel costs.
Hovingh said she found UP&L had credited about $8 million to the EBA from about $30 million in revenues from special power sale contracts in 1987.
Negotiations ensued resulting in UP&L agreeing to credit the EBA another $15 million over the next 12 months. The credit will mean average ratepayers will see a $10 reduction in their power bills over the next year beginning April 1.
At Thursday's hearing, UP&L accountants took exception to regulators calling the $15 million discrepancy an "error."
"This was not an error but an interpretive accounting issue," UP&L accountant Robert R. Dalley said.
He explained that no standards exist on how power sale revenues should be treated in the EBA and UP&L simply interpreted differently than regulators.
Byrne acknowledged that part of the problem lies with the PSC for not defining EBA accounting practices.Hearings will be set to establish standards in handling EBA credits by year end.
UP&L spokesman John Ward also disagreed with commissioners claiming operating cuts and lower fuel costs were not a factor in the rate cut. The utility has saved some $31 million by trimming operating budgets and implementing a productivity program that has dropped coal costs to a nine year low.
"If coal costs went up, it could have wiped out the $15 million credit from energy sales," he said.