The recommendation by regulators to approve the proposed merger between Utah Power & Light Co. and PacifiCorp came as "refreshing" news to the utility, which usually finds itself at odds with regulators.
But Utah's Division of Public Utilities believes this planned move by UP&L can do nothing but good if both merging utilities keep their promises of reducing power rates."We believe that the proposed merger will have a positive net benefit for both ratepayers and shareholders and otherwise does not cause harm," said the division's testimony filed with the Public Service Commission this week. "We believe, therefore, that the merger is in the public interest and should be approved."
After a monthlong hearing with merger opponents before federal regulators in March, the division's endorsement was relief to UP&L.
"I think this kind of a review from a third party is refreshing," UP&L spokesman John Ward said.
The merger, valued between $1.8 billion and $2 billion, would create one of the largest utilities in the west, serving more than 1 million customers in seven states. Opponents, mainly public power organizations, claim the merger would give too much control of the west's transmission to one utility.
Of primary concern to Utah regulators, however, is how the merger will impact this state. From the time UP&L and PacifiCorp announced their intent to merge last August, the two utilities have promised their union would lower rates 5-10 percent and result in multi-million dollar savings.
After nine months of analysis, the division found that even in worst case scenarios, the merger could save ratepayers and shareholders $177 million and support a 5 percent rate cut which could save customers an average of $25.68 annually over the next five years. The 2 percent reduction, promised within 60 days of the merger's approval, would save average residential customers $9.84 a year, the division said.
"The potential exists for benefits significantly greater than those claimed by the applicants in their filing," the division said.
The 2 1/2 inch thick stack of testimony concludes that regulators found no adverse impact on the state's coal industry, taxes or employment, or risk in regulating the proposed giant utility.
But the division didn't sign off on the merger without requiring that UP&L and PacifiCorp guarantee their promised rate cuts and certify rates will not ever be raised as a result of the merger.
Ward said the merged company plans on achieving those conditions anyway.
"It is gratifying to have the division take a supportive position in this case. It also gives a boost to what we have been saying for the last six to nine months," Ward said.
"And the division is no UP&L pushover. They have a proven record of being tough with the company."
The division's recommendation will have some influence upon the final decision the PSC must make on the merger.
"The division's recommendation does carry considerable weight, but it must be tested through the hearing process, which distills all the facts," PSC chairman Ted Stewart said.
Utah's Committee of Consumer Services, another state agency that represents ratepayers before the PSC, has yet to file its testimony. However, committee director Joe Ingles said the agency won't oppose the merger but will recommend conditions be imposed before the merger is implemented.
Reams of testimony are being filed by numerous intervenors in the case and Stewart said they are all imposing conditions on UP&L and PacifiCorp before endorsing the merger.
Hearings on the merger begin May 2 and a public witness day is scheduled May 9. Hearings in PacifiCorp's home state of Oregon began Wednesday.
Wyoming regulators have given officials approval and final orders are pending from Washington, California, Montana, Idaho, the U.S. Department of Justice and the Federal Energy Regulatory Commission.