After two days of hearing assurances from Utah Power & Light Co. and PacifiCorp officials, regulators remain skeptical about the utilities' promise of reducing rates 5 percent if the two companies are allowed to merge.
"I see ratepayer risks," Public Service Commissioner Brent Cameron told attorneys for both utilities.Fueling the skepticism was frustration on the part of the three-member commission, which scolded the companies Tuesday for not filing adequate information to back up claims that rates will fall, despite new federal conditions placed on the merger.
"We understand the parties do have the material, but the commission doesn't have it," commissioner James Byrne said.
In response to an assurance by PacifiCorp attorney George Galloway that it can be proven that ratepayers won't be at risk, commission chairman Ted Stewart said, "I don't think you can prove that with the testimony that's been filed."
The hearings were called after the Federal Energy Regulatory Commission approved the merger on condition PacifiCorp and UP&L open their seven-state transmission system to competing electric utilities.
The Utah PSC, fearing the condition could hurt UP&L's revenues and affect local ratepayers, suspended its merger approval and called new hearings to consider the impact of the FERC conditions.
UP&L and PacifiCorp have filed testimony saying the merger still has net economic benefits even if they have to open their transmission to competitors. Executives from both companies testified this week that they are committed to reducing rates at least 5 percent for UP&L customers after the merger, and the rate cut will be underwritten by shareholders.
Boards of both utilities have set Dec. 15 as the deadline to approve the merger. Under the merger agreement, UP&L would become a division of Portland, Ore.-based PacifiCorp. Combining the two companies would create an $8 billion electric utility serving 1.2 million customers in seven Western states.
PacifiCorp and UP&L say the merger would result in savings of $500 million after five years, enabling rate reductions of 5-10 percent for UP&L customers and stable rates for customers of PacifiCorp's electric utility, Pacific Power & Light.
The FERC order, which would make the merged company provide competitors access to its interstate transmission system, was initially believed to have wiped out many of the merger's benefits tied to the merged company's sales of excess power to the southwest.
Neither utility nor the parties intervening in the special hearings have decided whether to petition the FERC for a rehearing on any aspect of the federal order.
But Byrne questioned how UP&L, after jealously guarding its transmission in the past, could so quickly agree to give up one of its prized assets. He said UP&L has told the commission for 10 years how valuable their transmission system is and now "it's all out the window."
UP&L chief financial officer Verl Topham said federally mandated access to UP&L's transmission would come sooner or later and the merger is preparing both companies to be viable competitors.
"We want to position ourselves for a future that won't be like the past," Topham said. "That's why we want to merge."
A main concern of parties intervening in the hearings is whether UP&L and PacifiCorp could "roll in" or combine the retail rates into a single rate, which would lower costs for Utah customers but increase rates for PacifiCorp's customers. The FERC order requires a single, rolled-in rate for the merged company's wholesale business.
Hearings on the FERC order's impact on Utah ratepayers will reconvene Nov. 28.