Even if the state's electrical industry is opened to competition, Utah Power's market dominance may let it shape the prices people pay, according to a new report from the Public Service Commission.
And Nancy Kelly of the state's Committee of Consumer Services said that could translate into higher prices for residential and small commercial consumers."Wealth will transfer from Utah customers to (Utah Power parent company) PacifiCorp's shareholders," Kelly told members of the Legislature's Electrical Deregulation and Customer Choice Task Force on Friday.
Task force members are in their second year of trying to decide whether to let free-market forces shape the prices for some electric services. Currently, most electrical utilities operate as monopolies under strict state regulation.
The 44-page PSC report said ending that regulation could allow Utah Power to exercise "market power."
"The exercise of market power by a firm thwarts competition," the report said. "Market power enables a firm or a group of firms to raise the market price of electricity above competitive levels."
PSC Chairman Steve Mecham said PacifiCorp sells 81 percent of the electricity that is purchased in Utah, and the company owns 60 percent of the transmission lines that lead to the state's population centers.
That means effective competition will depend on the ability to import electricity into the state, Mecham said. But he said PSC analysis and an LCG Consulting study paid for by Utah's Division of Public Utilities show that importing power could be difficult at times, resulting in market power for PacifiCorp.
Ken Morris, assistant manager of transmission policy and pricing for PacifiCorp, said he thinks the LCG study is based on some false assumptions.
"Their study is flawed," Morris said. "The transmission model is flawed. And any conclusions drawn from this model are suspect."
Mecham said the LCG study is based on theory and "economists' dreams." But he said he still believes legislators need to make sure they address market power issues before moving ahead with deregulation.
Rep. J. Brent Haymond, R-Springville, and a task force member, said he does not think the task force is ready to make many recommendations regarding deregulation in general.
"I think this whole problem is about as close to a Rubik's cube as you can get," Haymond said.
Rep. Judy Ann Buffmire, D-Salt Lake City, and a task force member, said she is not sure how to handle deregulation in a way that is fair to PacifiCorp, consumers and all of the other players in the debate.
"I don't feel ready to do much of anything as yet," she said.
Task force co-chairs Sen. Leonard Blackham, R-Moroni, and Rep. Beverly Evans, R-Altamont, said they will use the group's past two years of discussions as the basis for a report to the full Legislature.