Rocky Mountain Power could face a legal battle with the state if the utility makes good on its statement this week that it might curtail electric service to its Utah customers because of the state's denial of the full amount of the company's rate-increase request.
Utah Public Service Commission spokeswoman Julie Orchard said Wednesday that state law requires the utility to provide "adequate electric service to Utah customers."
Rocky Mountain Power, the state's largest electric utility, said late Tuesday that effective Sept. 15, it would implement sweeping changes that include reducing customer service and eliminating discretionary maintenance. The utility also said that it would "ultimately consider curtailing electric service when the cost of purchasing electricity to serve customers in Utah is prohibitive and exceeds the funding the commission provided to purchase and generate electricity to serve customers."
The company on Tuesday filed a legal appeal challenging the commission's decision this month to approve a $33.4 million rate hike, when the utility had requested more than twice as much. The company received a 2.7 percent rate increase but had asked for a 5.6 percent hike.
Rocky Mountain Power said the increase the commission granted was not enough to meet the utility's needs to serve its growing customer base.
Orchard said that if the company believed it was not granted a sufficient rate increase to meet its obligations, then it should go through the appeal process set forth by state regulators, rather than cutting back on service.
Phil Powlick, director of the state Division of Public Utilities, said Wednesday that the utility's plans to curtail service "raise questions about Rocky Mountain Power's ability to meet their obligations to serve customers."
The state's utility watchdog on Wednesday criticized Rocky Mountain Power for its plan to scale back service. Michele Beck, director of the Committee of Consumer Services, said the commission had given careful consideration to each line item in the utility's request.
"If the utility doesn't have enough to run its business, then it's its own fault," she said.
Rocky Mountain Power in July filed an application with the commission requesting a total rate increase of $160.6 million, or 11.2 percent more than the utility was charging customers at that time.
Last December, the utility had requested an increase of $161.2 million. But the commission in March issued an order requiring the company to reduce its rate-increase request to $99.8 million. The company reduced its request again in May to $84.5 million and yet again in June to $74.4 million.
But in its final order last month, the commission determined that the increase should be $33.4 million. The utility also has a second request that is pending before the commission. The second request, for $85.2 million beyond the amount of the first request, was an attempt to eventually gain the $160.6 million overall rate boost.
Rocky Mountain Power said Tuesday that after analyzing the commission's order this month, "the company determined the commission did not provide sufficient revenue to support the electric service levels needed to meet Utah's growing demand for electricity."
"The cost of providing for increased electric consumption by existing customers and the cost of providing service to new customers has exceeded the revenue the company receives from these customers," said Rocky Mountain Power president Richard Walje.
But Shane Hanna, a Salt Lake City resident and Rocky Mountain Power customer, said the company shouldn't complain about the amount of its rate increase.
"In this economy and in this market, I would think that they would step up and would accept a lower margin for their service, with the understanding that everyone else is suffering with lower margins, as well as increased costs," he said.
He added that Rocky Mountain Power also has the benefit of being a monopoly. Because people have no option but to buy the utility's service, he believes that the company has a responsibility to the public to serve the community.
Another Salt Lake ratepayer, Michelle Cerutti, said she is wary of the prospect of reduced customer service and potentially higher electricity bills.
"Why can't they take the hit, pay their top executives less?" she said. "There are probably all sorts of things they can do, but it's a lot easier to charge people more."
But state Senate President John Valentine, R-Orem, defended the utility's actions. He heard about Rocky Mountain Power's announcement while attending the Republican National Convention in St. Paul, Minn. He said that he was encouraged by the utility's efforts to cut costs, but the commission should re-evaluate its decision in light of the possible consequences.
"I would strongly encourage the Public Service Commission to reconsider the petition and recognize there is no free lunch," he said. "We have to have sufficient costs to the public utility recovered to continue to preserve service to a growing state."
Rocky Mountain Power has donated just over $60,000 in the past two years to a wide group of powerful Utah politicians and political groups, disclosure forms show. That includes $10,000 to Gov. Jon Huntsman Jr.'s political action committee.
The company split another $28,050 in donations among 41 state legislators. The state has only 104 legislators, so two of every five of them received donations from Rocky Mountain.
The biggest of such donations went to Valentine, who received $3,000. Even so, Valentine is running unopposed this year and likely does not need much money for his own campaign.Utah law allows corporations to donate directly to state candidates and political groups, something that federal law bans for federal candidates. The state has no donation limits, though all amounts must be disclosed.
Contributing: Lee Davidson and Lisa Riley Roche.