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PacifiCorp proposes restructuring plan

Some state legislators react negatively, fear regulatory-control loss

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PacifiCorp wants to overhaul its corporate structure, but the proposal faces opposition. A legislative task force, meanwhile, is unsure if it wants to dive into the complexities or avoid the fray altogether.

The power utility, operating as Utah Power in Utah and Idaho, has proposed a restructuring that could be in place by the end of 2002. It calls for individual state power distribution companies, a generation company and a service company, all under the PacifiCorp Holdings Inc. umbrella.

Company officials have said the proposal, while extremely complex, would result in more independent state control of power generation matters and benefits to the company.

The existing structure requires the approval of six states before new generation facilities are built.

"That's the real benefit of this approach," said Doug Larson, PacifiCorp's vice president of regulation. "It gives Utah and the other states the ability to do a lot of independent decision-making. . . . Utah would not be at the whim of other jurisdictions when it comes to generation assets."

But legislators and others aren't sold on the plan.

Dee Jay Hammon, chairman of the Committee of Consumer Services, and Cheryl Murray, a committee staff member, noted several areas of concern. They include a loss of local regulatory control; expected poor regulation by the Federal Energy Regulatory Commission, which would oversee the generation company; and a supposed lack of exploring other options to cure PacifiCorp's woes.

"It (the proposal) seems to be out of proportion to the problem being solved," Hammon said. "I believe there are options out there."

Another aspect of the plan worries task force co-chairman Sen. Leonard Blackham, R-Moroni. It involves having 30-year power contracts between state distribution companies and the generation company. The contracts would be the basis for customer rates.

Once the Public Service Commission approves the contracts, it would be unable to make changes — unlike the current system, under which the commission's actions are not so locked in.

"We're going to live with that for 30 years," Blackham said. "Economically, we may have sealed our fate, one way or another."

The Legislature has several options for dealing with the PacifiCorp proposal, including doing nothing. The decision on the proposal ultimately rests with the Public Service Commission.

"I wonder if we should get involved in this," Sen. Mike Dmitrich, D-Price, said.

Sen. Dan Eastman, R-Bountiful, said legislators should get involved only if the commission and company reach an impasse, "rather than have you bring us all this information and try to make sense of it."

"I appreciate the information, but I'm not sure there is anything we can do about it until it is purified through the Public Service Commission," Eastman said.

Blackham, however, said that puts the commission in an inappropriate role. "The problem is, once they've decided on the issue, it will be done," he said.

The task force kicked around a few other ideas but reached no consensus. "Personally, I haven't got my mind made up," Blackham said. "I have lots of questions and things to consider."

Larson acknowledged the proposal may not be the only answer, but the company needs to have confidence that it can get a reasonable rate of return on investments — such as power plants — if it makes good decisions.

Several speakers commented on the importance of the matter. Lowell Alt, director of the Utah Division of Public Utilities, said its potential effects will make it the most significant decision the PSC will have faced in the past 20 years.

Larson, meanwhile, reiterated that the plan is not intended to be deregulation. It differs from California's failed scheme because California's restructuring required utilities to sell generation plants and to rely on the spot power market to obtain electricity.

E-MAIL: bwallace@desnews.com