Lawmakers once again are taking aim at the Intermountain Power Project in Millard County, armed with new ammunition from a legislative audit released Tuesday that asserts the entity operates with little state oversight, even though the state itself created it in 1977.
The Intermountain Power Agency is an intergovernmental agency that enjoys benefits of that governmental status.
For instance, it is going out on the market to secure $1.65 billion in bonds, of which 93% are tax-exempt.
The plant itself is run by the Los Angeles Department of Water and Power, the beneficiary of the 1,800-megawatt power plant that currently is fueled by coal.
With its creation by the state and the involvement of 23 cities, the idea originally was to not only ship energy to southern California, but to provide base load power as backup for those Utah consumers.
However, the first-ever statewide probe of IPP by the Office of the Legislative Auditor General found that over the course of its history, just 2% of the power generated at the plant has gone to Utah. Additionally, its annual budget of $520 million is within the purview of a board of which 79% is controlled by California purchasers, according to the audit. It takes an 80% voting block to make decisions.
Auditors said the Intermountain Power Agency is reaping substantial public benefit and contributes to Millard County’s tax base, but not without excessive disputes. The auditor pointed out the plant has appealed its county tax assessment 26 of 38 years.
The audit was presented Tuesday to the Legislative Audit Subcommittee, where multiple members expressed concern.
“I know there is a big question as to why only 2% (of power) comes back to Utah. If we have all these local power companies involved what’s the benefit for them? Is it window dressing they are on that board or are they actually getting some benefit from it?” questioned Senate President Stuart Adams, R-Layton and co-chair of the subcommittee. “Are they getting economic benefit? Are they getting revenue?”
In addition to the energy shipped to California, the plant is sitting on 45,000 acre-feet of water rights it secured, the audit said. While it does not use all that water, it is a scarce resource that is off the table for the benefit of Utah in a region that sees little rain.
Adams said that water controlled by the plant is a huge concern, beyond the fact that a major power plant is operating in Utah with little state oversight and primarily of benefit to California consumers.
The plant has contributed $490 million in property taxes over its lifetime and burned through 160 million tons of coal, according to the audit. Lawmakers, however, were irked a few years back when they found out some of that coal burned by the plant was from out of state.
The audit found that 26% of the plant’s coal consumption has been outsourced.
Sen. Dave Hinkins, R-Orangeville, represents coal country in Utah and was particularly upset when he found out about the coal being bought from out of state, raising the issue at the time.
“I guess it was a gentleman’s agreement at the time that they would buy Utah coal,” he told the Deseret News on Monday.
“But then they said the governor released them from that agreement. I wanted to know which governor.”
Hinkins said he never got a clear answer.
The longtime senator also said he understands that when the power plant transitions to natural gas in 2025, it will be buying the product from Wyoming, not Utah.
“They said they didn’t have any obligation or any contracts with anybody.”
Hinkins said he finds it to be an irony that California — which is mandating the switch from coal to natural gas at IPP — complains about the carbon footprint of fossil fuels but has little regard if the emissions are happening in Utah.
He emphasized too that IPP is not under any regulatory purview by the Utah Public Service Commission and gets a better tax break than Utah’s main power producer, Rocky Mountain Power.
The audit found the rates assessed in the context of the plant have not been economical enough for Utah purchasers to want to buy the electricity for nearly half of the 38 years of the project.
Cameron Cowan, general manager of the Intermountain Power Agency, said the plant serves as an insurance policy providing power for Utah customers if they need it. He did note that in 2022, Utah participants did take some of the power, saving $6 million.
But the relationship among IPA, Millard County and the state has not always been easy and disagreement over plant governance has been in dispute for years, including if Utah power needs are being adequately served.
“In the early 2000s a group of electric utilities expressed the need for additional sources of energy for some Utah members. Major groundwork was laid to allow IPP to provide this electricity through a third generating unit,” the audit pointed out.
Despite multiple efforts to push it through, including passage of legislation in 2002, the third unit never came to fruition. The audit said it would have pumped $110 million a year into the local economy.
“However, California participants would not support, and LADWP reportedly blocked the project from moving forward,” the audit said.
It added: “We believe that IPP has not fulfilled some original participant expectations for available, affordable power.”
The issue of IPP has been a conundrum for lawmakers for some time.
Over the years, Utah lawmakers passed 21 bills and amended state code 70 times, whittling away scrutiny and state oversight. That has caused frustration with Millard County officials who voiced concern in 2021, pushing the state Legislature for help.
That tension resulted in the passage of a bill in a special session that gave the state the authority to authorize a legislative audit of IPP, among other measures. At the time, IPP was described as a “600 pound gorilla with 2% body fat.”
The audit noted, too, that Utah’s renewable energy hub is being tapped for the benefit of California with renewable energy resources in that region discussed at a 2019 Los Angeles City Council meeting.
“Project representatives shared their plan to deliver power from wind, solar, and geothermal sources through the IPP transmission system in Millard County to Los Angeles,” according to the audit.
The audit came up with a number of recommendations for lawmakers to consider, including:
- Add new reporting and transparency requirements, restrictions on future operations, and consider having legislative appointees on the governing board.
- Create a new government entity to have oversight.
- Require the privatization of the plant’s operations.
Cowan, in response to the audit, said IPA is committed to working with the state Legislature to resolve issues and pointed out its out-of-state customers have benefitted the Utah economy greatly.
“The out-of-state purchasers have funded nearly all of the billions of dollars of investment in the state resulting in hundreds of millions of dollars in fees and taxes. The out-of-state purchasers have provided the commitments needed to continue electric power generation at IPP,” the company’s response said.
The agency also contends the majority of the coal used at the plant has come from Utah, despite severe shortages in local supplies. Additionally, the agency said in terms of board governance, Utah purchasers hold more than 20% of the voting rights and no decision can be made without that approval for the life of the project through 2077.
But House Speaker Brad Wilson, R-Kaysville, said the lack of transparency and cooperation demonstrated by IPA in the audit process was unprecedented.
“I’ve been attending audit meetings up here now for seven years and I have never seen language like this in an audit,” said Wilson, who co-chairs the audit subcommittee.
Auditors noted they had requested but did not receive minutes from closed-door meetings over a five-year period — except in one instance — and there was a monthslong lag time on requested documents, indicating auditors could not guarantee they had received complete information.
In addition, the audit noted, a non-IPA public official wanted to be in the middle of discussions between auditors and IPA.
“Can you just give me some information as to why the cloak and dagger, why we’re not sharing information about a public entity that’s been set up by the state,” Wilson questioned Cowan, “and when we are trying to get good information for the taxpayers and lawmakers so they can make good decisions.”
Cowan said revelation of that information in closed-door meetings would have violated privilege and sensitive legal negotiations.
But Wilson pushed back on that assertion, backed by committee members who noted access to closed-door meeting minutes was granted in an audit on the inland port, which greatly informed the document.
“Maybe I’m a little new to this, but we’ve never had anything like this happen before in terms of, quote unquote, privileged information being withheld,” Wilson said. “I can see it being withheld from being made public, but being withheld from state auditors, I am baffled about this.”
The audit was referred to a trio of interim committees: public utilities, energy and technology, natural resources and revenue and tax.