Utility companies petition FERC to deny PacifiCorp's proposal to increase transmission rates by $1.7 billion due to wildfire liabilities.
In a move that could have significant implications for energy rates, Utah-based power providers Deseret Generation & Transmission Co-operative, Utah Associated Municipal Power Systems, and Utah Municipal Power Agency have asked the Federal Energy Regulatory Commission (FERC) to reject PacifiCorp's proposal to include $1.7 billion in wildfire-related liabilities in its transmission rates.
The wildfires in question occurred in 2020 and 2022. PacifiCorp, a utility owned by Berkshire Hathaway, aims to recover these liabilities from wholesale transmission customers through its formula rate in a single rate year. However, the Utah-based power providers argue that this move would unfairly shift shareholder risk to customers without ensuring the liabilities were prudently incurred.
The power providers claim that PacifiCorp's proposal is an inappropriate use of a formula rate and violates the Federal Power Act, FERC precedent, and accounting rules. They argue that allowing PacifiCorp to make wholesale transmission customers prepay potential liability could lead to rate shock, accounting issues, and undue discrimination.
If wholesale transmission customers are the only ones paying, PacifiCorp has an incentive to overestimate its wildfire liabilities to pass through the formula rate. The power providers argue that FERC should not assume the liabilities were prudently incurred and should launch a separate proceeding to review them.
Comments on the matter are due to FERC by August 1. PacifiCorp has not yet paid the estimated $1.7 billion in wildfire liabilities, but is seeking to recover it from wholesale transmission customers. The power providers argue that PacifiCorp should not treat wholesale transmission customers differently from retail customers regarding wildfire liability claims.
PacifiCorp faced an additional $48 billion in wildfire-related claims by the end of last year, as indicated in its most recent annual report. The power providers also point out that about $8 billion in wildfire-related claims have been made in Oregon and California.
The power providers argue that juries have already determined that PacifiCorp acted with gross negligence, recklessness, and willfulness on the vast majority of claims that have been paid out. Even if the costs had been prudently incurred, there remain issues related to rate shock, accounting, and undue discrimination, according to the power providers.
The $8 billion in wildfire-related claims mentioned is from PacifiCorp's parent company, Berkshire Hathaway Energy's, 2023 annual report at the U.S. Securities and Exchange Commission. This dispute comes at a time when energy costs are a major concern for many consumers, and the outcome could have significant implications for energy rates in the region.
The proposal by PacifiCorp, a subsidiary of Berkshire Hathaway, to recover $1.7 billion in wildfire-related liabilities from wholesale transmission customers could be a significant development in the finance sector, as it may impact energy rates. The power providers contend that this move could lead to unwarranted financial burden on customers, potential rate shock, accounting issues, and undue discrimination within the energy industry.
