Transmission lines lead away from the coal-fired Intermountain Power Plant near Delta, Utah on Monday, Feb. 3, 2025. (Photo by Spenser Heaps for Utah News Dispatch)
Passing 100% of unexpected costs to keep the lights on to Utah ratepayers — rather than having a cost-sharing structure with large utilities — can be expensive.
With a different financial policy from what Utah has currently, ratepayers could have saved $21.6 million between 2020 and 2024, according to a new study.
That’s because having large utilities share the risk of substantial expenses like fuel price volatility would ultimately incentivize “good utility fuel-cost management,” according to an analysis by RMI, formerly known as the Rocky Mountain Institute, a clean energy think tank.
The study, published in June, explores a scenario in which customers and large utility companies divided the cost of funding an energy balancing account, which in Utah is 100% fed by a market adjustment fee that can either credit or debit ratepayers for the utility’s costs not covered by the regular electricity rates.
That “insulates utilities in the state from the financial consequences of fuel procurement decisions,” the RMI study says. “If Utah utilities manage to reduce their fuel costs, they retain none of the savings; if they spend more than is budgeted, their customers pick up the bill.”
The analysis is based on a policy in which utilities would assume 10% of the energy balancing account, a scenario with lower stakes for the companies than what Utah lawmakers have been proposing in recent years without success.
Why are Utahns’ electrical bills so high? Market adjustment sends costs soaring
As state leaders grappled with a controversial 30.5% rate hike proposed by Rocky Mountain Power, they also focused on what to do about the energy balancing account structure.
Ratepayers have been covering the total cost since 2016, after the Legislature passed a law sponsored by Senate President Stuart Adams, R-Layton, establishing the structure. Before then customers covered 70% of the price adjustment and Rocky Mountain Power paid for the remaining 30%.
Rep. Carl Albrecht, R-Richfield, first proposed wiping the energy balancing account altogether in 2025, but he later acknowledged the move to be a negotiation tool.
He then drafted a bill to establish a cost-sharing mechanism during the 2026 session, in which Rocky Mountain Power would be responsible for 20% of the energy balancing account costs to have the utility “have some skin in the game,” he said.
In response to that bill draft, which didn’t become law, Rocky Mountain Power said that the account’s structure was consistent with industry standards and that it “helps keep rates stable for customers while also contributing to the financial stability for the utility between general rate reviews.”
According to the RMI analysis, in most states fuel adjustment costs are entirely paid by customers, but about nine states have a cost-sharing policy.
“Under fuel cost-sharing, utilities set a fuel budget at the start of the year based on expected fuel costs,” the study says. “If actual costs are greater than expected, utilities pay a share of the difference, which reduces customer bills. If actual costs are lower than expected, the utility retains that difference as a reward, and customers save money from the reductions in fuel costs overall.”
