Sep 18 - Deseret News (Salt Lake City)

By Paul Foy Associated Press

Rocky Mountain Power has dropped plans to make sweeping customer- service cuts in protest of a rate denial, but the utility still needs more money to meet demand for electricity in Utah, the company's top executive said Wednesday.

The utility had said Sept. 2 it wasn't making enough money to keep up with demand for additional power. It said it would cut back overtime pay for linemen, slowing the response to some power outages. It also planned to eliminate "discretionary" maintenance. Ultimately, the utility said it might have to curtail electric service if the cost of buying power became "prohibitive."

But on Wednesday, instead of taking those steps, the president of Rocky Mountain Power said he was opening discussions with state officials and others to make a case for billions of dollars in electric-system improvements needed in Utah.

"We decided that we are not going to change our outage-response methods," Richard Walje told The Associated Press. "We have an obligation to serve. We recognize that."

Industry veterans said the utility's original plan to cut service was unprecedented.

"To determine unilaterally that these rates are unsatisfactory and put their customers at risk simply because they are unhappy threatens to undermine the regulatory compact," said Rob Thormeyer, a spokesman for the National Association of Regulatory Utility Commissioners.

Charles Acquard, executive director for the National Association of State Utility Consumer Advocates, said Rocky Mountain Power was playing a high-stakes game -- and blinked first.

Rocky Mountain Power had sought a $74 million rate increase but was awarded just $33.4 million by the Utah Public Service Commission last month.

The new rates, 2.4 percent higher or an extra $16 a year for a typical household, took effect in mid-August.

Walje said the utility deserved more money to cover spending on power generation, substations and new transmission lines to serve "one of the fastest-growing, most robust economies in the country."

The most critical project, Walje said, is a 132-mile, high- voltage transmission line that would run from Salt Lake City to Downey, Idaho. The $800 million segment is part of a larger project needed to expand the company's transmission system to bring more power to Utah and serve other states. The larger project would cost $6 billion.

Walje acknowledged having some reservations about his announced service cuts within days of issuing the news release Sept. 2. The utility didn't follow up with a required filing with regulators spelling out how it planned to cut back service.

Nonetheless, Walje said the announcement opened broad discussions with state leaders, industrial customers and opponents of the full rate hike about the need to fund major improvements in Utah. Rocky Mountain Power, meanwhile, has appealed the commission's rate decision, and the utility filed for a separate increase even as the first request was being scrutinized.

"We were just saying we didn't think the state understood how we need to perform our duties, long-term," Walje said.

Some industry officials attributed Rocky Mountain's aggressive response to new owners, while others say the utility was trying to make up for weak earnings. Under Utah law, Rocky Mountain Power can earn up to 10.2 percent on investment but says it has netted as little as 4 percent over the decade.

The utility underestimated operating costs and has only itself to blame for any shortfalls, said Michelle Beck, director of the Committee of Consumer Services, the state's consumer watchdog group at the Utah Public Service Commission.

"It's news to me that they're backing off" service cuts, Beck said Wednesday. "Based on their own filing, we thought they needed even less of a rate increase than what they got."

Rocky Mountain Power is the largest division of PacifiCorp, which also operates in parts of California, Idaho, Oregon, Washington and Wyoming. PacifiCorp, based in Portland, Ore., has been owned by MidAmerican Energy Holdings Co. since 2006.

MidAmerican has invested hundred of millions of dollars in PacifiCorp operations without taking a single dollar back as a dividend, Walje said.

MidAmerican is controlled by Berkshire Hathaway of Omaha, Neb., the investment vehicle of billionaire Warren Buffett. Berkshire Hathaway owns 88 percent of MidAmerican's stock, according to regulatory filings.

(c) 2008 Deseret News (Salt Lake City). Provided by ProQuest LLC. All rights Reserved.