Auditors say the Utah Office of Energy Development needs an overhaul to be effective

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The Utah Office of Energy Development lacks defined goals and internal governance, and should do more to implement state energy policies, according to a comprehensive review released today by the Utah Legislative Auditor General.

The energy office, which has had five directors and seven mission statements in the twelve years of its existence, does not offer sufficient orientation in a crucial transition phase for the energy industry, said auditors.

“Despite much uncertainty within the industry, we have found that the state’s planning for the energy future through the Office of Energy Development (OED) is limited,” auditors said in their report, which was submitted Tuesday to the Utah Legislative Audit Committee.

The auditors recommended a major overhaul of the office, including updated job descriptions and “standard operating procedures” to become more data-driven and forward-looking.

In their response, Joel Ferry, director of the Department of Natural Resources, and Greg Todd, director of the OED, essentially said that the revision is already underway.

“We recognize that there has been inconsistency and uncertainty due to the transitional nature of the OED directors and structure, but the current government is committed to setting standards for operations to formalize processes that create long-term stability,” the write Ferry and Todd.

The big players call the shots

Auditors said implementing energy policy at the state level has become more difficult, in large part because regional and national factors drive energy production and distribution. They found that the state’s largest electric utility, Rocky Mountain Power, is part of a six-state PacifiCorp system.

With electricity becoming increasingly important as both electric vehicles and electric home heating proliferate, Utah must work with PacifiCorp’s regional planning priorities, including the recent decision to shut down its coal-fired power plants in Emery County years before their original end date.

“Power planning is challenging in this environment, and Utah’s ‘any of the above’ policies do not provide much leverage to the planning process,” the review reads.

The auditors also recognize that federal policy is fundamentally changing the energy market.

“Despite the legislature’s desire for the market to drive energy, we found that there is disagreement among state energy stakeholders as to whether or not the state’s policies are market-driven,” the audit reads. “…Government policies and not just the economy seem to be the main drivers of the energy transition. Understanding these forces, who may not care about Utah’s priorities or economy, is critical as the state seeks to keep Utah’s energy affordable, reliable, and sustainable.”

No mention of climate change

But the auditors, like the lawmakers they work for, have been reluctant to acknowledge the reason for the federal policy and the shutdowns of PacifiCorp’s coal-fired power plants: the need to reduce greenhouse gas emissions to counteract global climate degradation. The word “climate” appears only once in the 40-page review, and that’s in reference to the federal anti-inflation law.

The auditors called on lawmakers to change state energy policies to require data-driven modeling at the state level. “Our observation is that OED does not use any modeling to predict the impact of energy sources on economic development and energy prices. However, other states have demonstrated the benefits of modeling to understand and mitigate future risks.”

The audit also accused OED of a lack of long-term planning, including risk assessment. “While the Utah Code requires OED to file an annual report, no specific energy risk content is required. We believe that given the crucial energy phase we are now in, it is important that the legislature be properly informed of the risks and benefits of energy resources to the state.”

Auditors criticized the state’s most recent energy plan, released last year before Todd took office, for lacking specific goals and timelines. “Utah’s plan does not follow strategic planning best practices, including those identified by the National Association of State Energy Officials. Compared to other state energy plans, we found that Utah’s current plan lacks key goals and actions necessary to fulfill the stated vision and provide direction.”

An office renovation

Finally, the auditors recommended updating all office policies, job descriptions, grant eligibility criteria and standard operating procedures “to better fulfill its mandate” and to provide continuity in the face of staff turnover. “Only one current employee has been with the office for more than two years,” the audit reads.

As of 2021, the office has been part of the Department of Natural Resources but has still not fully integrated, the audit said. “Recently, OED failed to identify the office’s risks as part of an internal audit risk assessment process, becoming the only office out of nine DNR departments to fail to do so.”

With regard to federal grants, “we found OED to meet several broad metrics required for federal grants,” the auditors noted. “However, when asked about the selection mechanism for selecting federal grants, the current administration created a mechanism based on how they believe grants align with state energy policies, but did not include any specific criteria or assessment measures. Criteria for selecting grants were not documented or passed from previous administration.”

Federal legislation during the Biden era provided billions of dollars in federal grants for energy-related projects, but the review did not address whether the state sought and received a fair share of those billions.

Despite all the problems, the reviewers were still optimistic that the current OED leadership is ready to deal with them. “We recognize that the current administration of the OED has inherited many of the issues highlighted in this report that have plagued the Office since its inception. This government has shown a willingness to address the concerns and recommendations identified during this review.”

Justin Scaccy

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