Editors Note: This article was originally published in the Oct. 18, 2023 issue of the Chronicle Progress. Some information may be outdated.
Audit report creates stir with state lawmakers; changes to governance, status mulled
State lawmakers are poised to put the squeeze on the intermountain Power Agency…again.
Legislators appeared set to introduce a raft of new legislation next year in response to recommendations offered by the Office of the Legislative Auditor General, which produced a detailed performance audit report on how IPA is governed, its unique status as defined by state statute and its waning positive impact on the state and Millard County.
The report was first introduced last Tuesday to the Legislative Audit Subcommittee, made up of the political leaders in both state House and Senate.
One detail lawmakers kept returning to during their questioning of both auditors and an IPA executive was why auditors were unable to acquire—and IPA unwilling to provide—certain information sought during the months-long audit.
Multiple lawmakers and auditors both said they’d never experienced that before during an audit of a public entity.
IPA is a political subdivision of the state, classified both as a taxed interlocal entity and project entity, with state legislators having ultimate oversight responsibilities in its governance.
However, when legislative auditors recently came calling, one area of IPA’s decision-making was deemed off-limits even to them.
Auditors sought five years worth of meeting minutes and recordings from closed-door, executive board sessions, but were allowed minutes from only one to be used in their audit. Auditors included a line on one page of their report letting lawmakers know there was some risk the audit was incomplete due to the lack of transparency.
Rep. Mike Schultz, Republican House majority leader, whose district includes Weber and Davis counties, called the denial of information by a state-created entity “disturbing.”
“I find that a little bit disturbing that they wouldn’t let you in during those closed meetings,” he said.
Senate President Sen. J. Stuart Adams, who co-chairs the audit subcommittee alongside House Speaker Brad Wilson, shared Schultz’s reaction.
“It really bothers me greatly that they would not let our auditors audit. That they would hold information back,” he said.
Adams wondered aloud at one point whether the state actually had any control over one of its own entities.
“Are they really a state agency? What are they? If they are a private entity, let’s treat them like a private entity and tax them like a private entity and have them do the things that a private entity would do,” Adams said at one point.
Speaker Wilson saved his comments for IPA General Manager Cameron Cowan, who was provided the opportunity to respond to the audit.
Wilson began his questioning by asking “why the cloak and dagger” regarding IPA’s refusal to share some information.
Cowan said the concern about IPA’s closed meetings and refusal to share information from them with the auditors was about “privilege.”
“Our understanding is during the last legislative session the legislature agreed that privilege should be protected,” he answered, referring to IPA’s attorney-client privilege.
Wilson said he’d never witnessed a public entity withholding information before. He said he could see keeping the information out of public view over privilege concerns, but not from lawmakers.
“I’m baffled about this,” he said.
Cowan said IPA was subjected to the state’s open meetings rules starting in May last year. Since that time, there was only one closed meeting deemed not to include privileged information, he told the legislators.
Cowan said IPA was in litigation on a number of fronts and that providing the information to auditors ran the risk of waiving the attorney-client privilege.
“It does put us at risk on those different fronts,” Cowan explained.
Wilson pointed out that IPA was not in litigation with the state, but Cowan said IPA was in litigation for all five years that the closed meetings were withheld— one of the litigants against IPA was Millard County.
“You’ve got a real lack of trust between IPA and policymakers. And then the fact we send our auditors in to try to give us line of sight, to provide some sunlight, so we can have better information so maybe the trust level can go up and we can feel better about what’s happening with IPA, the exact opposite happens,” Wilson said. “And the trust level based on this audit, this is not going to help. The trust in IPA is going to get downgraded, at least in my perspective…I’ve never seen this. I’ve never seen hide the ball from lawmakers.”
Wilson then returned to one of the key recommendations auditors said lawmakers should consider—altering the governance structure IPA operates under. He asked Cowan why the state shouldn’t now change how IPA is governed in order to get the information lawmakers believe they require.
Cowan said mainly he and IPA have concerns with how changes in governance and oversight would impact existing contracts and the rights of bondholders—IPA has sold hundreds of millions of dollars in municipal bonds the past two years to finance construction of its new hydrogen and natural gas replacement of its existing coal-fired facility.
“IPA is moving forward on a course of action only because of actions the legislature provided over the last 10 years. The renewal project did require legislative action in 2012, 2013 I believe. And 2015,” he said, adding that all of the California purchasers of IPA’s future power production are moving forward based upon the Utah Legislature’s previous support.
“At this point, changing a governance structure entirely, or in some form, we feel could interfere with those contracts and bondholder rights. We do have outstanding bonds and those bonds were purchased with the understanding of the current governance structure,” Cowan said.
The IPA general manager assured legislators his organization was concerned with transparency and improving its own. “We are very committed to transparency,” he said.
Wilson said it would be difficult for the assembled lawmakers to go back to their constituents and tell them the legislature received the audit report and then did nothing.
But not all on the audit subcommittee seemed in favor of punishing IPA, especially the two Democrats.
Rep. Angela Romero, the Utah House’s Democratic minority leader, said she has a decade of experience legislating with regard to public utilities and that while her colleagues on the subcommittee were behaving professionally toward IPA that day, many other lawmakers have not.
“I want us to be mindful about how we treat people when they come up here and how we talk to them. Because I can tell you at times, in that committee (Public Utilities) I didn’t feel comfortable, and I’m a legislator,” she said, adding that her comments shouldn’t be construed to mean she was justifying IPA’s withholding of information from lawmakers.
Sen. Evan Vickers, Republican Senate majority leader, whose district includes the western half of Millard County, said he was concerned about how changes to IPA’s governance could harm the power project or his constituents.
He said the only difference between IPA and all the state’s other energy developments are the governance structures. “A lot of my questions go to that,” he said.
“What happens to Millard County, what happens to the people I represent in Delta, if IPA, IPP becomes a private entity? Does that positively or negatively affect them?” he asked.
Vickers said Delta constituents he has spoken to are concerned about what the legislature could do to IPA.
“They want the entity to be there and be effective,” he said.
At the end of the audit subcommittee hearing, the audit report was referred to three interim committees for review the following day, with the Public Utilities, Energy & Technology Interim Committee given the lead on drafting any legislation. The audit was also presented to the Revenue and Taxation Interim Committee as well as the Natural Resources, Agriculture & Environment Interim Committee.
Sen. Derrin Owens, whose district represents the eastern half of Millard County, said during the review of the audit report in the public utilities committee that he’d favor an annual audit of IPA to ensure lawmakers are being kept informed of how the entity is operating.
Owens originally requested the audit earlier this year.
During the natural resources committee hearing, Owens described a December 2021 meeting he and other lawmakers held with IPA’s board, where he said policymakers asked what he viewed as simple questions, but got no answers.
“It doesn’t really surprise me what you ran into. I am grateful for the audit so we can shine a little bit of light on this,” the senator told the auditors.
Sen. Scott Sandall, a Republican whose district includes Box Elder, Cache, and Tooele counties, said he opened a bill file to explore whether IPA’s political subdivision status should be changed as a result of the audit report.
“It seems really egregious to me that a political subdivision of the state would be able to withhold information from a state auditor. Or disallow you from attending meetings. That causes me really great concern,” he said.
Rep. Carl Albrecht, who also sits on the natural resources committee, said he and other lawmakers are opening a bill to address the audit’s recommendations as well.
When it came time for the taxation and revenue committee to take up the report, however, not much seemed to be suggested by way of new legislation, particularly to fix the broken taxing structure that has created so much angst, and costly litigation, for taxpayers and leaders in Millard County.
Depreciation of IPA’s current plant and years-long disputes with the county over its tax payments created a rift between IPA and county leaders going back years now.
Commissioners—two of whom work for IPSC, an IPA subsidiary—recently agreed to pay a few million dollars to settle the tax disputes, which date to 2014. IPA’s board and other stakeholders have yet to approve the settlement, though Cowan told lawmakers he thought it would be.
IPA, by state law, has the ability to negotiate its tax payments directly with county commissioners. If commissioners and IPA disagree over how much those payments should be, the state tax commission’s Property Tax Division is supposed to settle the dispute. When that fails, the disagreement goes to the full tax commission and then to district court.
Cowan told lawmakers on the taxation committee he thinks the county and IPA can return to a model where the two negotiate payments again, perhaps even adopting a model that levels payments over a period of multiple years so the county’s finances are better protected when the new power plant begins to depreciate much like the old one.
Commissioner Vicki Lyman, who sat between Cowan and an IPA attorney during last Wednesday’s hearing, said she was in favor of finding such a solution.
“I am definitely open to having something like that worked out so we can do our budgeting easier,” she said.
Lyman spent most of her time, however, encouraging lawmakers not to rush into any new legislation, particularly if there’s a risk it could harm the new power plant project under construction.
“Our county needs it,” she said of the IPP Renewed project. “It’s time we all start working together again.”
No bill file was open to address tax issues based on the audit, but it was noted during the taxation committee hearing that a bill file was already open by the public utilities interim committee.
