Wednesday, January 17, 2007

News From My Backyard: PacifiCorp's Plans for New Coal Plants Rejected by Oregon Utility Commission

Regulators reject the company's argument it needs more facilities, emphasizing more conservation and renewables instead

[From the Oregonian:]

Oregon utility regulators on Tuesday turned down PacifiCorp's request to seek bids for construction of two conventional coal-fired power plants in Wyoming and Utah.

In a proposal filed last summer, PacifiCorp maintained it needed the additional resources by 2014 to meet growing demand in its six-state territory. But customer groups argued that the plants weren't needed and, if built, would harm the environment with carbon dioxide emissions, considered key contributors to global warming.

The Oregon Public Utility Commission based its rejection primarily on an independent analysis of how much electricity PacifiCorp's customers would need in six to eight years.

PacifiCorp "has significantly overestimated its resource needs," the PUC order concluded.

The PUC recommended that PacifiCorp emphasize conservation, acquisition of renewable energy and electricity purchases on wholesale markets. The alternate strategy would allow PacifiCorp to delay a commitment to coal until a cleaner technology, known as integrated gasification, could be developed and commercialized, the PUC said.

PacifiCorp has not yet decided whether it will appeal the order or submit a new plan.

Before PacifiCorp begins soliciting bids for any new power plants, it must secure the approval of regulators in each of the states where it operates. The costs to build and operate any new resources would be apportioned among all PacifiCorp customers through rate increases. The utility currently serves 1.6 million customers, primarily in Utah and Oregon.

PacifiCorp is owned by Iowa-based MidAmerican Energy Holdings Co.


This was a docket that Renewable Northwest Project (my employers) was an active intervenor in. We lobbied hard, along with our allies, the Oregon Citizen's Utility Board, Northwest Energy Coalition, OSPIRG and Ecumenical Ministries of Oregon, to oppose PacifiCorp's plans for new coal plants.

If PacifiCorp had gotten its way at the Commission, the company would have solicited bids for at least two new coal-fired power plants, totalling 840-915 megawatts. The plants would have been located in the Intermountain West portion of PacifiCorp's six state service territory, which includes parts of Oregon, Washington, California, Utah, Wyoming and Idaho.

PacifiCorp originally went to the PUC seeking approval to build or purchase four coal plants totalling up to 2,290 megawatts. The environmental community, ratepayer advocates and renewable energy advocates all closed ranks to fight off that proposal back in October and PacifiCorp came back with the more modest proposal.

However, the Oregon PUC found that even that proposal was too much - too much power and too much carbon dioxide risk.

The Commission concluded that PacifiCorp: (1) did not demonstrate the need for two large coal plants and (2) failed to prove that their need is for baseload power (PUC Staff analysis shows the need to be limited to summer peak demand periods on the east side of their system - i.e. Utah, Idaho and Wyoming). "Before acquiring new thermal base load resources, we expect the company to fully explore conservation, demand response resources, renewable resources, distributed resources, and short term purchases ," the Commission said in their Final Ruling on the docket.

The Commission also agreed with concerns about PacifiCorp's ability to sell excess coal power saying that "wholesale sales from coal plants to states adopting, or considering adoption of, constraints on greenhouse gas emissions, carry significant risk."

The Commission also agreed with arguments that PacifiCorp had failed to directly address the issue of the risk of future CO2 regulations and costs and accepted RNP's argument that the $8 per ton cost they assume for future CO2 costs is too low. The Commission did say that the issue of CO2 risk was dwarfed by "more fundamental ones related to the amount and type of resources PacifiCorp seeks in this RFP." However, they reiterated that they are opening another docket to review treatment of CO2 in utility's Independent Resource Plans (IRPs), something RNP and our allies have been urging for some time.

If utilities assume a reasonable future cost for carbon, it will (1) make coal-fired power plants look less attractive and cheap and (2) reduce the utility and it's investors and ratepayer's exposure to risk when carbon dioxide emissions are regulated, either at the state or local level.

The California Public Utility Commission went even farther and mandated that California regulated utilities could not enter into
any new longterm contracts for coal-fired power plants (anything worse than a new combined cycle gas plant actually), a decision that was extended to all California utilities with the passage of California Senate Bill 1368 last year.

The Oregon, Washington and New Mexico Commissions all joined the California PUC this past December to sign a Joint Action Framework on Climate Change. The four western state utility commissions will cooperate to develop and use low-carbon technologies and renewable energy resources, while promoting energy efficiency, conservation, and demand response programs. As part of the agreement, the commissions will consider policies to encourage the development of transmission lines to provide access to sites with significant renewable energy resources.

This latest docket decision seems to be the first application of this new stance towards global warming adopted in the Joint Action Framework. As promised, the OPUC rejected PacifiCorp's high-carbon risk proposal for new coal-fired generation in favor of energy efficiency and conservation, demand response, and renewable energy.

We have hopes that the OPUC will soon join the California PUC in adopting a formal rule that will prevent Oregon's regulated utility's from entering into any new long-term coal contracts.

Tuesday's PUC decision will not necessarily prevent PacifiCorp from continuing with it's plans to construct the new coal plants. However, if it choses to go that route, the utility will have a very difficult time getting PUC approval to recover the costs of the new plants from Oregon ratepayers (something all regulated utilities must do in order to recover the costs of their investments). That would put their investors at high risk of eating the bill for the new plants, a risky decision that will hopefully mean PacifiCorp abadons its plans for new coal plants.

It's back to the drawing board for you, PacifiCorp...


Resources

  • "Request for Approval of Draft RFP Denied" - Oregon Public Utility Commission Final Order

  • Joint Action Framework on Climate Change Adopted by Four Public Utility Commissions (Press Release, 12/1/06)

  • Westenr Utility Commission's Joint Action Framework on Climate Change


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