Bellevue-based Puget Sound Energy rate case settled

Environmental groups call on utility to retire coal plant completely by 2025

Future generations of Puget Sound Energy customers will no longer have to pay for the cleanup of a Montana coal plant current generations are benefiting from.

After a months-long back and forth between Bellevue-based Puget Sound Energy, several intervening parties and the Washington Utilities and Transportation Commission, the commission issued an order Wednesday approving the utility company’s electric and natural gas rate case settlement agreement.

Also in the settlement is $10 million to help the community of Colstrip transition through economic development and job training.

Starting this month, customers who use electric energy will be expected to pay a 1 percent increase, or about $1.25 more a month per customer. The funds will go towards decommissioning and remediation costs of the coal plant, which is located in Colstrip, Montana. Depreciation schedules were set for all four units of the power plant, meaning the utility will pay down all of its debts on the coal plant by 2027, instead of its initial 2045 projection.

However, the settlement agreement only establishes a retirement date for half of the power plant’s coal-fired units, 1 and 2. They will retire in July 2022. While the settlement agreement sets aside funds for shutdown and cleanup costs of the remaining units, 3 and 4, environmental groups, such as the Sierra Club, believe the utility should establish a retirement date of 2025.

Doug Howell with the Sierra Club, which is an intervening party in the settlement, said there are many reasons they believe 2025 should be the target year.

“The clear majority of [PSE] customers want to be off coal by 2025,” Howell said, noting service territories of King County, Olympia, Lacy, Fife and Bainbridge have all spoken up.

Howell said Puget Sound Energy’s own analyst said with just modest carbon pricing, customers will be losing $50 million a year by 2025. The coal plant is becoming more expensive for the owners to operate and maintain as well. Sierra Club said the cost of operations and maintenance goes up each year. In 2008, it cost $17 per megawatt an hour to run units 3 and 4 and now it costs about $25 per megawatt an hour.

And because the Rosebud Mine, the coal mine Colstrip gets its coal from, is expected to run out of coal at the end of 2024, and federal regional haze requirements are on the horizon, Howell said there’s a “perfect storm” of reasons why 2025 is the year to retire the units.

Puget Sound Energy officials say it’s not that easy.

Ken Johnson, Puget Sound Energy’s director of state regulatory affairs, said the utility company is one of the power plant’s six owners.

“PSE is a 25 percent owner of [units] 3 and 4 and cannot make decisions unilaterally about the useful life and a retirement date for units 3 and 4,” Johnson said, noting it is their interpretation of the owner’s agreement that all owners must agree.

Johnson said he believes the other owners have slightly different positions on when the useful life of Colstrip is. The majority, he said, think the coal plant’s useful life will last until 2030. NorthWestern Energy, which serves Montana, believes its life is somewhere closer to the 2040s, however.

Howell doesn’t buy it.

While it’s true there are six owners, he said Puget Sound Energy has the power to say they won’t put a penny into the “aging and decrepit coal plant” past 2025 and the coal plant will implode.

“Talon, the other owner, is losing tens of millions of dollars a year and it can’t continue so it will walk away,” Howell said.

Caleb Heeringa, also with Sierra Club, said there is an immense amount of risk that this plant could close suddenly without much protections to workers or Puget Sound Energy’s 1.1 million customers.

Johnson said the availability of coal, and several other economic factors do play into the decision of when the plant would retire.

“There are ongoing conversations with Westmoreland [Coal Company], which is the coal mine proprietor about the coal,” he said. “There could be an extension of the coal contract up to and potentially beyond 2024 but I do believe there will be a number of issues for the mining company in Montana, and how those get resolved will determine whether or not they can deliver coal to the mine at an economic price beyond day the mid-2020s.”

The biggest factor that would lead to units 3 and 4’s retirement is the price on carbon, Johnson said.

Last year, Washington state’s Initiative 732 sought to impose the nation’s first tax on carbon but it failed. But with Democrat control in the state Senate, House and governor’s seat, 2018 could be the year a carbon tax passes.

“There are a number of variable policy issues that we see on the horizon that can impact an early closure of Colstrip,” he said. “There are also things that could happen in the marketplace that would suggest its life could be extended, but again, they will all be based on the economic implications of market and policy decision that come forward over the course of the next few years.”

Although electric energy users’ bills will go up, natural gas customers’ bills decreased this past November by 6.5 percent in as part of the settlement agreement.