Staff advisers at Oregon’s utility regulator threw cold water on PacifiCorp’s plan to spend $3.5 billion, one of its biggest upgrades ever, on wind turbines and a new transmission line.
The Public Utility Commission staff say the utility had failed to justify the need for the massive capital investments, whether to meet its capacity, energy or reliability needs.
PacifiCorp is seeking state regulators’ blessing for what it calls “Energy Vision 2020.” Approval from the regulators would provide greater assurance that the power company would be able to recover the costs in a rate case when the projects are done.
The staff instead contended the plan comes with significant risks for ratepayers. They recommended the three commissioners not “acknowledge” the plan, which would make the investments considerably riskier for the utility and its parent company, Berkshire Hathaway. Alternatively, if the commissioners decide to approve the plan, staff recommended a number of conditions to protect ratepayers.
“There is no need for the proposed resources at all,” said the staff recommendation. “PacifiCorp’s existing resources are able to meet its resource needs.”
That’s not a universally held opinion. Some environmentalists support the wind investments, if not the transmission. And PacifiCorp insists it needs it all. But if commissioners agree with its advisory staff, it would be a big setback for the company.
PacifiCorp is proposing to “repower” some 900 megawatts of existing wind turbines, upgrading them with new blades and gear boxes to improve their efficiency and output. It plans to add another 1,100 megawatts of new wind resources in Wyoming. And it says it needs to build a 140-mile section of transmission line there to relieve congestion and get the new energy to market.
The company maintains that it has a near-term energy need that it needs to fill, and the wind resources are the lowest cost choice in the market to do so. Moreover, it will eventually be forced to make similar purchases to comply with Oregon’s renewable energy standard, which requires utilities to meet half their customer demand with renewable energy by 2040, with progressively higher targets in intervening years.
It makes sense to make the wind investments now, the utility says, because the projects would still qualify for federal production tax credits that cover 70 percent of the capital costs of the projects. Those incentives are scheduled to start sunsetting in 2020.
“It’s hard to see how this could be improved on,” said Scott Bolton, a senior vice president for the company. “We’re proposing exactly the kind of resources that our customers want and that the market is telling us are the lowest cost.”
Some customers – including the City of Portland and Multnomah County – have been telling the company they want significantly more of their energy to come from renewable resources. But ratepayer advocates for both residential and business customers, have big qualms about the plan.
Bob Jenks, executive director of The Citizens’ Utility Board, supports the upgrades to existing wind turbines, saying the company’s analysis shows those are cost effective. But he has big concerns about the new wind and particularly the transmission investments. The company’s analysis shows the economic benefits of those investments are small over two decades.
Echoing concerns expressed by the commission’s staff, Jenks thinks those benefits could be wiped out by cost overruns or construction delays that prevent the company from realizing the full amount of the production tax credits.
“I’m concerned they’re lowballing the costs and in the end, I’m going to end up stuck with a much higher bill,” Jenks said. “I think there’s a lot of risk to customers, particularly when they start building transmission lines.”
Adding more wind now would help PacifiCorp lower its greenhouse emissions more quickly, an important point for environmental groups, as 60 percent of the company’s electricity still comes its fleet of coal-fired plants. State leaders are also talking about a new carbon pricing scheme that would force utilities and other big industrial customers to lower emissions.
But the carbon benefits are not part of staff’s analysis, or the commission’s traditional method of evaluating utilities’ resource action plans.
Some groups like the NW Energy Coalition have suggested that PacifiCorp should shut down one of its big coals plants in Wyoming, which would free up the transmission capacity to move the new wind power to market without the underlying cost.
PacifiCorp says that’s not possible, as the plant still provides 13 percent of its capacity reserves, and plays an important role stabilizing the voltage on transmission lines in the area. Rick Link, the company’s vice president of resource and commercial strategy, said the company can accommodate the upgrades to existing wind farms without the new transmission line, but “we can’t interconnect an additional megawatt without some upgrades on the system.
The staff did recommend that PacifiCorp be required to complete a comprehensive economic analysis of its coal plants by March of 2018. Advocates hope that study will help make clear which of the coal plants should be retired, and which should keep running with expensive new pollution controls.
“We’ve been asking for this for ten years,” said Amy Hojnowski, an organizer with the Sierra Club’s Beyond Coal Campaign, which contends that 40 percent of the utility’s coal fleet is already uneconomic to run. “They’re trying to sweep this under the rug and get a bunch of other stuff pushed through in the meantime.”
PacifiCorp does plan to shut down 14 coal units by 2034, but that would still leave it with 30 percent of its power coming from coal-fired plants.
“We are open to develop the type of analysis they would like to see,” Link said.
The company will file its response to the staff recommendation in two weeks and expects a final decision from the commission in December.
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