Microsoft could bypass Puget Sound Energy to secure clean power from other electricity generators under a tentative settlement. This also could be a harbinger of the future as more companies opt to secure their own power.

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Microsoft could bypass Puget Sound Energy to secure clean power from other electricity generators under a tentative settlement.

The settlement announced Wednesday marks a striking shift in the relationship between the state’s largest private utility and its largest corporate customer. It was spurred by Microsoft’s quest to combat climate change by using electricity that does not generate the carbon emissions released by fossil-fuel combustion.

The agreement creates a new kind of tariff for large industrial or commercial customers that opt not to buy electricity from Puget Sound Energy (PSE), which generates nearly 60 percent of its power from fossil fuels.

“This is a step that helps us gain control of our own energy destiny, and meet our renewable-energy goals,” said Irene Plenefisch, Microsoft’s government-affairs director.

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This also could be a harbinger of the future as more companies seek a greener-energy footprint or opt, for some other reason, to secure their own power. And it shows how the private sector can help push suppliers toward alternative-power sources, even as the Trump administration calls for production of fossil fuels.

The agreement was reached among Microsoft, PSE and state Utilities and Transportation Commission (UTC) staff. Interested parties also signing the agreement include Wal-Mart Stores, Sam’s West Inc., Kroger Company and the Industrial Customers of Northwest Utilities.

The settlement must be approved by the UTC, with a decision expected later this year.

At this point, only Microsoft has expressed an interest in moving ahead with this kind of contract, according to a PSE official, and the amount of power that Microsoft would seek to buy has not been disclosed.

PSE is the state’s largest energy utility, serving more than 1.1 million Western Washington electric customers through a mix of power that it generates or buys from other producers.

PSE could not put together a package of carbon-free power that met Microsoft’s needs. So PSE worked with Microsoft to help the corporation find a way to buy its own power.

If the deal is approved, Microsoft plans to shift about 80 percent of its power in Puget Sound-area operations away from PSE, and put it out to bid to suppliers that could provide carbon-free electricity.

One option, for example, would be to purchase power from Eastern Washington public-utility districts that sell hydroelectric power. But some of the power, under the agreement, must also come from wind, solar or other renewable sources that aren’t hydropower.

Even if Microsoft does not buy PSE power, the corporation would still pay the utility to deliver electricity and help shoulder the costs of maintaining the utility’s distribution network.

The settlement calls for Microsoft to pay a $23.6 million “transition fee” that PSE would pass on to other customers. It also includes payments to the utility’s energy conservation and low-income assistance programs.

“Microsoft is still a customer. But it is an evolution in our relationship,” said Ken Johnson, director of state regulatory affairs for PSE.

Microsoft’s Plenefisch praised PSE officials for being “very innovative and flexible in thinking about this.”

For years, Microsoft has worked to reduce the corporation’s contributions to climate change. That has involved imposing an internal carbon fee on actions that generate greenhouse-gas emissions such as electricity consumption and air travel.

Since 2012, corporate officials say, global operations have been “carbon neutral,” with the internal fee helping to generate money that’s invested in projects such as reforestation that help offset carbon pollution.

Microsoft’s leaders are pushing to move down a green path as the rise of cloud computing requires increasing amounts of electricity to store data.

“Our world is in the midst of a digital transformation that is changing the way we live, work and communicate with one another … Microsoft’s carbon program is central to our commitment to sustainability,” Microsoft president and chief legal officer Brad Smith wrote in November.

The value that Microsoft puts on carbon-free power could help influence the way utilities think about adding new power generation.

PSE, for example, has an ownership interest in four coal-powered electricity plants in Colstrip, Montana, and has announced plans to shut two of them by 2022. It is unclear how much of that power would be replaced by natural-gas-generated electricity that releases reduced amounts of carbon compared to coal, or by alternative power sources such as wind.

“Historically, a kilowatt hour was a kilowatt hour, and it really didn’t matter to the end users how that power was produced,” said Mark Vasconi, the state commission’s director of regulatory services who helped to negotiate the agreement. “That’s changing as customers’ environmental values change.”