Puget Sound Energy reaches agreement on how to fund its costs in closing down a major coal-power complex in Montana. The terms have been submitted for approval to the state Utilities and Transportation Commission, which can opt to approve, reject or modify them.
Puget Sound Energy would bump up electric rates by 1 percent under a settlement reached Friday that also lays out the utility’s financial blueprint for the eventual shutdown of the coal-power complex in Colstrip, Montana.
The agreement sets aside some $380 million in the years ahead to handle the cleanup and closure costs for Colstrip, where PSE has a major ownership share. That money includes $10 million to help Colstrip workers as they transition away from jobs in the coal industry.
The settlement also calls for a roughly 4 percent cut in the natural gas rates charged to PSE customers, and also would boost PSE support for weatherization and customer-bill assistance.
The terms have been submitted for approval to the state Utilities and Transportation Commission, which can opt to approve, reject or modify them. The deal results from negotiations between PSE, commission staff, environmental groups, industry groups, the state of Montana and others with a stake in the rate case.
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Ken Johnson, PSE’s director of regulatory affairs, said the settlement creates a “workable mechanism” for funding the closure and cleanup at Colstrip. “It ensures future generations will not be burdened by costs resulting from decisions made five decades ago,” he said in a statement released by PSE.
The office of Washington state Attorney General Bob Ferguson also participated in the negotiations but did not sign on to the agreement. Instead the office will present an “alternative viewpoint” to consider, according to a letter sent to the state Utilities and Transportation Commission.
The agreement reflects efforts by PSE, the state’s largest private utility, to transition away from coal.
The fossil fuel is championed by President Donald Trump, who is seeking to boost U.S. production. Coal power plants continue to have strong support in Montana, where they provide family-wage jobs that prop up the community of Colstrip.
But coal is a major source of carbon emissions that drive climate change, as well as other pollutants. And it has been at a serious competitive disadvantage to other power sources such as natural gas.
Two of the smaller Colstrip units already are scheduled to be shut down by 2022. The agreement states that the remaining two larger units — Colstrip 3 and 4 — would accelerate the time period during which their costs would be written off and fully depreciated. Rather than 2045, the new date would be 2027.
PSE officials caution it does not mean Colstrip 3 and 4 would be shut down at that date, because there could continue to be an economic case for running them. But environmental groups are hopeful that the agreement, which calls for annual updates of the estimated closure dates, sets the stage for PSE to end its involvement in Colstrip and prod four other utilities to do the same.
“It is a big deal. It really does pave the way for PSE to get out of coal, and sends a huge message to the rest of the (Colstrip utility) owners,” said Caleb Heeringa, a spokesman for the Sierra Club’s Beyond Coal campaign.
PSE, a state-regulated utility, is headquartered in Bellevue. It has a service area of some 4 million people in 10 Western Washington counties. PSE owns one-third of Colstrip’s total output, which is 677 megawatts of power, or enough to meet the electricity needs of about 500,000 households,
In a commission filing in January, PSE proposed raising electric rates by 4.1 percent as it grappled with the costs that would be involved in closing Colstrip. Later, the commission staff proposed PSE, in the period beginning in January, drop those rates by 2.2 percent.
Under the settlement, PSE would set aside several pots of money to handle the closure costs for all four of the Colstrip units. The biggest chunk would be some $280 million in federal tax credits that PSE will take in over the years from operating wind-power turbines.
PSE shareholders would chip in $5 million of the $10 million to fund the transition plan for Colstrip workers.
Some issues in the rate case, such as how best to encourage conservation, were not resolved in the settlement.
The agreement also does not address the sources of the electricity that PSE will use to replace the Colstrip power. That will be determined in the years ahead as PSE puts out requests to bid for alternative generation that could come from natural gas, wind power or other sources.