Puget Sound Energy (PSE) will reduce the amount of coal-fired electricity that flows to Western Washington ratepayers by selling part of its stake in Colstrip, an aging eastern Montana coal plant.
The $1 sale to NorthWestern Energy, which requires regulators’ approval, comes as PSE faces pressure to move to cleaner sources of energy.
“This is what our customers have been asking for, and we have been on a path for years,” said David Mills, PSE senior vice president of policy and energy supply, in a statement released Tuesday. “We’re excited to take this major step forward …”
The sale price of $1 was confirmed in a statement released by NorthWestern Energy, which called its acquisition a “unique opportunity” that would help keep its customers supplied with power while the utility transitions to cleaner energy sources.
PSE is the largest of six companies that own the Colstrip plant, which has four generating units. The sale involves the utility’s share in Colstrip Unit 4, according to a PSE statement.
The deal got a hostile reception from environmental groups, which have fought to shut down the plant, a major emitter of greenhouse gases. They expect NorthWestern to continue scaled-down operations at the plant for many years.
“Washington is a climate leader, and allowing our state’s largest utility to cut and run from its mistakes isn’t leadership … By selling the Colstrip plant to an out-of-state polluter rather than guiding it to an orderly retirement, Puget Sound Energy is enabling more climate disruption,” said Doug Howell, senior campaign representative for the Sierra Club.
PSE’s Ron Roberts, director of generation and natural gas, said Colstrip, with six owners, is an “incredibly complicated place … I am keenly aware that there will be a lot of parties out there who will be opposed to this because they don’t see everything shutting down immediately.”
But he said it achieves a very important PSE priority, which is to further decarbonize the utility’s energy portfolio.
The announcement comes as Colstrip faces serious financial challenges.
But the plant, which requires big investments for repairs and pollution cleanup, has been struggling to compete in Western markets full of natural gas, wind and other energy sources that have emerged as cheaper options. PSE’s announcement comes at the tail end of a year of big changes in the Washington electric-power industry with the passage of legislation requiring all utilities in the state to be off coal power by 2025.
PSE plans to keep an ownership stake in Colstrip Unit 3, and the utility will buy 90 megawatts of Unit 4’s power through 2025.
Colstrip in 2018 had annual carbon emissions, as reported to the Environmental Protection Agency, equal to some 2.8 million automobiles. This pollution has added to the pressures to wind down the plant. Colstrip units 1 and 2, the smallest and oldest units, already are scheduled to shut down at the end of the year.
In a statement, PSE said the sale would mean a 50% cut to coal in its energy portfolio. In an interview, Roberts said the coal power would be replaced by a mix of natural gas, hydro, wind and other energy sources purchased on power markets, and over the longer term, largely by renewables the company plans to develop.
The Sierra Club, in a statement, said that PSE, the largest owner of Colstrip, should have tried to guide the plant to an orderly retirement. The organization also criticized PSE’s sale of a Colstrip transmission line, which environmentalists hope can be used to bring Montana wind power to Washington and Oregon.
Colstrip Unit 4 began operating in 1986 and requires an estimated $20 million in repairs, according to the Billings Gazette.
The Nov. 27 Billings Gazette story was based on a review of regulatory filings with the Washington Utilities and Transportation Commission, including testimony by a commission staff member that someone attempted to unsuccessfully redact.
Washington utility commission staff recommend that owners not be allowed to pass on those repair costs to state ratepayers, according to the Billings Gazette.
PSE’s Roberts said the company carefully scrutinizes investments. But he said the need for Unit 4 repairs did not play a role in the sale.
The sale still requires the approval of the Washington utilities commission as well as the Montana Public Service Commission. The process is expected to play out over months.
PSE officials say the utility’s involvement in the Colstrip community will continue for years. The utility has contributed $10 million to a community transition planning effort and will be involved in decommission and cleanup.
Colstrip has strong political support in Montana as a big source of family wage jobs in the rural southeast part of the state, but there also is concern among some NorthWestern ratepayers about the costs of the utility acquiring more ownership in Colstrip.
NorthWestern officials, in a statement released Tuesday, said the purchase makes financial sense.
“Even with projected operating and maintenance costs factored in, purchasing more of Colstrip Unit 4 for only one dollar is by far the most affordable way to help close the gap in the capacity shortage facing our customers,” said John Hines, NorthWestern Energy vice president of supply/Montana government affairs. “No other option — buying additional energy from the market or building a plant that would generate this amount of energy over multiple days when it is needed the most — can achieve the same results.”