Pacific Power: Learn a lesson from PGE, OK?

By Bob Jenks of Portland, Oregon. Bob is the Executive Director of the Citizens' Utility Board of Oregon.

Last month, Oregon customers of Pacific Power saw a "Generation Credit" on their bills. While the credit was small enough that many customers may not have noticed (between $1 and $2 per month), its total amount, $17 million, was hopefully large enough to get the utility's attention. The credit was ordered by the Oregon Public Utility Commission in December when it found Pacific Power imprudently invested more than $100 million in its coal units. These decisions were made without considering alternative investments that could be cheaper than extending the life of aging coal plants.

While we think of the Pacific Northwest as a beautiful place endowed with an amazing low-cost hydroelectric generation system, the truth is that much of Oregonâ s electricity is generated by burning coal in 30 different coal units throughout the west. Nearly all of these plants require significant and costly investments to meet federal clean air regulations. Many of these plants are old â several were built before color television was available in Portland.

PGE deserves a lot of credit for working with both regulators and customers to determine the future of its Boardman coal plant. By retiring that plant in 2020, PGE found a way to avoid $500 million in clean air investment and reduce its overall costs, resulting in a better deal for the utility, consumers, and the environment. In addition, PGE avoids decades of continued pollution and potential climate change regulation.

PGE demonstrated that sometimes the least-cost investment is to phase out a coal plant. Pacific Power has not learned this lesson, and that's why the utility's customers will see a rate credit on their bills. With an operating fleet of 26 coal units, Pacific Power is in the process of investing billions of dollars in clean air upgrades on its coal fleet. However, Pacific Power failed to consider alternative investment strategies, such as a phasing out of its coal units, similar to PGE's approach. After months of testimony, cross examination of witnesses, and oral argument, Oregon's Public Utility Commissioners determined that Pacific Power had failed to do the necessary least-cost least-risk analysis, and that its investment to keep operating its coal units was imprudent.

While this is certainly good news for Pacific Power customers, it will be even better news if the utility commits to doing what PGE did: considering the full range of cost-effective power generation options before investing in a coal plant to determine if there are cheaper and cleaner ways to meet customer needs.

Because these coal plants contribute to climate change and will be subject to some sort of carbon regulation in the future as the country tries to reduce carbon emissions, it is important to be careful before investing in their continued operation. You wouldn't invest thousands of dollars in an aging car that will not last, and you donâ t want your utility investing hundreds of millions of ratepayer dollars in an aging coal plant nearing the end of its lifespan.

March 27, 2013 Posted in guest column.