Pacific Power customers will pay less for electricity in 2021, partly because of investments in renewable energy, but also because Oregon utility regulators found fault with parent company PacifiCorp’s decision several years ago to install pollution control systems at a coal-fired power plant in Wyoming.
PacifiCorp originally asked for a 6% increase in its base rates, then trimmed the request to 3.5%. But the Oregon Public Utility Commission on Friday ordered a cut of $20.9 million in the company’s revenue requirement, a 1.6% decrease.
Separately, customers will also benefit from nearly $50 million in lower expected energy costs next year, which the PUC attributed in part to new wind power plants that will drive down fuel costs and deliver federal tax credits.
In a news release Monday afternoon, PacifiCorp put the net average rate decrease at 5.2 percent, more than half of which it attributed to the renewable energy investments.
“The commission’s decisions demonstrate the customer benefits derived from years of innovation and system investments the company has made since our last general rate review in 2013 to improve service, give customers more tools to manage their energy use and increase the amount of renewable power available to them through a more resilient transmission system,” Stefan Bird, Pacific Power’s CEO, said in the release.
But the Oregon regulators put off dealing with $27.3 million in coal-plant decommissioning costs pending further investigation, and some amount of those costs will eventually be folded into rates, they noted, perhaps as soon as 2022.
“Decommissioning costs are real and significant costs that Oregon customers will incur as part of the coal transition, and we need to improve Oregonians’ confidence in the cost estimates through additional PUC staff and stakeholder review before we include PacifiCorp’s projected costs in rates,” Megan Decker, the PUC chair, said in a statement.
Customers will benefit, however, from the PUC’s decision to set PacifiCorp’s return on equity at 9.5%. That was at the higher end of what various stakeholders wanted, but well below the 10.2% that the company had requested in its first general rate case in seven years.
It’s typical for regulators to trim utility rate requests, but ratepayer advocates and environmentalists also got a clear win on the hotly contested issue of PacifiCorp’s decision in 2013 to install selective catalytic reduction systems at two units of the Jim Bridger plant.
The investments helped the plant comply with federal regional haze rules in an agreement with Wyoming regulators, and potentially extended the life of the two units by 20 years.
At the time, the Oregon PUC said PacifiCorp hadn’t adequately justified the decision in its integrated resource planning process. That lack of regulatory “acknowledgement” didn’t foreclose cost recovery for PacifiCorp once the systems were operational, but it dug the company a hole in demonstrating the investments were prudent.
The company was challenged on the investments by the Sierra Club, along with the residential ratepayer advocate CUB and the Alliance of Western Energy Consumers, which represents big commercial and industrial customers.
In a filing in the case, CUB called the Bridger upgrades a “significant means to buoy shareholder returns” for PacifiCorp. CUB and the Sierra Club said the company had been warned to explore options that could have led to an early retirement of the plant — and, indeed, it’s now scheduled to be removed from Oregon rates at the end of 2025.
The stakeholders argued PacifiCorp rushed to do the upgrades even as gas prices were falling and coal costs were increasing, shifting the economics against the investment. PacifiCorp said it had tracked those developments, but was under pressure from Wyoming to move fast.
In its order, the PUC said the company was cursory in updating and reviewing its analysis, and “failed to demonstrate that it proactively explored alternatives” to the investments, both early in the regulatory process and leading up to when it made a final decision in December 2013.
As a result, the commission ruled PacifiCorp couldn’t earn a return on the equity portion of the $56.9 million in investment costs attributable to Oregon ratepayers, who make up about nearly a third of its 1.9 million customers in six states. The Sierra Club, in a preliminary estimate, said that would cost the company — and save Oregon ratepayers — about $24 million over the depreciable life of the investment, which runs to 2038.
“This decision sends a clear signal to utilities — coal plants are no longer a cost-effective way to produce electricity, and they shouldn’t expect ratepayers to shoulder the costs of propping them up,” Cesia Kearns, deputy regional director of the Sierra Club’s Beyond Coal campaign, said in an emailed statement. “By denying Pacificorp the ability to charge its customers for tens of millions in ill-advised investments in the 45-year-old Jim Bridger coal plant, this decision saves Oregon families money on their monthly electricity bills and makes it clear that Pacificorp needs to move its aging coal plants towards an orderly retirement that supports community transition.”
A spokesperson for PacifiCorp said the company continued to believe the investments were the most cost-effective options for ratepayers at the time. He noted that most states in its territory have allowed full recovering of the investments, “including California, which approved the SCR investments in 2020.”
Under Oregon law, PacifiCorp can’t include coal power in its Oregon rates beginning in 2030. Shifting energy economics are fast making that an easy pill to swallow for the company, particularly as its piles up investments in new wind and solar power, energy storage and associated transmission.
In its latest resource plan, PacifiCorp outlined several early coal retirements, along with a renewable energy expansion, following fast on the heels of its $3 billion Energy Vision 2020 initiative, likely to cost billions of dollars. And in the rate-case order Friday, the Oregon PUC backed exiting Oregon from 12 generating units by the end of 2027 at the latest.
But the move away from coal is bitterly opposed by most Wyoming politicians, where mining the fossil fuel and generating energy from it have long been economic mainstays.
That complicates how the cost (and benefits) of the transition from coal are allocated throughout the utility’s six-state system, and played a role in the PUC’s decision to hold off on putting a price tag on the decommissioning costs that lie ahead.
