Chasing coal plant longevity, bills open door to deregulation

Chasing coal plant longevity, bills open door to deregulation

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Naughton Power Plant closing unit 3

PacifiCorps’s Naughton Plant and the adjacent Westmoreland coal mine are seen in 2014. Lawmakers are considering two bills intended to prop up coal-fired power plants.

Lawmakers are considering two bills aimed at propping up coal-fired power plants, but some say they could lead Wyoming down the road to deregulation and a fundamental reordering of the electric utility system.

The draft deregulation bill would allow the buyer of an early retired coal unit to transmit power over another utility’s lines, a practice that’s not permitted today. The new owner of an early retirement unit would compete with the existing power-generating company for the sale of power itself.

A second draft bill would allow Wyoming regulators to require power companies to pony up “transition assistance” to communities impacted by early retirements. When considering early retirement of coal-fired plants, the Wyoming Public Service Commission must take into account “socioeconomic factors” including lost jobs and taxes, the draft bill states.

Together with Senate File 159 — a law passed in February that requires power companies like PacifiCorp to try and sell coal-fired units they plan to retire early — the proposals threaten to disrupt the traditional monopoly/franchise system in which one utility generates and transmits the electricity under oversight by the Public Service Commission, a regulatory board of appointed citizens.

The measures come in response to PacifiCorp’s plans to shut down four coal-fired units at the Jim Bridger and Naughton power plants before the end of their useful, or depreciable, lives.

Those plans, driven by West Coast consumer preferences, have left communities from Kemmerer to Rock Springs to grapple with the looming effects of early closures. They’ve also left Wyoming lawmakers scrambling for solutions.

“We don’t want to put this plane into a nosedive,” Sen. Dan Dockstader (R-Afton) said of the coal industry in September. “We want to land it soft and easy.”

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Whether the bills can ameliorate the pain of power-unit closure is an open question, Sen. Cale Case, R-Lander, told WyoFile in an interview. Even if Wyoming chooses to get all its electricity from coal, an option regulators across the West are collectively examining, the relatively meager power demands here would not meet historic levels of generation, the economist and Corporations Committee member said.

PacifiCorp serves 1.9 million customers in six states. About 16 percent, or 14,712 customers, are in Wyoming. Seventy-five percent of the company’s power consumed in Wyoming is used by industrial facilities, according to a company presentation.

“We don’t have room to take much power in Wyoming,” Case said. To maintain the state’s plants, “we need customers in other states.

“It’s hard for me to imagine this is going to have a significant impact,” Case added of the bills’ effects on the large-scale coal industry.

Utilities will fight the draft bills, Case said.

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Deregulation could allow competitors into the existing monopoly/franchise system by “unbundling” power generation and transmission from one another. The Public Service Commission, a regulatory board of appointed citizens, oversees the existing franchise system to ensure fairness in a non-competitive market.

About 15 states have some sort of deregulated electricity markets in which consumers can choose a power supplier, even if that supplier does not own the area’s transmission lines. Consumers in such instances usually receive a single invoice but with separate power and transmission charges.

Debate persists whether a regulated or deregulated system is superior, and whether deregulation promotes innovative energy solutions or undermines community and business investments.

The draft deregulation bill under consideration — Coal Fired Electrical Generating Facilities — would enable the buyer of an early retirement coal plant to sell electricity over an existing utility’s transmission lines. The result is that the new buyer wouldn’t have to build its own transmission lines.

Some see red flags in the proposal, which they say can escalate into the risky realm of deregulation. The concept “is a step down the total-deregulation route,” Sen. Charles Scott, R-Casper, told the Corporations Committee in September.

The Wyoming Office of Consumer Advocate administrator called the concept a “half-bred heifer.”

“When you regulate parts of a market or deregulate [parts], we have a long history in this country of that not working well,” Bryce Freeman told the committee.

The owner of transmission lines would likely be able to charge for their use by another provider, Case told WyoFile. “I’m sure we cannot force PacifiCorp to do that for free,” he said. Federal laws enforced by the Federal Energy Regulatory Commission will limit what Wyoming can do over the grid.

“This is a very complicated area between the federal and state government,” Case said. The biggest advantage of such deregulation could land among industrial users, he continued, some of whom already generate a portion of their own electricity.

“This would open up a bigger world for all these industrials to work together, to buy each other’s power,” he said.

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In recent months, state lawmakers have grilled PacifiCorp representatives and chastised them for plans that shift power generation from coal to natural gas, wind and solar sources. PacifiCorp representatives said repeatedly the company’s decisions benefit ratepayers and are founded on economics that include the low price of gas.

“Our focus is to find the least-cost provider to our customers,” PacifiCorp Vice President Chad Teply told lawmakers Oct. 30 at a meeting of the Joint Appropriations Committee. The company’s plans will save ratepayers “hundreds of millions of dollars,” he said. Lawmakers expressed disbelief.

“I clearly think wind and solar are driven by politics,” Sen. Eli Bebout, R-Riverton, said to PacifiCorp officials. “Short-term benefits to you have a long-term negative effect to my state.”

PacifiCorp can’t abandon the Wyoming communities that have powered it for decades, Rep. Albert Sommers, R-Pinedale, said. A $75,000 matching grant to the town of Kemmerer, where PacifiCorp plans to retire two Naughton Plant units early, “that’s frankly not going to cut it,” Sommers told Teply and PacifiCorp spokesman John Cox.

“As you pull out of these communities, what can you pull into them to help them survive?” Sommers asked at the appropriations meeting. “It’s your civic responsibility … to try and manage this in a humane way.”

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The 19-page Early Retirement of Coal Fired Generation Facilities is designed to enforce that civic responsibility with the weight of law.

The draft bill lists factors the Public Services Commission may weigh while considering a power company application to retire a coal-fired power plant early. It also requires deposits for reclamation and environmental remediation and calls for “transition assistance” from utilities that would cover worker training programs and even give displaced workers financial aid.

Utilities would also have to pay local governments for the loss of property taxes through 2025. The bill defines early retirement as “before the end of the facility’s established depreciable life,” or if the unit is set to be converted to another fuel.

The Legislature’s bill-drafting office raised numerous questions about this bill in notes inserted between sections of the measure. At least one provision might run afoul of the Wyoming Constitution, “which provides that private property cannot be taken or damaged for public or private use without just compensation,” one note reads.

Some of the notes pass on worries from the PSC about new tasks and responsibilities. The PSC “noted the expansion of its role and duties” and suggested lawmakers consider “whether another department or state agency is best suited to address transition assistance.” Another note said draft bill language asked the commission to grapple with issues that can only be addressed in rate cases, not other proceedings.

“If you read between the lines they’re saying, ‘we don’t want this job,’” Case said of the PSC. It’s uncertain what authority the PSC has over a company seeking to retire a plant in any case, he said. The PSC’s principal job lies in scrutinizing and approving rates, investment returns and profit margins, among other similar duties.

To protect coal-plant workers, Rep. Sara Burlingame, D-Cheyenne, proposed an amendment to the draft deregulation bill that would require the buyer of a coal-fired unit to honor retirement benefits that plant workers had accrued. That requirement would kick in if the selling company dropped its benefits program.

“The workers have done nothing but commit their lives — their blood, sweat and tears — to these companies,” she told WyoFile. “So some attention should be paid.”

WyoFile is an independent nonprofit news organization focused on Wyoming people, places and policy

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