Wednesday, December 19, 2007

Utility Sees the Error of its Ways

Some utilities blindly stumble forward with plans to build new coal plants, hoping promises and exaggerated claims and a little luck will allow them to continue outmoded operations well into the 21st century. Others get wise and change with the times.

One such utility is the northwestern utility, PacifiCorp.

From the Oregonian:

PacifiCorp has backed away from plans to build any new coal plants within the next 10 years, conceding that coal no longer can overcome tightening regulations and environmental opposition.

In recent filings and communications with regulators in Utah and Oregon, the Portland-based company said three coal plants included earlier this year in long-range resource plans and subsequent requests for proposals were "no longer viable options."

PacifiCorp cited as reasons for its decision: The likelihood of national carbon emissions legislation, which it said makes accurate cost projections and risk assessment for coal plants "futile," and the fact that most of the coal plants proposed around the United States recently have been canceled, denied permits or been involved in protracted litigation.

In a filing with the Utah Public Service Commission, the company said it wasn't excluding coal from its 20-year planning options. But "absent some change in conditions, it cannot be determined at this time whether new coal generation ownership will satisfy the least-cost, least-risk standards that would enable us to consider it as a viable option in our 10 year plans."

Ratepayer advocates and environmentalists called the utility's decision a victory.

"We're encouraged that they seem to be moving away from coal," said Bob Jenks, executive director of the Citizen's Utility Board. "It's a good sign. I also think it's a sign of the reality that they're not going to get approval for it."

The move away from coal is an about-face for a company that generates nearly 65 percent of its electricity from coal.

Until recently, there was a distinct difference in receptivity to new coal plants on the two sides of the company's service territory. In Utah, where customers make up more than 40 percent of the company's total electricity consumption, regulators and state authorities have been far more willing to consider coal plants.

By contrast, regulators and lawmakers in Oregon, Washington and California have sent a clear signal that they don't want any more.

Earlier this year, Oregon passed a law requiring utilities to serve 25 percent of customer demand with renewable resources such as wind and geothermal by 2025, with interim targets. California and Washington have their own standards in place.

PacifiCorp's decision to drop coal from its near-term resource plans came after that legislation passed. It also came after Utah's decision to join the Western Climate Initiative, a group of Western states working on a regional plan to curb carbon emissions, said Marc Krasnowsky, a NW Energy Coalition spokesman.

David Eskelsen, a PacifiCorp spokesman, said there was no connection between Utah's action and its decision, though the company is certainly aware of increasing state pressures to go green. The question now, he said, is "if not coal, then what?"

The cost factor

Coal-fueled electricity, he said, has been less expensive, and the company's decision to invest in it allowed it to become one of the nation's lowest cost providers of electricity. Uncertainty around coal will push the company toward more gas-fired generators and as much wind power as it can round up, he said.

"If policies change, we'll comply," Eskelsen said, "but we want policymakers to be informed about the consequences on reliability and price. The price impact is unescapable."

Consumers advocates disagree. They contend that climate legislation will dramatically increase the cost of coal power. Moreover, they say, the capital costs for adding a gas plant are low compared with coal, so if a utility is forced to back off using a gas plant or shut it down, it doesn't cost ratepayers as much. By contrast, once utilities sink capital into a coal plant with a 60-year useful life, they want to use it.

Steve Weiss, an analyst with the NW Energy Coalition, also points out that gas-fired power plants, which can be cycled up and down rapidly, are more compatible with the intermittent renewable resources such as wind and solar, which are becoming a larger part of utilities' generation mix.

Natural gas emissions

Burning gas to make electricity still creates carbon dioxide, but at about half the level of an equivalent amount of electricity from a coal-powered plant, Weiss said.

PacifiCorp forecast in May that its overall customer demand would grow by 2.4 percent per year between 2007 and 2016. Most of that growth was skewed toward the east side of its six-state territory, particularly Utah and Wyoming.

By 2012, the company is projecting the need for an additional 1,700 megawatts of generation capacity. Consequently, it is hoping state regulators will expedite their review of a new request for a proposal it hopes to issue to suppliers in January. That call for bids will exclude coal.

Why doesn't Santee Cooper follow this prudent utility's lead. Coal isn't a viable option in our state either.

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