State regulators uphold Centralia coal plant contract




Media contact: (360) 664-1116 or media@utc.wa.gov
Docket Number: UE-121373
OLYMPIA, Wash. – State regulators today issued an order resolving the final issues surrounding Puget Sound Energy’s (PSE) petition for approval of a power purchase agreement between the company and TransAlta Centralia Generation LLC (TransAlta).
At PSE’s request, the Washington Utilities and Transportation Commission (UTC) reconsidered portions of its January order approving  a long-term “coal transition” power purchase agreement between PSE and TransAlta that set the stage for closing the state’s remaining coal-fired electric generating plant by 2025. That agreement allows PSE to purchase an average 346 megawatts of coal transition power from the Centralia coal plant. The contract takes effect Dec. 1, 2014, and continues through Dec. 31, 2025.
The UTC found that the long-term contract for 346 average megawatts from the Centralia plant was the least-cost option for the acquisition of power the utility needs to meet demand, and that the contract would not result in higher costs to PSE’s customers than if the company had purchased power from other sources.
In its order today, the UTC clarified that PSE may recover its costs for coal transition power starting in 2014. The order authorizes PSE to request annual rate adjustments to account for coal transition power costs beginning Dec. 1, 2014.
The UTC also approved amendments to the coal transition power contract that, among other things, will allow the company to alert the UTC if TransAlta does not follow through on its commitment to make payments for local economic assistance. Under a separate memorandum of agreement between TransAlta and the state, TransAlta must contribute at least $13.8 million in local economic development in Lewis County, $6.9 million in energy efficiency and weatherization, and $17.3 million in clean energy technologies once the power purchase agreement goes into effect.
By law, the utility may earn a return on the contract as if the power were generated by a facility owned by the utility itself. The UTC reaffirmed its decision that the company will earn an additional $44.12 million over the 11-year term of the coal transition power contract.
Gov. Chris Gregoire signed the Coal-Transition Energy Bill (Engrossed Second Substitute Senate Bill 5769) in 2011. This bill provides certain deferrals of greenhouse gas emissions performance standards to encourage the early closure of coal plants in Washington.
In its earlier order in January, the UTC required that PSE file an annual report regarding the contract, which includes detailed plant operation and power-source data from TransAlta to allow the UTC to ensure that the purposes of the Coal Transition Energy Bill are met and that the public interest is protected. 
The commissioners said that approval of the contract “provides a transition for citizens living in the communities most directly affected by the closure, maintaining family-wage jobs and promoting economic development that will substitute for the loss of the plant, which remains an economic mainstay in Centralia and surrounding suburban and rural communities…. [T]he state has provided for the broader public interest to benefit from the assured closure of a significant source of air pollution on a definite schedule.”
Bellevue-based Puget Sound Energy serves about 1.1 million electric customers and nearly 760,000 natural gas customers in parts of Snohomish, King, Pierce, Lewis, Thurston, Whatcom and Kittitas counties.
The UTC is the state agency in charge of regulating the private, investor-owned electric companies in Washington. It is the commission’s responsibility to ensure regulated companies provide safe and reliable service to customers at reasonable rates, while allowing them the opportunity to earn a fair profit.

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Content Type: Announcement
Created at 6/25/2013 3:23 PM by Meehan, Marilyn (UTC)
Last modified at 6/27/2013 9:33 AM by Meehan, Marilyn (UTC)