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More Gas-Fired Generation Welcomed in Pacific Northwest

Construction of a major natural gas-fired power plant and the possibility of rate-based gas reserves are part of Portland General Electric Co.'s (PGE) immediate future, PGE CEO Jim Piro told financial analysts on a 3Q2015 earnings conference call Tuesday. He called the utility's future need for natural gas "significant."

While reiterating that supplies from wind and hydropower resources are down so far this year (see Daily GPI,July 28), Piro said construction is 70% complete on PGE's $450 million, 440 MW gas-fired Carty generation plant at Boardman, OR, adjacent to a coal-fired plant scheduled to be retired in 2020. Carty is on budget and on track to start operations in 2Q2016, Piro said.

"We completed installation of the heat-recovery steam generator and the successful hydrostatic testing of related piping integrity on the plant," Piro said. "We are now starting the commissioning process."

Piro said that the Carty plant needs to be in service by July 31 to avoid having to make a separate filing to get the new facility into rate base. He expects that, aside from some catastrophic weather or force majeure event, the plant will be online before then.

For the first six months of this year, wind power was off by 30% and hydroelectric supplies were below normal, and Piro said that has continued throughout the most recent quarter, which included one of the warmest summers ever in the Portland area.

Future needs, including gas-fired generation, will be evaluated in an updated integrated resources plan (IRP), Piro said. That IRP will not include potential ratepayer support for natural gas reserve purchases, although he said PGE is still pursuing a rate-based gas reserve program.

"We've pulled [gas reserves] out of the IRP, but we are conducting discussions with all the stakeholder groups about where we see the value of long-term hedging, and that's really where the conversation starts," Piro said.

"We think where gas prices are, and the fact that we have a pretty significant need for natural gas to fuel our [future] power plants, a long-term hedge would provide value for our customers, so we're in discussions with stakeholders on the structure of that, how we would do it, and what risks/rewards we take and the customers take around a gas reserve strategy. Those conversations are going forward outside of the IRP process."

Piro said PGE continues to "work hard" on a reserves strategy.

For 3Q2015, PGE reported profits of $36 million (40 cents/share), compared to $39 million (47 cents/share) for the same period last year.

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