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CPP, Climate Change Politics Impacting Western Coal, PGE CEO Says

The Obama administration’s Clean Power Plan (CPP) and increasing state-level political activity on climate change is impacting existing coal-fired generation in the western states, particularly Montana, Portland General Electric Co. (PGE) CEO Jim Piro said Tuesday during a quarterly earnings conference call.

In the context of integrated resource planning (IRP) for which PGE will be updating its strategy next year, Piro mentioned pressures in Oregon and Washington to mandate future bans on coal-fired generation along with boosting upward the renewable portfolio goals from 20% to percentages approaching 40-50%. Under the CPP, coal generation has few alternatives.

"Montana has a significant challenge from the CPP," Piro said. "If you look at the plan, Montana has some pretty significant hurdles to achieve, and that will have an impact on the coal projects up there.”

States are challenging the Environmental Protection Agency, claiming it exceeded its authority and provided insufficient time to design and submit plans on how they would replace coal-fired generation with cleaner alternatives, including natural gas (see Daily GPIAug. 21Aug. 14).

Bellevue, WA-based Puget Sound Energy (PSE) has 50% interest in Colstrip's Unit 1 and 2 coal-fired plants in Montana, and PGE holds 20% interests in Units 3 and 4.

"PSE is having a lot of conversations [about coal-fired power] up in Washington, and the early talk is focused on Units 1 and 2 since those are the oldest ones," Piro said. "There are lots of conversations ongoing around Colstrip, but it is hard to tell how it will all play out."

Over the longer term, Piro said the biggest risk for impacting the ability to buy coal-fired power to smooth out loads and prices would come from the proposed CPP for generation plants.

"As I understand the CPP, rules need to be developed by the states, and if a given state doesn't take action, the federal government can move in and put an implementation plan in place," he said. "The requirements are very stringent up in Montana, and it is unclear how they can achieve those goals, so there are likely to be some coal plant shutdowns to meet the mass rules."

Piro said there is "much more to play out" on the CPP issues, and it would be essential to see how the courts view the plan. "I think we are still early in the game in this process."

In updating its IRP, Piro said PGE will have to consider potential impacts from state legislative or ballot initiative efforts to ban the use of coal-fired power in Oregon. A proposed ballot measure in early development would ban use of coal-fired power by 2030, which would impact the Oregon utility's use of its Colstrip interests.

"That would definitely impact our ability to use some of the power for our customers needs, but it doesn't mandate shutting the coal-fired plants down," Piro said. "Under this ballot measure, Colstrip would still be available for something, it is just not clear what."

The other part of the proposed ballot initiative would increase the state RPS standard to about 50% by 2040. The proposal has been filed with state authorities, but has yet to qualify for the ballot or meet other criteria, Piro said.

PGE plans to own many of the future renewable projects that would be required to meet the near-50% standard, Piro said.

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