A proposal in the Oregon legislature (HB 4036) advocating clean electricity could alter the state’s natural gas-fired generation, and a troubled gas-fired plant under construction in the state is back on track and should open later this year, Portland General Electric (PGE) CEO Jim Piro said Friday.
Ultimately, PGE could be looking at the need to invest up to a billion dollars in new gas-fired and renewable generation projects, Piro said. “We’ve got some really competitive potential sites, particularly on the gas side.”
In reporting slightly lower year-over-year profits in 2015 and a boost in 4Q2015 earnings, Piro told analysts on a conference call that PGE is still assessing the possible consequences for gas-fired generation from HB 4036’s proposed ban on coal-fired power and increased reliance on renewables, as well as the already designated closure of PGE’s majority owned and operated Boardman coal generation plant.
PGE at the end of last year had to delay work and fire the contractor on the utility’s 70% completed construction of the $450 million, 440 MW Carty gas-fired generation plant at Boardman (see Daily GPI, Dec. 22, 2015).
“We’re back on schedule and it is slated to finish at the end of July, but [to stay on schedule] everything is going to have to go perfect,” Piro said. “We’re going to watch it very carefully and we’ll know a lot more on our next earnings call.”
There will be additional costs, but how much depends on what PGE is able to negotiate in terms of coverage from surety providers, and those initial talks don’t get under way until March, Piro said. Those providers are project insurers Liberty Mutual Surety and Zurich North America, which provided a performance bond of $145.6 million under the original construction agreement.
Meanwhile, the proposed “Oregon Clean Electricity Plan” recently passed out of a House committee and is slated to be heard by the full lower legislative chamber next week (see Daily GPI, Jan. 14). HB 4036 addresses two major areas: eliminating coal-fired power in Oregon by 2030 (giving PGE until 2035), and increasing the state’s future renewable portfolio standard (RPS) targets, culminating with a 50% standard by 2040. Leading up to that the targets range from 27% in 2025 to 45% in 2035.
PGE is factoring the bill becoming law in its latest integrated resource plan (IRP), which it plans to file with the Oregon Public Utility Commission (PUC) in the second half of this year.
“There are supporters and opponents of the measure, so we will just have to see how it plays out,” Piro said.
PGE is still wrestling with what it will do after 2020, when the Boardman coal plant closes. “That is being evaluated in the IRP, and obviously prior to HB 4036 our thinking was replacing it with a likely natural gas-fired plant; that would normally be what we’d do, and we would have to issue a request for proposals [RFP] like we did before,” Piro said.
“Carty is being designed as a two-unit site, so it would be very good to look at a second unit there. But with the 50% RPS standard, we have to consider the entire mix and long-term trajectory of what’s the right thing we need, so it is not clear at this point what we will do; whether it will be more renewables or gas-fired generation. That is really the central topic in the IRP.”
It is also unclear how much, if any, new capacity the Pacific Northwest needs, but Piro said that he feels additional capacity is going to be needed as higher RPS standards are imposed.
Piro said there is potentially $1 billion collectively in future gas-fired and wind power projects tied to the higher RPS standards. Piro said PGE should get PUC feedback on the IRP next year and expects the RFP to be phased in during 2018.
PGE reported net income of $172 million ($2.04/share) for 2015, compared to $175 million ($2.18) in 2014. For 4Q2015, net income was $51 million (57 cents), compared to $43 million (55 cents) for the last quarter of 2014.
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