Carty Generating Station In Limbo
Posted on April 28, 2016 by Bob Jenks
Tags, Energy
Last November, a Spanish Company, Abengoa, entered pre-bankruptcy talks with its creditors. At the time, PGE was well on its way to finishing construction of its new $514 million 440 MW natural gas plant in Boardman, Oregon, called the Carty Generating Station. The plant was expected to be producing power to serve PGE loads by the middle of the summer.
While it may still come on line by the middle of the summer, it will do so with more than $150 million in cost overruns and faces several years of litigation.
PGE had hired Abeinsa to be the primary contractor to manage building the plant. Abeinsa was owned by the Spanish company now facing bankruptcy. In December, PGE fired Abeinsa, finding its contractor in default of the construction agreement.
Since taking over construction, PGE has claimed that there were “serious, and potentially deadly” defects and that Abeinsa had failed to pay subcontractors. These problems have contributed to the cost overruns at the plant.
But PGE was supposed to be protected by a $145.6 million performance or “surety” bond, backed up by Liberty Mutual Surety and Zurich North America. However, those insurance companies claim that PGE forfeited that bond when it fired the contractor in December.
This led to last month’s lawsuit by PGE against the insurance companies. PGE has also stated that if it fails to get the insurance companies to pay, it will ask the Oregon Public Utility Commission to raise rates and charge these cost overruns to customers.
A request to charge customers will probably not happen until several years of litigation have passed, and even at that point will be difficult for PGE. PGE had a performance bond to protect itself against this sort of problem. Somehow, that bond failed to do what it was supposed to do. PGE will have to explain why customers should be on the hook for this failure.
In the meantime, PGE is working to try to get the project completed by July 31, 2016, the deadline for the plant to be “used and useful,” which will allow PGE to begin recovering the original $514 million plant investment. If it fails to complete the project on time, PGE will likely be required to file a new rate case, which will delay the rate increase associated with the plant for several months.
Stay tuned for updates as PGE’s deadline approaches for completing the Carty project.
To keep up with CUB, like us on Facebook and follow us on Twitter! You can also keep up to date with breaking news by joining our email list today!
12/27/16 | 0 Comments | Carty Generating Station In Limbo