CUB Concerned About Pacific Power’s Risky Proposed Investment
Posted on September 15, 2017 by Bob Jenks
Tags, Energy
On Thursday, September 14, at a Public Utility Commission workshop concerning Pacific Power’s Integrated Resource Plan (IRP), CUB informed the Commission of our serious concerns about the risks of the investments compared to a relatively small benefit to customers and a large benefit to shareholders.
Pacific Power is proposing to spend $3.2 billion on a plan with two elements: repowering its existing wind facilities with newer turbines that will increase generation, and building a new transmission line in Wyoming that would allow the company to incorporate an additional wind facility. CUB believes that the proposal to repower the existing wind farms is economic and makes sense for customers. However, the new transmission line is extremely risky.
CUB’s analysis shows the benefit primarily flows to shareholders. Pacific Power claims that the project will provide $137 million in benefits to customers between now and 2050 – this represents four percent of the amount invested. Pacific Power serves six states, so the benefit to Oregon customers is a little more than $1 million per year through 2050. Shareholders, however, will see a much bigger benefit. Utilities earn a profit on their invested capital. A $3.2 billion investment will provide approximately $150 million in profits in its first year. And the company will continue to earn a profit every year until 2050.
The risks associated with the project are primarily on the customer side. CUB looked at transmission projects across the country and concluded that there is a high degree of uncertainty as to the cost of a transmission project, and significant cost overruns are common.
One recent study of 30 transmission projects in the southeast found that 76 percent of them had cost overruns of more than 30 percent. Another recent study of ten transmission projects in New England found that on average they cost 79 percent more than projected. In this case, much smaller cost overruns could eliminate all benefits from this project.
The power provided by this investment is not needed to serve customers. For the first several months of Pacific Power’s IRP process, stakeholders were told that the company did not need any new resources until 2028. There is enough power available in wholesale markets for it to meet its customer load through 2028.
In addition, by 2028 Pacific Power will begin closing some of its fleet of coal plants. This will free up a great deal of existing transmission that could then be used to support wind projects in Wyoming. Rather than building an expensive and risky new transmission line, Pacific Power has the option of reducing its coal generation as a way to provide transmission for renewables.
CUB is supportive of utilities investing in renewables. The transition from coal to a cleaner system is necessary. But utilities must manage this transition in a way that does not create significant risks to customers. And Pacific Power’s proposal to invest in a risky new transmission project fails this test.
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09/15/17 | 0 Comments | CUB Concerned About Pacific Power’s Risky Proposed Investment