CUB, Pacific Power Reach Settlement on Mine Closure Costs
Posted on April 17, 2015 by Bob Jenks
Tags, Energy
CUB and Pacific Power sat down recently and reached an agreement on the costs associated with the utility’s proposal to close the Deer Creek Mine. Earlier, CUB filed testimony which supported the closure of the mine, but opposed the method that the Company sought to recover the costs from ratepayers. The effect of the agreement, if approved, is that customers will see a 1.1 % increase in January 2016, rather than a 3% increase this May.
The centerpiece of the transaction is the closure of the Deer Creek Coal Mine, but the transaction has several parts, including: (1) the sale of some property near the mine, (2) the settlement of the company’s future retiree health insurance costs with the union associated with the mineworkers, (3) a reduction in the liability associated with the multi-employer union pension plan when compared to continued operation of the mine, and (4) a new contract for coal for the company to supply its Huntington plant.
The economic analysis of the transaction is confidential, but generally shows significant benefits for customers for closing the mine and selling some of the mining property. Coal mining comes with risks of future liabilities. Closing the mine will limit Pacific Power’s exposure to those liabilities. CUB’s evaluation of the economics of the transaction found it to be positive for customers. While it will require a small increase in the short term, in the long term, the benefits will be significant.
CUB strongly disagreed with the ratemaking treatment proposed by the utility in its initial filing. Pacific Power proposed to raise rates starting this May, even though the utility had agreed to not have additional rate increases before next January. And it did so in a manner that raised rates by 3%—CUB believed the rate increase could be reduced.
In CUB’s testimony, CUB proposed ratemaking treatment that was based on the retirement of the Trojan nuclear power plant. After Trojan closed, CUB sued the Public Utility Commission over its treatment of the costs associated with Trojan and won a Court of Appeals decision saying Oregon law prohibits utilities from earning a profit on investments that are retired and no longer providing service to customers. CUB’s proposed ratemaking treatment in this docket is consistent with the Trojan decision.
Not only does CUB think there is real value in closing the mine and reducing future liabilities, CUB also thinks there is real value in reaffirming that the Trojan decision is the basis for how retired property is treated for ratemaking purposes. Regulation of carbon emissions is just beginning. There are 30 coal plants that currently serve Oregon, and the costs of compliance with environmental regulations for carbon emissions will likely make it uneconomic to keep the plants running. Customers will be well served if we keep the Trojan case in mind as we consider what to do with retired coal plants.
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04/28/17 | 0 Comments | CUB, Pacific Power Reach Settlement on Mine Closure Costs