Decision Reached on Residential Customer Impacts of New Wheatridge Energy Facility
Posted on December 22, 2020 by Will Gehrke
Tags, Energy
Out with the old, and in with the new. The picture above is symbolic of the energy transition occurring around Oregon’s power generation. In the foreground, a new wind turbine at Wheatridge is being constructed to provide zero fuel cost energy to Portland General Electric (PGE) customers. The Wheatridge Energy facility is a new PGE power plant which is providing 300 megawatts of wind energy, enough power to meet the annual energy use of 100,000 homes. In 2021, Wheatridge will also include 50 megawatts of solar and 40 megawatts of energy storage. In the background, the picture captures PGE’s Boardman coal plant, which is the last coal power plant in Oregon. A decade ago, PGE committed to closing down Boardman. Electric utility companies across the US are no longer constructing coal power plants. Existing coal plants are being shut down and replaced with cleaner and cheaper sources of electricity.
Starting in December 2020, the average residential PGE customer will experience a monthly bill increase of $0.62, or 0.6 percent, due to the costs of the Wheatridge Energy Farm. This is a remarkably low rate increase for a new generation facility being added onto a utility’s system. Wind generation is much cheaper than coal generation in large part because the resource providing the energy – wind – is free.
Over the past five years, Pacific Northwest utilities have constructed a considerable amount of wind resources. This boom has been largely caused by federal energy policy, state energy policies, and low wind generation capital costs.
From 2016 to 2020, new utility-scale wind generation resources have qualified for a federal production tax credit. A new wind resource qualifies for production tax credits in the first ten years of operation. The production tax credit scales based on the output of the wind turbines. The more energy the wind turbines produce, the more tax credits the facility earns for the company. Since utility customers pay for the taxes associated with utility revenue, tax credits are passed back to utility customers. These federal tax credits for wind resources have reduced the total cost of owning and operating wind generation units. Since utilities operate under a least-cost and least-risk framework, low wind costs have encouraged the construction of new wind resources. However, the wind production tax credits are due to expire in 2020; this sunset date has also incentivized utilities to build new renewable projects and lock in a lower cost renewable resource for their customers.
CUB evaluated the economics and process around PGE’s decision to move forward with constructing the Wheatridge Wind Farm. CUB found that the decision was a reasonable and prudent action for PGE. However, CUB had concerns about how the expected generation of Wheatridge would factor in future utility customer rates.
Electric utilities update their expected power costs in annual proceedings before the Oregon Public Utility Commission (PUC). Historically, the utilities used the expected generation of wind facilities provided by independent engineers as an estimate of a given wind facility’s annual generation. However, PGE changed its modelling approach to use the historic data to estimate the expected generation of a wind facility. PGE’s modeling change for power costs has shifted the risk of underperformance to utility customers.
CUB wanted to change how the Wheatridge facility’s wind generation was modeled in power cost rates. PGE will earn thirty years of profits on the new Wheatridge facility. CUB believes that customers should not bear all the production risk associated with Wheatridge. If Wheatridge underperforms on its expected generation, customers will likely see less of a benefit from this new wind resource. PGE will still earn its 30 years of profit on the project. Unfortunately, the PUC did not accept CUB’s proposal to share the production risk of Wheatridge. The PUC did indicate that if, in future power cost dockets, Wheatridge does not perform to expectations, it may impose adjustments to make customers whole.
CUB is always looking out for the best interests of Oregon’s residential utility customers. Our staff reviews electric utilities’ annual rate proposals to ensure that residential rates are fair. If Wheatridge underperforms, you can bet that CUB will be there to ensure that residential customers aren’t unfairly made to pay the price.
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12/23/20 | 0 Comments | Decision Reached on Residential Customer Impacts of New Wheatridge Energy Facility