PacifiCorp Can Recover Renewables Costs, Important Precedent Retained
Posted on October 17, 2019 by Mike Goetz
Tags, Energy
In a previous blog post, CUB detailed Pacific Power’s proposal to repower its wind generation fleet. In a recent decision, the Oregon Public Utility Commission (PUC) approved Pacific Power’s proposal. In early October, Pacific Power completed the first phase of its repowering projects that will increase the efficiency and output of its wind fleet throughout the West. The average Pacific Power residential customer rates will increase by 0.97 percent due to the cost associated with repowering.
What will repowering accomplish?
Pacific Power will remove old wind turbines and replace them with new wind turbine components. The new wind turbines will generate more energy than the old turbines. This will not only make the turbines more powerful and efficient, but it enables the projects to become re-eligible for federal Production Tax Credits (PTCs). PTCs are a federal tax credit that is linked to the production output of a wind generation facility. The more output, the greater the PTC benefit. As a regulated utility, Pacific Power passes this type of benefit back to customers. Retaining these PTC benefits was a key element of CUB’s support of the stipulation reached in this proceeding.
What issue did CUB raise about repowering?
Utilities earn a profit from the capital investments they make. When a utility outlays capital for a project that is used and useful to serve customers, it not only gets the investment back, it also earns a return on that investment. Initially, Pacific Power was seeking to earn two streams of profit in this case. One stream of profit from the old wind turbines, and another stream of profit from repowered turbines. CUB argued that is not fair for ratepayers to pay for two streams of profit on a single wind project, especially since the old wind turbines were no longer in service to serve customers—they were no longer used and useful.
In an all-party settlement, CUB and Pacific Power agreed to use the tax savings from 2017’s tax law change to buy down the old legacy wind turbines and avoid the company earning two streams of profit on a single wind turbine. This is important, because Oregon PUC practice and law has a longstanding precedent that utilities are not able to earn a return on an investment that is no longer used and useful to serve customers. Instead, the utility can earn the money back that it spent on the investment coupled with a “time value of money”, or inflation, component. The stipulation reached in this case helped preserve this important customer protection precedent.
Pacific Power’s repowering project will undoubtedly bring clean energy benefits to its system, and monetary benefits to its customers in the form of PTCs and deferring the need to operate more expensive energy resources or purchase energy on the market. Wind energy is cheap—beyond the capital needed to construct the resource, there is no extra fuel cost. It is also clean—something Oregon customers have said time and again that they want. Here at CUB, we will continue to advocate for sound energy policy and investments that deliver inexpensive energy to residential customers. It’s what we do.
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10/17/19 | 0 Comments | PacifiCorp Can Recover Renewables Costs, Important Precedent Retained