PUC finds PGE Imprudent in Operation of Boardman

In an order released today, the Public Utility Commission found that PGE was imprudent in its operation of the Boardman coal plant, and that PGE’s imprudence contributed to, but was not the sole cause of, the 2005 outage at the plant. The PUC ordered PGE to absorb $13 million associated with replacement power costs. Because the PUC found that PGE’s imprudence was not the sole cause of the outage, it did require that customers pay $13 million of the costs associated with the plant outage.

One of the factors that contributed to the operational misalignment – an improperly secured bearing pedestal – resulted from PGE’s imprudent conduct. Although the unsecured bearing pedestal in isolation did not create enough stress on the turbine shaft to cause the crack, the evidence supports the conclusion that improper support of the turbine train contributed to the initiation and propagation of the turbine crack. PGE could have prevented this problem had it physically inspected the turbine’s support structure to ensure that all fasteners were present and properly secured.

Because PGE imprudently failed to inspect the LP1 turbine’s support structure before installing a new rotor, we deny full recovery of the Deferred Amount.  We find, however, that partial recovery is warranted because PGE’s imprudence was not the sole cause of the outage.

At issue in the case was a total of $26 million in replacement power costs that were incurred when Boardman was closed in 2005 due to a cracked rotor. During the outage, PGE’s power cost increased by $45.7 million because the company had to replace the energy output of Boardman. In an earlier case, PGE had asked the PUC to allow it to defer the $45.7 million so it could charge those costs to customers. CUB strongly opposed that deferral, saying that the replacement power costs were part of the normal business risk associated with running a large coal power plant. CUB argued that customers should not be charged more than $1 million of the costs associated with the outage, and the PUC ruled that the PGE had to absorb some of the $45.7 million as part of the normal business risk. The PUC, however, allowed PGE to defer $26 million in replacement power costs for a later prudency review.

The order just issued stemmed from that prudency review which set about determining the cause of the outage, and whether PGE was at fault. Customers can only be charged for prudently incurred costs, and if PGE was fully at fault then there would be no basis to charge customers for any of the replacement power costs.

Determining the cause of the outage was a difficult process. PGE filed this case in the fall of 2007 seeking to charge customers the full $26 million that the PUC had allowed them to defer. PGE, and its contractors Siemans and Alstom, each conducted their own root cause analysis. CUB, representing residential customers, and ICNU, representing industrial customers, spent a great deal of time reviewing these three analyses of the outage. Both organizations concluded that the outage was caused by “high cycle fatigue,” and that the fatigue was caused by misalignment. CUB argued that PGE, who oversaw the installation of new rotors in 2000, should be found to be imprudent; and that the Commission should find that customers were not liable for any part of the expense of the outage.

CUB also argued that one cause of the misalignment was an improperly secured bearing pedestal which PGE failed to find when it inspected the plant in 2000 and during all subsequent inspections prior to the outage. The new turbines PGE put into the plant in 2000 were larger and heavier than the rotors they replaced. When installing the new rotors, PGE failed to realize that the support structure for one of the new rotors had some missing fasteners; others were loose. While PGE tried to dismiss this as insignificant, the Commission found that the “preponderance of evidence shows that the missing and loose fasteners contributed to the initiation of the crack” in the turbine rotor.

This was the basis for the Commission dividing the $26 million of replacement power costs between customers and the company.

And finally, we note that there was an additional procedural issue in this docket related to information production and sharing that is of great importance. Within the PUC process, PGE is required to answer our requests for information as long as those requests are within the scope of the docket. During this docket, CUB was incredibly frustrated in our dealings with PGE. CUB found it difficult to get the data we rightfully and properly requested from the company. This led CUB to take an unusual step and ask the PUC to admonish PGE for their conduct with regards to the provisioning of documents.

In its order, issued today, the PUC did choose to admonish PGE:

We agree with CUB that PGE has not been as forthcoming with documents and information in this docket as it should have been.

While CUB had asked the PUC to deny PGE any recovery associated with the 2005 Boardman outage, we are happy with the result. Asking the Commission to find a utility’s action to be imprudent is always difficult. In this case, PGE incurred a total of $45.7 million in replacement power costs, but is permitted by the PUC to only charge customers for $13 million of those costs. PGE is clearly being told that it acted imprudently. This creates a very clear incentive for the company to improve its plant operations.

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