Can Wyoming law delay coal plant closures?


A new Wyoming law aimed at extending the life of coal-fired power plants is  coming to its first test, even as the Wyoming Public Service Commission wrestles with the fine points of how the conceptual legislation will be practically applied. 

Senate File 159 “New Opportunities for Wyoming Coal Fired Generation,” enacted into law earlier this year, requires public utilities that want to retire a coal unit in Wyoming to first make a good-faith effort to sell it to a third-party buyer. 

The mechanics of its implementation are still to be determined, as utility giant PacifiCorp rolls out its proposal for retiring several of its coal-plant units, including four in Wyoming. 

PacifiCorp, which owns and operates power generation and transmission systems across six western states, didn’t oppose the legislation but says it’s likely to have little bearing on its planning. “The economics of [retiring coal units] are not capricious in nature,” PacifiCorp spokesman Spencer Hall told WyoFile. “The decision-making on fleets is in the best interest of our customers.”

However, the law does serve as a check to ensure that a coal plant retirement is in the best interest of Wyoming consumers, Hall said. 

PacifiCorp expects that if it can no longer make the economic case for keeping a coal-fired power unit online, there’s little chance another company can make the endeavor pencil out.

“We really don’t see any scenario where anyone could operate cheaper than we can,” Hall said.

Economics and politics are sometimes different matters, however, and Wyoming lawmakers still are under pressure to throw a lifeline to communities that have long relied on coal plants in the state. 

Some worry that Wyoming lawmakers may be so eager to keep coal plants burning that they’ll inadvertently put Wyoming ratepayers and taxpayers at risk. 

Connie Wilbert, director of Sierra Club Wyoming Chapter, draws a parallel to the bankruptcy crisis among coal mining companies in Wyoming. In some instances, mines have changed hands to companies without the financial wherewithal to meet long-term operational, cleanup and employee obligations, leaving workers and communities in a lurch when they escape responsibilities in bankruptcy.

“What’s happened there [in the coal mining industry] is these uneconomic facilities pass into ever more dubious hands,” Wilbert said. “That has not played out well, obviously, for the workers, for the communities, or for the state.”

PacifiCorp is likely to be the first public utility subject to SF 159 when it begins retiring coal units in Wyoming in 2023. Utility co-ops are exempt from SF 159.

This month PacifiCorp, which operates as Rocky Mountain Power in Wyoming, rolled out its proposed Integrated Resource Plan for how it will provide the least costly, most reliable power across a six-state customer region for the next decade and beyond. 

The plan calls for adding 3,500 megawatts of new wind generation in Wyoming by 2025, and another 4,600 megawatts of wind by 2038, PacifiCorp said in a press statement. More than 1,500 megawatts of new wind generation is currently under construction in Wyoming, and the utility plans to add another 1,920 megawatts by 2024 — a $3 billion-plus capital investment.

PacifiCorp anticipates taking 2,800 megawatts of coal-fired generation off its multi-state system by 2030, which includes retiring one unit at the Jim Bridger power plant outside Rock Springs in 2023 and two Naughton coal units near Kemmerer in 2025. Another unit at Jim Bridger will go offline in 2028, and all four units at the Dave Johnston plant near Glenrock are set to close by 2027.

The utility assures that the overall shift away from coal and toward renewables will keep Wyoming rates among the lowest in the nation, whereas keeping coal units in Wyoming running beyond new proposed retirement dates exposes the state’s ratepayers to higher costs.

“We still expect Wyoming to have among the lowest utility rates in the country,” Hall told WyoFile. “It’s the reason why businesses will want to relocate to Wyoming where they can get affordable, reliable power.”

SF 159 is a rare excursion into a complex regulatory regime that Wyoming lawmakers have mostly left untouched. 

The Wyoming Public Service Commission is busy trying to figure out how exactly to implement the law, including timing stipulations and whether to require an “independent evaluator” to help assess whether a utility has made a good-faith effort to sell a coal unit scheduled for closure. Ultimately, the three-member commission will make a determination on whether a potential buyer and seller have met the terms laid out in the new law.

The PSC held its first of three technical conferences earlier this month, and will host two more, on Oct. 28 and Dec. 2, before it initiates a rulemaking process intended to be completed before the legislature’s budget session begins on Jan. 8.

The law includes several accommodations for potential buyers that are not yet part of the heavily regulated utility industry, including one that would force a utility such as PacifiCorp to buy back the power generated from a unit it was forced to sell.

Under SF 159, not just any enterprise can qualify as a buyer. Many of the same utility rules apply; a buyer must demonstrate it has the financial and technical resources to operate the facility, and meet myriad reliability and environmental requirements, according to proponents. But many of those details are left to the PSC to figure out. The buyer must also demonstrate that the purchase will not result in higher rates for Wyoming customers than the utility’s plan to retire the coal unit. 

“The Public Service Commission has a duty to make sure financial catastrophes are avoided,” PSC chief counsel Chris Petrie told WyoFile. “We are not to stand by as a utility makes decisions that might lead to financial ruin Rocky Mountain Power [a division of PacifiCorp] is not in a position with this law to just sell it to the first LLC that comes along with a big enough checkbook.” 

However, putting SF 159 into play does require the PSC to “fill in some gaps,” Petrie said. Although the PSC’s approval of a sale under the law parallels traditional regulatory requirements regarding such transfers, a successful buyer of a coal unit under SF 159 does not necessarily have to operate as a regulated public utility. In fact, one of the main purposes of the bill is to create a new category of power generator. Although another regulated public utility may offer to buy a coal unit, lawmakers are opening the door to buyers outside the traditional market.

For example, one of the biggest proponents of SF 159 is Glenrock Energy, part of Casper-based Glenrock Petroleum. It envisions possibly acquiring power generating facilities at PacifiCorp’s coal-fired Dave Johnston Plant near Glenrock. The company envisions using some of both the electrical power and CO2 stream for an enhanced oil recovery project at a nearby oilfield.

“Wyoming SF 159 was legislated to encourage the continued operation of coal-fueled generating stations in Wyoming — e.g., in instance(s) where the present owner(s) are unable or unwilling to implement [carbon capture, utilization and storage],” the company wrote to the Wyoming PSC. “Coal-fueled electrical generation has not outlived its usefulness or relevancy and will sustain the cultural legacy in Wyoming.” 

Glenrock Petroleum CEO Terrence Manning told WyoFile that the company and its representatives are in close contact with lawmakers, the governor’s office and Wyoming’s congressional delegation to encourage support for such projects. “We obviously have a vested interest in the continued operation of Wyoming’s coal-fired power plants,” Manning said.

Wyoming Industrial Energy Consumers, a group of oil and gas and trona operators that consume roughly half of the power PacifiCorp supplies to Wyoming, has also expressed interest in SF 159 to allow non-regulated power generators to take ownership of coal units.

The Sierra Club’s Wilbert said she worries that the entry of less well-established, less-regulated entities into electrical generation not only fails to combat climate change, it also creates more health and financial risks for Wyoming residents. 

Wilbert said her organization sees PacifiCorp’s move toward renewables and away from coal as too meager. But at least Wyoming has full authority to hold PacifiCorp and other public utilities to account for taking care of workers and meeting all necessary environmental regulations.

“PacifiCorp is not going to go bankrupt in five or 10 years,” Wilbert said. “They’re as good of a bet as we have. Having those financial responsibilities stay with them is a good thing. It’s good for Wyoming, it’s good for the workers, it’s good for the communities.”

Rock Springs Mayor Tim Kaumo said he believes coal-fired power is still essential to a reliable electric grid, and he supports efforts to keep coal units in Wyoming burning. “SF 159 is hopeful, and would possibly retain good paying jobs at our power plant and coal mines and help get more mileage from these operations if sold to another entity,” Kaumo wrote WyoFile in an email.

Public utilities, coal-fired power plants, coal mine bankruptcies, wind energy and net-metering for homes and small businesses rank among the top priorities for some legislative committees ahead of the 2020 budget session. The Corporations Committee is also considering amendments to SF 159 to ensure it opens the door to potential sales of coal units otherwise scheduled for “early retirement.” 

Sen. Cale Case (R-Lander) serves on the Corporations Committee, which is tackling many of these priorities. He said lawmakers are trying to formulate a “big picture” plan to help coal mining and coal-plant communities in the state weather the storm of major energy transitions. “There are discussions,” Case told WyoFile. “Which way it all comes out, I’m not entirely clear.”

University of Wyoming Professor of Energy and Economics Robert Godby said whether a potential buyer can make the economics work mostly depends on how the PSC calculates the “avoided costs” if a power unit were sold. “The state is trying to create a situation where the buyer doesn’t have a huge risk,” he said, because the buyer will have a guaranteed power purchaser at a certain rate.

A potential buyer may also see economic opportunity in qualifying for credits for carbon capture.

“These [PSC] hearings are where the rubber meets the road,” Godby said. “SF 159 is a concept. But how it works is still a question, so people talk in terms of possibilities.”

There are questions about how the PSC is going to ensure that ratepayers don’t end up paying more, and how taxpayers will be protected in the event a buyer goes bankrupt and doesn’t pay for decommissioning and environmental cleanup costs, Godby said. Still, depending on how the PSC sets the rules, ratepayers could end up paying more.

“The state should [say], ‘OK ratepayers, the reason we’re doing this is to keep your friends and neighbors in a job,” Godby said. “Maybe they are [willing]. But it was never put to the public.”

Few Wyoming lawmakers share PacifiCorp’s confidence that the transition will ultimately benefit ratepayers in the state. They do know that closing coal units, no matter the ratecase, is a huge hit to Wyoming communities, and many are determined to do whatever possible to keep coal plants churning for as long as possible. 

“It’s hard to say we know more than the utility, or can predict the future better than a utility,” Case said. “Let’s hold the line until we better understand the grid implications.”

 

WyoFile is an independent nonprofit news organization focused on Wyoming people, places and policy.

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