PGE Suspends Development of Two Gas-Fired Units, Seeks Bilateral Deals with Existing Generators

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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--Portland General Electric Company (PGE) (NYSE:POR) (Portland, Oregon) has suspended plans to invest about $900 million to add two gas-fired units to its existing Carty Generating Station. The utility would have commenced construction of the new units at Carty, totaling 900 megawatts (MW), only if they were the lowest-cost, lowest-risk options in a competitive bidding process. Instead, the utility will seek to obtain generation from existing resources in the region.

PGE completed construction of the Carty Generating Station, a 440-MW power plant, last summer. The utility planned to add two additional units of 450 MW each over the next few years, to make up for the generation it will lose when it closes its nearby coal-fired Boardman Generating Station in 2020. The Boardman and Carty plants are located about 150 miles east of Portland.

Last year, Oregon banned electricity generated from coal and doubled its renewable portfolio standard (RPS). Under the new RPS, by 2040, 50% of electricity delivered to Oregonians must come from renewable resources, the Oregon legislature decreed. For more on that, see March 23, 2016, article - Oregon Bans Coal, Doubles its Renewables Mandate.

PGE's plan to replace Boardman's generation with the second and third units at Carty has been opposed by environmental and community groups. The tentative construction kickoff date for Carty Unit 2 was late 2018. Unit 3 was scheduled to begin turning dirt in early 2021. Unit 2 was scheduled to be operating by yearend 2020, while Unit 3 was expected to begin generating electricity in early 2023.

While PGE hasn't definitively pulled the plug on the two proposed unit additions at Carty, it is looking to contract with existing generating resources, possibly renewable resources, to help keep the lights on for its customers.

"We're currently in bilateral negotiations to acquire dispatchable resources to meet our customers' energy needs," Jim Piro, PGE's president and chief executive, said in a mid-May statement. "It's appropriate for us to suspend the permitting process at Carty until we complete these negotiations."

If PGE is able to secure capacity through bilateral negotiations, it will seek approval of the agreements from the Oregon Public Utility Commission along with a waiver to competitive bidding guidelines as necessary. The company also may propose a competitive request for proposals to acquire any needed capacity resources not acquired through the bilateral negotiations, it said.

In its mid-May statement, PGE said it wants to conduct an RFP to acquire approximately 175 average MW of new renewable resources, equivalent to a wind nameplate capacity of approximately 500 MW. Adding these new renewables now will allow PGE to capture the benefits of the federal production tax credit (PTC), which is ramping down and will expire in 2020. If it is able to procure those new renewable resources, the utility projected that, when combined with existing wind, solar and hydroelectric facilities, it will have 50% of its electricity generated by carbon-free sources by 2020, decades ahead of the state mandate.

"PGE has maintained an extensive dialogue with our regulators, customers and many stakeholder groups throughout our current resource planning process," said Piro, the utility chief. "We appreciate their input, and we're working hard to identify cost-effective options from existing generating resources in the region that could help us both back up our renewable resources and meet our customers' peak energy needs."

Since announcing the need for as much as 800 MW of new generating capacity by 2021, PGE reportedly reduced its future electric forecast by 71 MW, entered into a 10-year power purchase agreement for 135 MW of hydropower and procured another 52 MW from independent producers. PGE's plan to add two new units at its Carty generating station were opposed by environmental groups, Native American tribes and competing power producers, according to reports in the Oregonian and East Oregonian newspapers.

In opposing adding two units to Carty, intervenors raised various issues, including the potential for self-dealing by PGE, safety concerns at the existing Carty plant and the use of natural gas extracted using hydraulic fracturing, the reports said. Generally speaking, opponents want the utility to choose renewable resources instead of gas-powered generation. The Oregon Public Utility Commission (Salem, Oregon) has until late August to reach a decision on PGE's long-range resource plan.

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