Colstrip Power Plant Operator Talen Looks Toward the Exits

Talen Energy, which owns a portion of the Colstrip Power Plant in Montana and operates the plant for the five other utilities and holding companies that also own shares, told the other owners on May 23 that it plans to exit as operator by May 2018 because it is losing too much money.

The huge coal plant east of Billings, which draws fuel from an adjacent mine, comprises four units totaling 2,094 MW (Figure). Units 1 and 2, each 307 MW, began operations in 1975 and 1976; ownership is shared equally between Talen and Washington utility Puget Sound Energy (PSE). Units 3 and 4, at 740 MW each, began operations in 1984 and 1986; ownership is divided (not equally) between Talen, PSE, Washington utility Avista Corp., Oregon utilities Portland General Electric (PGE) and PacifiCorp, and South Dakota utility NorthWestern Energy.

1. The Colstrip Power Plant in Colstrip, Mont., is facing an uncertain future as its coalition of out-of-state owners weigh concerns of economics and regulations disfavoring coal generation. Courtesy: Puget Sound Energy

Life and Death for Colstrip, Mont.

Colstrip employs about 360 workers, but roughly 80% of households in the surrounding town of the same name work for either the plant or the mine, making its continued operation a matter of life and death for the community. The plant has been struggling in recent years, battered by low gas prices that make its generation uncompetitive and legislation in Oregon and Washington that has forced its owners from those states to plan for its retirement.

PacifiCorp must cease using coal power in Oregon by 2030 and PGE by 2035, though the latter firm is planning for an earlier exit. PSE has begun saving money for Colstrip’s retirement costs—which it estimates may total up to $200 million for Units 1 and 2—though Avista publicly insists Colstrip will remain part of its fleet for now.

Talen is the only owner that sells power from Colstrip as an unregulated generator, which means it has been exposed to competition from cheaper natural gas. CEO Paul Farr said earlier this month that the company is losing “millions” operating Colstrip. The company is required to give two years’ notice to the other owners in order to withdraw as operator.

Toward the Exits

The Pennsylvania-based independent generator, which has most of its assets in the eastern U.S., has made clear its desire to exit the Montana market. Spokesman Todd Martin told POWER that the company is “working with numerous constituencies in the state to develop a separate plan to conclude our business operations” in Montana.

In February 2015, Talen announced plans to shut down the 153-MW J.E. Corette plant near Billings, and it previously spun off its Montana hydropower assets to NorthWestern Energy. NorthWestern has already stated that it is not interested in stepping into the other firm’s role as operator, which means a third-party operator could be in the plant’s future.

Montana officials have been struggling with what to do about Colstrip’s future. Some have estimated that a complete closure of the plant would result in the loss of 7,000 jobs statewide and $150 million in lost tax revenue. The state is holding an election for governor this year, and candidates from both parties have made Colstrip’s future an issue, though no firm solutions have emerged.

—Thomas W. Overton, JD is a POWER associate editor (@thomas_overton, @POWErmagazine).

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