Ownership Shakeup at Colstrip Coal Power Plant

NorthWestern Energy said it will file an application with the Montana Public Service Commission for pre-approval to acquire Puget Sound Energy’s (PSE’s) 25% interest in Colstrip Unit 4, which is a 740-MW coal-fired boiler. The price? $1.

“Securing more capacity for only a $1 investment is a unique opportunity that helps give us the time to continue transitioning to an even cleaner energy future without putting either our customers’ safety or their ability to pay their energy bills at risk,” Bob Rowe, president and CEO of Sioux Falls, South Dakota-headquartered NorthWestern Energy, said in a statement.

NorthWestern Energy serves electric and natural gas customers in three states: Montana, Nebraska, and South Dakota. In what appeared to be an effort to fend off criticism for adding more coal-fired generation to its portfolio, NorthWestern also announced it is committing to reduce carbon intensity of its energy generation in Montana by 90% by 2045.

“Nothing is more important to the people of NorthWestern than safely providing Montanans with the affordable and reliable energy we all need while also protecting our environment,” Rowe said. “We take that dual responsibility seriously, and right now our state faces an urgent capacity shortage—energy that’s available 24 hours a day, 365 days a year, regardless of the weather.”

According to NorthWestern, more than 60% of the energy it currently produces for Montana comes from renewable and carbon-free sources, including hydro, wind, and solar. The company claims even after the deal its portfolio will be twice as clean (56% carbon-free) as the U.S. average.

Washington Utilities Must Move Away from Coal

Under Washington’s Clean Energy Transformation Act, all electric utilities in the state must eliminate coal-fired electricity from their portfolios by 2025. PSE’s coal portfolio will decrease by 307 MW in early January when Colstrip Units 1 and 2 close (Figure 1). The company will continue to be one of five owners of Colstrip Unit 3, which provides about 185 MW to the utility’s customers.

Colstrip Power Plant. Courtesy: Puget Sound Energy

“This is what our customers have been asking for, and we have been on a path to for years,” David Mills, PSE senior vice president of Policy and Energy Supply, said in a statement. “We’re excited to take this major step forward in creating a better energy future for our customers and the state of Washington.”

PSE signed a power purchase agreement (PPA) with NorthWestern for 90 MW until 2025 to facilitate the transition for both companies. NorthWestern noted that PSE would remain responsible for its presale 25% ownership share of all costs for remediation of existing environmental conditions and decommissioning, regardless of when Colstrip Unit 4 retires. For its part, NorthWestern said it would set aside benefits from the transaction, which it expects to be about $5 million annually, to address environmental remediation and decommissioning costs associated with its existing ownership of Unit 4.

More Control for NorthWestern

If the sale is approved, which also requires approval by the Washington Utilities and Transportation Commission, NorthWestern will own 55% of Colstrip Unit 4, giving it greater control over the future of the plant. The company said the additional capacity from Colstrip Unit 4 will not solve its capacity shortage, but NorthWestern considers it the most-affordable way to close the gap.

“Customer bills are expected to stay flat as a result of the transaction. Increased operating costs due to increased ownership percentage are expected to be offset by lower purchased power costs,” said John Hines, NorthWestern Energy vice president Supply and Montana Government Affairs.

Avista Signals Intent to Exit Colstrip

On Nov. 21, Spokane, Washington-headquartered Avista Corp., which owns 15% of Colstrip Units 3 and 4, announced it would speed up plans to exit the facility. As part of a partial settlement agreement between the company and multiple intervening parties in the utility’s general rate case in Washington state, Avista said it would accelerate the depreciation schedule for Colstrip Units 3 and 4 from 2034 and 2036, respectively, to 2025. Furthermore, Avista agreed that it would not support capital expenditures at Colstrip that go beyond routine capital maintenance costs that extend the plant’s operational life beyond Dec. 31, 2025.

To help support the region as its coal-dominant economy transitions, Avista agreed to contribute $3 million (50% from customers and 50% from shareholders) to the Colstrip Community Transition Fund. PSE said it will contribute $10 million to the Colstrip Community Fund.

In a separate transaction, NorthWestern said it will acquire a piece of PSE’s interest in the 500-kV Colstrip Transmission System (CTS) with 95-MW capacity for net book value at the time of the sale. The cost is estimated to be between $2.5 million and $3.75 million. Following expiration of the five-year PPA with PSE, NorthWestern would have the option to acquire another interest in the 500-kV CTS with 90-MW capacity for net book value at that time.

Aaron Larson is POWER’s executive editor (@AaronL_Power, @POWERmagazine).