20140915Sierra Club Comments.pdf

IN THE MATTER OF THE POWER
COST ADJUSTMENT (PCA) ANNUAL
RATE ADIUSTMENT FITING OF
AVISTA CORPORATION.
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
cASENo. AVU -E-r4-06 ?l!tj s[P l5 Pl{ 3: 05
COMMENTS OF THE
SIERRA CLUB
IDAHO CONSERVATION TEAGUE
MONTANA ENVIRONMENTAL
INFORMATION CENTER
The Sierra Club, the Idaho Conservation League (ICL), and Montana Environmental
Information Center (MEIC) submit these comments on Avista Corp's 2014 Power Cost
Adjustment (PCA). We urge the Commission to disallow the recovery of the extraordinary power
costs associated with the forced outage of Colstrip Unit 4. We recommend the Commission open
a separate docket to investigate whether costs associated with an extended, forced outage of
Colstrip Unit 4 in2013-2014 were reasonable and prudently incurred.
Sierra Club is America's oldest and largest grassroots environmental organization. Sierra
Club has 1.4 million members and supporters, with over 2,000 members in Idaho. Founded in
1892, the Sierra Club has been working for over a century to protect communities, wild places,
and the planet itself. Sierra Club is dedicated to exploring, enjoying, and protecting the wild
places of the Earth; to practicing and promoting the responsible use of the Earth's resources and
ecosystems; to educating and enlisting humanity to protect and restore the quality of the natural
and human environment; and to using all lawful means to carry out these objectives.
Idaho Conservation League is Idaho's largest state-based conservation organization. We
represent 20,000 supporters, many of whom are customers of Avista, who have a strong interest
in protecting Idaho's air,land, and water. Ensuring a clean, affordable, and reliable electric
system is key to protecting these interests.
MEIC is a 4O-year strong environmental advocacy organization with members across the
country, including Idaho. MEIC works to protect public health and the environment from air
pollution, water pollution and climate change.
Our organizations primary concern in the filing regards the Colstrip coal-fired power
plant-located 120 miles east of Billings in southeastern Montana. This plant consists of four
generating units collectively owned by Puget Sound Energy, PPL Montana LLC, Portland General
Electric, Avista, PacifiCorp, and NorthWestern Energy LLC. Avista owns 150/o of each Units 3 and
4, representing a combined total capacity of 222MW.
In this 2014 PCA filing, Avista seeks authorization to impose on its customers a$7.6
million surcharge, consisting primarily of a $ 4.1 million increase over authorized expenses
related to Colstrip power generation and fuel.t As Avista tersely stated in its direct testimony,
t See Johnson Direct Testimony atp.4. (Because Avista has not made its cost breakdown
publicly available, it is unclear whether the $4.1 million line item for Colstrip includes the costs
for replacement power during the 7-month forced outage of Colstrip Unit 4, or whether those
costs are reflected elsewhere.)
AVU-E-14-06 September 15,2014
"Colstrip Unit 4 was unavailable due to a forced outage from )uly 1,2013 until |anuary 22,2014.
Colstrip's incremental generation expense is lower than the wholesale power prices, therefore,
replacing Colstrip power led to an increase in power supply expense."'
However, the process afforded by the PCA mechanism does not afford the public or the
Commission with adequate information to assess whether the costs associated with the outage
were reasonable. Thus, we urge the Commission to initiate a complete investigation and
prudency review before allowing Avista to recover any portion of these extraordinary Colstrip-
related expenses from its customers. However, should the Commission consider these expenses
in the context of the PCA mechanism, we urge the Commission to nevertheless require a
complete accounting of the expenses and adequate justification of their reasonableness,
consistent with the Commission's authority and obligation under Idaho law.
The extended outage of Colstrip Unit 4 in2013-2014 is only the latest evidence that the
Colstrip facility has become unreliable and unreasonably costly to operate. In 2009, Colstrip Unit
4 had a forced outage that lasted more than 6 months and likely increased costs for Avista and
other owners. Thus, between 2009 and the present, Colstrip Unit 4 alone was unavailable for
more than a year-or approximately 20 percent of the time it was scheduled to operate-due to
unplanned, extended outages. Further, as one Commissioner on the Montana Public Service
Commission has noted, "the [Colstrip] plant has been uneconomical to run, because of low-price
market conditions primarily in the spring and early summer, for another significant period of
time."3 The Montana Commission perspective is especially important because they have
extensively reviewed Colstrip costs, operations, and risks.
Allowing Avista to recover the extraordinary costs of such outages through the
streamlined PCA mechanism effectively shelters the company's actions from scrutiny over
whether such costs could have been reduced or avoided altogether. And given the seemingly pro-
forma approval of utility PCA filings, Avista would appear to have little incentive to take actions
that may avoid such high costs in the future. Avista has argued that the PCA mechanism does
not allow the Commission to "apply[] 'hindsight' to power purchase ... decisions made by Avista
to serve its customers."n Likewise, the PCA mechanism is inadequate to encourage the foresight
necessary to avoid or reduce such inevitable costs in the future.
The Commission has the authority and obligation to apply greater scrutiny to Avista's
Colstrip-related expenses. As a regulated public utility in Idaho, Avista is subject to the limitation
that its charges to the public must be "just and reasonable."s Further, Avista must provide and
maintain service and facilities in a manner that is "efficient, just and reasonable."6 This
'1d.,p.3.
3 In the Matter of NorthWestern Energt's 2013-2014 Electricity Supply Tracker,Montana PSC
Docket Nos. D2013.5.33, D2014.5.46 (consolidated) Order No. 7283a.
a In the Motter of the Submission of the Status Report of Avista Corporation and Applicationfor
a Continuation of a Power Cost Adjustment (PCA) Surcharge,Idaho PUC Docket No. AVU-E-
02-06, Order No. 29130 at22 (Oct. 11,2002).
5 tdaho code g 6l-301.
u td.S 6r-302.
AVU-E-14-06 September 15,2014
Commission may not allow Avista to charge the public for expenses that fail to meet this
standard.T
Consistent with these authorities, the Commission should initiate an investigation of the
reasonableness and prudency of the costs associated with the extended outage of Colstrip Unit 4.
Among other things, the Commission should consider whether Avista purcliased the lowest-cost
replacement power available; whether proper maintenance could have prevented the outage; and
whether Colstrip is too costly and unreliable to satisfr Avista's obligation to provide and
maintain service and facilities in a manner that is "efficient, just and reasonable."s While we urge
the Commission to initiate a new docket specifically to answer these questions, even in the
context of this PCA, the Commission must at a minimum review the reasonableness of Avista's
Colstrip-related expenses before it can approve Avista's 2014 PCA.
Engaging in a thorough prudency review of Avista's expenses associated with the Colstrip
Unit 4 outage would be consistent with the practice of other utility commissions. For example,
the Montana Public Service Commission is investigating whether NorthWestern Energy
"prudently incurred" costs associated with the outage in the company's annual electricity supply
tracker docket.e Indeed, the Montana Commission expressly addressed the risk that "cost
uncertainties related to [Colstrip Unit 4 (CU4)], such as coal cost increases, a future carbon tax,
potential market price decreases, or CU4 maintenance and operation costs that exceed
lNorthWestern'sl estimates, will increase the cost to ratepayers of CU4 power over and above
what [NorthWestern] has projected" when it authorized the inclusion of Colstrip Unit 4 in
NorthWestern Energy's rate base in 2008.t0In response, the Commission committed to "conduct
rigorous examinations in annual supply trackers of the prudence of [NorthWestern's] expenses
related to CU4."rr Avista's customers deserve no less.
While the Commission should not defer scrutiny of the high operating cost of Colstrip
Unit 4, the need for such careful review will only grow as the expenses associated with the
Colstrip facility escalate. Colstrip's 6v7ng15-including Avista-are facing mounting liabilities
due not only to the apparent failure of regular maintenance to avoid extended outages, but also
due to significant and unaccounted for direct costs associated with future regulatory compliance.
As summarized in the attached comments submitted by Sierra Club and MEIC in connection
with Avista's Electric Integrated Resource Plan for 2013, Docket # AVU-E-13-07, Avista faces
near-term costs to comply with obligations under the RegionalHaze Program, the Mercury and
Air Toxics Rule, the Clean Power Plan to regulate greenhouse gases from existing sources such as
Colstrip, and other federal regulatory requirements.
7 See id. $ 6l-502 (requiring commission to fix rates when it finds that rates charged by public
utility are o'unjust, unreasonable, discriminatory or preferential, or in any wise in violation of any
provision of law") id $ 61-503 (authorizing Commission to investigate rates and charges).
t ld. $ 6r-302.
e Mont. Code Ann. $ 69-8-210(l); see In the Matter of NorthWestern Energy's 2Ol3-20I4
Electricity Supply Tracker, Montana PSC Docket Nos. D2013.5.33,D2014.5.46 (consolidated).
r0 Montana PSC Docket No. D2008.6.69, Order 6925f,n227 (Nov. 13, 2008) (emphasis added).
tt Id.
AVU-E-14-06 September 15,2014
In addition to those concerns, Avista's customers face more risks. Colstrip's massive
system of coal ash waste ponds presents enormous potential liabilities and direct costs for all of
the Colstrip owners, including Avista. Colstrip owners frequently omit reference to the ever
expanding plume of contaminated groundwater originating from the 800 acres of leaking coal
ash waste ponds. The waste impoundment system has been contaminating groundwater since it
was built. ln20l2, the Montana Department of Environmental Quality (DEQ) issued an
enforcement action to require cleanup of these impoundments. Currently an assessment of the
extent of contamination at each of the three discreet waste disposal sites is underway. After the
assessment is complete, the state will calculate and require a remediation bond and require
cleanup of the site. While this one example is not at issue in this current PCA, it is evidence of the
mounting financial liabilities for ratepayers. This PCA is just the beginning of new expenses for
ratepayers from the unreliable and increasingly-expensive Colstrip plant.
In sum, the Commission should not reflexively approve Avista's request to foist the costs
of operating the increasingly unreliable and expensive Colstrip plant on Idaho ratepayers. We
urge the Commission to reject Avista's proposal to charge its customers for $4.1 million in
unauthorized expenses associated with Colstrip unless and until the Commission finds, based on
a rigorous investigation, that Avista's costs were reasonable and prudently incurred.
Respectfully submitted this 156 day of September 2014,
f tlfu; "*-
Zack Waterman
Executive Director
Idaho Chapter of the Sierra Club
Z,i//4 Z;?e--
Benjamin J Otto
Energy Associate
Idaho Conservation League
/or* e+,
Anne Hedges
Deputy Director
Montana Environmental Information Center
4
AVU-E-14-06 September 15,2014
BEFORE THE IDAHO PUBLIC UTITITIES COMMISSION
IN THE MATTER OF THE POWER
COST ADIUSTMENT (PCA) ANNUAL
RATE ADJUSTMENT FITING OF
AVISTA CORPORATION.
CASE NO. AVU-E-14-06
COMMENTS OF THE
SIERRA CLUB
IDAHO CONSERVATION LEAGUE
MONTANA ENVIRONMENTAL
INFORMATION CENTER
Attachment A
Sierra Club and Montana Environmental Information Center Comments on Avista 2013
Integrated Resource Plan
AVU-E-14-06 September 15,2014
SIERRACrus
FOUNDED I392
November l?.,?0L3
Idaho Public Utiliry Commission
P.0. Box 83720
Boise, lD 8377,0-0074 :_l
Re: Comments on Avista's Electric Integrated Resource Plan for 20L3, Docket # AVU-
E-13-07
Dear Commissioners:
The Sierra Club and Montana Environmental Information Center (MEIC) submit these
comments to the ldaho Public Utility Commission (PUC) to better inform your decision
regarding Avista's 2013 Electric Integrated Resource Plan (lRP) of August L3,2A13.
Sierra Club is America's oldest and largest grassroots environmental organization. Sierra
Club has 1.4 million members and supporters, with over 2,000 members in ldaho. Founded
in 1892, the Sierra Club has been working for over a century to protect communities, wild
places, and the planet itself. Sierra Club is dedicated to exploring, enjoying and protecting
the wild places of the Earth; to practicing and promoting the responsible use of the Earth's
resources and ecosystems; to educating and enlisting humanity to protect and restore the
quality of the natural and human environment; and to using all lawful means to carry out
these objectives.
MEIC is a 40-year strong environmental advocacy organization with members across the
country, including ldaho. MEIC works to protect public health and the environment from
air pollution, water pollution and climate change.
The Commission's Order No.32888, dated September L0,2013, notes thatAvista states its
preferred resource strategy provides a "'least reasonable cost' portfolio that minimizes
future costs and risks given actual or expected environmental constraints." We submit
these comments on behalf of our members, particularly those in Montana and ldaho, to
provide information to the Commission on the significant and increasing risks the Colstrip
power plant (Colstrip) poses to public health and the environment, as wellas Avista's
ratepayers.
November t2,?073
Page 2 of 11
We believe Idaho ratepayers are at risk in two major ways as a result of Avista's Colstrip
ownership interest.
1, Colstrip Units 3 & 4 are facing potentially significant and unaccounted for direct
costs that would likely be passed on to ldaho ratepayers. See Regulatory Risks of
Colstrip Ownership starting on page 4. Specifically see subsections entitled Regional
Haze; Mercury and Air Toxics Rule; and Coal Costs and the Rosebud Mine.
2. All four Colstrip units are subject to overdue government regulation, citizen
enforcement actions, and increased coal supply costs that could escalate costs for
Idaho ratepayers. See Regulatory Risks of Colstrip Ownership on page 4. Specifically
see subsections entitled Prevention of Significant Deterioration; Greenhouse Gases;
National Ambient Air Quality Standards; Mercury and Air Toxics Rule; Coal
Combustion Waste; and Coal Costs and the Rosebud Mine.
We do not believe these risks have been adequately disclosed or analyzed in Avista's 20L3
Electric IRP, and would urge the Commission to require an analysis that explores the f,ull
breadth of liabilities and risks that the Colstrip plant currently poses to Avista's ratepayers.
Avista has a 15 percent ownership interest in Colstrip Units 3 and 4. This equates to a
nameplate capacity of about ?Z?-megawatts. Rising costs at all four Colstrip units could
affect Idaho ratepayers directly and indirectly, As Colstrip ages, more upgrades,
maintenance, modifications and expenditures are required. According to the ownership
agreement for Units 3 &.4, Avista is a minority owner and is at an apparent disadvantage in
decision-making. This issue could become more important if PPL or one of the other larger
owners sells its interest to another entity or a majority of owners want to close one or
more of the units.
Last year, news outlets reported that PPL Montana was attempting to sell all of its Montana
generation assets. Those assets included LL hydroelectric dams and two coal-fired power
plants: Colstrip and Corette. On September 25,2013, NorthWestern Energy, Montana's
largest utility, announced an agreement to purchase PPL Montana's hydroelectric assets,
but not PPL's coal assets. NorthWestern's CEO Bob Rowe said, "Hydro power provides a
nice diversification and mitigates the risk of changing fuel prices and environmental
regulations associated with coal." Mr Rowe's comment indicates that NorthWestern
understands the risks posed by Colstrip and did not want to further expose its customers to
those risks. It is important for the ldaho PUC to understand these risks as well.
As you know, the nation's energy market is engaged in a fundamental shift away from coal-
based electricity resources. At the direction of the Nevada Legislature, NV Energy, Nevada's
largest utility, is on a path to retire all of its coalgenerating resources. The Northeast is
essentially coal free. The Canadian Province of Ontario announced plans to be coal-free by
the end of 2014. And the only coal plants in Oregon and Washington are now slated to
retire in2020 and2025, respectively. Most recently, the 0regon PUC issued very stern
warnings to PacifiCorp for not including a sufficiently thorough assessment of liabilities
associated with their coal plants.l
November 72,201.3
Page 3 of 11
These examples and many more across the country underscore the remarkable change in
the electric industry that continues to take place. Less than a decade ago, coal generated
electrici[y accounted for 50 percent of our nation's electricity portfolio; in recent years that
number has plummeted to below 40 percent.
This unprecedented trend away from coal generation stems in large part from the fact that
this nation's existing coal fleet is antiquated and in need of expensive repairs. Colstrip is no
exception. In 2009, Colstrip Unit 4 had a forced outage that lasted more than 6
months and likely increased costs for Avista and other owners. Recently it was
reported to the Montana Public Service Commission (PSC) that Unit 4 again went
down unexpectedly, and is expected to be offline for repairs until early 2014. These
two long-term forced outages in four years undermine any argument that Colstrip is a
reliable source of power. Both incidents occurred during high summer demand.
As organizations with thousands of members across the West, we urge the Commission to
understand these trends and consider the true costs ofthe outdated, increasingly
unreliable, highly polluting, and liabiliry-laden Colstrip plant,
Spncruc CorucEnrus Rncnnprrvc Avrsrn's 2013 Elrcrnrc IRP
Avista's shift away from coal has been commendable. Its increasing reliance on efficiency is
an indication that it values public health, the environment, and ratepayers. Unfortunately,
Avista's 2013 Electric IRP is misguided in regard to Colstrip.
Colstrip Unit 4's lack of performance in recent years indicates Avista is using the wrong
measurement to analyze its costs and the cost of replacement power. Avista appears to be
analyzing Colstrip's output based on its nameplate capacity and then analyzing what would
be needed to replace that capacity. To accurately measure the cost of Colstrip's power
versus the cost of a portfolio without Colstrip, Avista should be analyzing Colstrip on
a megawatt-hour basis, not a potential or nameplate basis.
Measuring Avista's interest in Colstrip's nameplate capacity would overestimate the
replacement power needs in its planning scenario without Colstrip. As previously
discussed, Colstrip Unit 4 is not currently operating and has not operated since early July. It
is not expected to resume operations until early 20L4. Colstrip Unit 4 experienced a similar
lengthy outage in 2009. In 2011, a year in which Colstrip provided more reliable power,
Avista shows Colstrip providing L62 aMW or L,416,O00 megawatt hours fAppendix
A, Technical Advisory Committee from November 7,2012,p.5).
Despite lengthy forced outages at Unit 4 and Colstrip's 2011 outputof 152 aMW, Avista's
Preferred Resource Strategy analysis says Colstrip would need to be replaced by a
combined cycle CT gas plant with a nameplate capacity of 270 MW, and provide 248 aMW.
(Table 8.13, p. 8-25; and Appendix A, page 54) Avista's share of Colstrip's nameplate
November 12,2013
Page4of11
capacity is 2?2 megawatts. It is unclear how Avista is calculating the actual replacement
power costs should Colstrip no longer be in its portfolio. The IRP's charts appear to predict
a need for far more energy than necessary to replace Avista's share of Colstrip's power.
Analyzing Colstrip's costs using actual megawatt hours instead of the inflated
nameplate capacity would provide a more realistic cost analysis for planning future
resource needs.
Avista's 201.3 Electric IRP makes reference to the Washington State Utility and
Transportation Commission IRP process (p.8-26). Avista said in a207L IRP process, the
UTC requested only two scenarios be measured with regard to Colstrip: without Colstrip
and Colstrip with upgrades from potential environmental regulations. We believe this is a
simplistic and outdated request from the UTC. Puget Sound Energy, which owns the largest
share of Cosltrip, was recently required to model additional scenarios for Colstrip. PSE
submitted modeling to the UTC for a low cost, medium cost, high cost, and very high cost
scenario for Colstrip. These modeling scenarios are far more useful for determining the
costs and risks Colstrip may present to ratepayers. We recommend Avista conduct similar
scenario models.
Appendix A contains the Technical Advisory Committee meeting presentations by Avista.
The analysis presented by Avista at the November 7 ,2012 meeting were flawed. The
economic analysis referred to on page 4 only analyzed potentialeconomic benefits for
Montana. The report that is referenced failed to include analysis of any costs. In other
words, this was not an economic analysis of Colstrip. [t was a one-sided look at benefits
with no consideration for impacts or costs.
RgcurlroRv Rrsrs or ColsrRrp Owrunnsurp
EPA is in the process of finalizing and implementing longstanding Congressional directives
related to pollution controls at large power plants. Many of these impending regulations
will implement long-overdue requirements to protect public health, the environment, the
economy, and property rights. These regulations will have significant impacts on the
economics of outdated coal-fired electricity generation facilities. In addition to federal
regulations, Colstrip is also the subiect of several pending citizen enforcement
actions that could result in significant modernization and cleanup costs. These
regulatory and legal risks must be factored into the estimated cost to ratepayers.
I. Regional Haze
Sierra Club, MEIC, and the National Parks Conservation Association appealed EPA's
regionalhaze decision for Colstrip. Avista's 2013 Electric IRP make no mention of the risks
posed by our appeal even though it could cost Colstrip's owners over a hundred million
dollars. We believe those risks should be disclosed and analyzed as part of the planning
process.
Federal law requires a reduction in air pollution that affects some of our nation's most
November 12,2073
Page 5 of 11
treasured federal lands. The Clean Air Act's visibility-protection provisions,42 U.S.C. S
749L, require states and the EPA to adopt plans to eliminate human caused haze from
national parks and other protected federal lands, known as Class Iareas. The plans must be
designed to make reasonable progress toward eliminating human-caused haze pollution by
imposing Best Available Retrofit Technology ["BART") pollution controls on some of the
largest and oldest sources of haze-causing emissions. Regional haze regulations generally
require installation of additionalair pollution controls to reduce harmfulemissions of
nitrogen oxides, sul[ur dioxide, and particulate matter.
Colstrip Units 1 and 2 are subject to BART requirements. Colstrip 3 and 4 are subject to
reasonable progress requirements.ln September 201.3 EPA finalized its BART
determination for Colstrip. EPA required no upgrades at Unit 3 and 4 even though it
admitted regional haze requirements will not be met by the statutory deadline of 2064.
EPA's plan for Units 1 and 2 requires reductions in SOzemissions to.08 Ibs/MMBtu and
NOx emissions to .15 lbs/MMBtu.z These new lower N0x emission limits will require the
owners of Colstrip to install new air pollution control equipment. To reduce NOx, Colstrip
Units L and 2 must install combustion controls and Selective Non-catalytic Reduction
(SNCR), at a combined estimated capital cost for both units of approximately $27 million,
and additionalannual costs of approximately $6.5 million. To reduce S0z, Units 7 andZ
each must install a spare scrubber and conduct lime injection, for a combined estimated
capital cost for both units of $56 million, and additional annual costs exceeding $8 million.
The total capital costs of regional haze compliance for Units 1 and 2 is thus $83 million,
with an additional $14.5 million each year. PPL's shares of Colstrip 1 and 2 is unregulated.
PPL's power from these two units is sold into the market. BART compliance costs will likely
be passed on to other utilities, like Avista, who purchase power on the open markel
The National Parks Conservation Association, along with MEIC and Sierra Club, believe that
EPA's proposal did not go far enough. We appealed EPA's Colstrip decision to the 9tr Circuit
Court of Appeals. We are seeking to reduce emissions limits on all four Colstrip units
beyond what the EPA proposed. We believe the record demonstrates that the installation of
industry-standard pollution controls like Selective Catalytic Reduction (SCR) are cost-
effective, demonstrated to be more effective at removing NOx pollution than SNCR, and are
required under the law. Over three hundred coal units across the country have already
installed SCR technology, including a coal plant in Montana. According to EPA, SCR would
have an approximate capital cost of $156 million at Colstrip Units 1 and 2 and an
approximate increased annualoperation and maintenance cost of $20 million.3 EPA did not
even analyze the costs for Units 3 & +. This appeal seeks to require additional pollution
controls at Colstrip Units 3 and 4 under the reasonable progress program. We are now
awaiting a decision by the Ninth Circuit Court of Appeals.
These potential costs are not currently but should be accounted for in Avista's IRP.
II. Greenhouse Gas Regulations
277 Fed. Reg.57864.t77 Fed,. Reg.23988
November 72,2013
Page 5 of 11
Coal-fired power plants are the largest industrial source of carbon dioxide emissions today.
According to the U.S. Environmental Protection Agency's greenhouse gas database, which
encompasses large emissions sources, Colstrip alone was responsible for about two-thirds
of Montana's greenhouse gas emissions in 2011. a Colstrip appears to be Avista's only coal-
fired thermal resource. This places Avista at an advantage over other utilities that are more
heavily reliant on coal-fired power. However, Avista's interest in Colstrip means it will not
be immune from future carbon regulations and costs.
On f une 25,2AL3 President Obama delivered a speech about his plan to make the reduction
of greenhouse gas emissions a centerpiece of his second term. He immediately followed
this speech with a directive to EPA to move forward with regulating greenhouse gas
emissions from new ond existing power plants. In a memo issued to the Administrator of
EPA, the President directed the agency to finalize regularions for greenhouse gas emission
from existing power plants by June L,20L5.
The Idaho PUC stated just fwo months ago that "it seems more likely than not that the EPA
will move forward and enact additional regulations of fossil fuels under the federal Clean
Air Act."s Many western utilities are planning for some form of carbon regulation before
2018. These utilities are planning for a carbon cost in the range of $10-$80/ton. For
example, the Northwest Power Planning and Conservation Council uses an average carbon
cost of $45 per ton. Many utilities rely on the Council's estimates to plan future resource
needs. In California's initial carbon bidding for its cap-and-trade program, the cost of
carbon was about $10/ton, and most experts expect this price to rise, British Columbia has
a $30 per ton carbon tax. In addition, federal imposition of a revenue neutral carbon cost is
quickly gaining momentum on both sides of the political spectrum, and could occur by
201.8.6
Until a greenhouse gas regulation is finalized, the exact financial impacts to Colstrip are
unknown. However, it is clear that Colstrip and other similar facilities will face significant
costs in some form. Colstrip emitted 17 million tons of greenhouse gases in 2010 and about
14 million tons in 20L1. The Idaho PUC must require Avista to incorporate these
financial risks by including a carbon price in future planning efforts.
III. Prevention of Significant Deterioration Permitting
The Clean Air Act's Prevention of Significant Deterioration permitting program requires
new and modified pollution sources that have fhe potential to degrade air quality to
conduct an analysis prior to receiving a permit for proposed changes. The analysis is
intended to veriff that cost-effective pollution controls will be installed to protect against
unnecessary degradation of air qualiry. In 2003 and again in20L2, the EPA requested
a http : // ghgd ata.epa.gov /
s ldaho PUC Order No 32890 at 12, [September 11, 2013).
6 httpi / /www.nationaljournal.com/magazine/the-coming-gop-civil-war-over-climate-change-20130509
November 12,20L3
Page7 of11
information from the Colstrip owners in investigations of potential violations of these
permitting requirements. EPA and PPL resolved the initial request without providing the
public with PPL's complete response. EPA's investigation of the 2012 request into
potential violations is ongoing.
In April 2010 we requested a copy of PPL's response to EPA's 2003 request. After years o[
haggling, EPA finally agreed in April 20L2 to release important documents to the public.
PPL promptly sued EPA to keep that information secret. We are stillawaiting the outcome
of that court action.
Also in April 2012 the Billings Gazette published a newspaper article entitled, "Buzzing
with Activify. $70 million maintenance project brings upgrades to Colstrip plant. More than
500 workers busy refurbishing massive boiler in Unit 1." Shortly thereafter, EPA sent PPL
an information request regarding the upgrades. After the article, we also began
investigating these reported upgrades to determine if they were done in compliance with
the permitting provisions of the Clean Air Act. Our investigation uncovered what
appeared to be a dozen instances in which all four Colship units have been upgraded
without obtaining the necessary prevention of significant deterioration permits. In
March 2013 we filed a citizen enforcement action in federal district court in
Montana. A trial date has been set for November 2014.
The outcorne of this citizen initiated enforcement action could result in a requirement for
the Colstrip owners to go through a permitting process and install modern air pollution
control equipment at all four units. These potential costs must be accounted for in the
planning process.
IV. National Ambient Air Quality Standards
National Ambient Air Quality Standards INAAQS) generally impose ambient air quality
standards for ozone, lead, particulate, sulfur dioxide, nitrogen dioxide and carbon
monoxide. A NAAQS by itself does not require emissions reductions from a specific source.
Instead emissions reductions from specific sources could be required if the source causes
or contributes to an exceedance of an ambient standard.
EPA is required to regularly review and revise NAAQS based on current health-based
scientific literature. It has done so recently for sulfur dioxide, particulates, oxides of
nitrogen and ozone. Ifa source contributes to an exceedance ofthe standard, it could be
required to install updated air pollution control equipment. As previously mentioned,
updating air pollution control equipment For sulfur dioxide or nitrogen oxides could cost
several million dollars to several hundred million dollars depending on the faciliry and the
extent of the exceedance.
ln 2010 EPA updated the NAAQS for sulfur dioxide. Sierra Club conffacted with
independent air pollution modelers to review Colsffip compliance with the new sulfur
dioxide standard. That air dispersion modeling found that Colstrip's emissions likely
November 1,2,20t3
Page I of 11
violate the one-hour sulfur dioxide NAAQS.7,8 Nonattainmenf status for a county requires
those sources causing or contributing to the violation to decrease emissions by installing
updated pollution controls or curtailing operations. As mentioned above, this cost could be
significant.
The potential NAAQS violation near Colstrip place it under a significant risk of requiring
additional sulfur dioxide pollution controls. Colstrip has already been ordered to meet
lower sulfur dioxide emission limits as a result of EPA's BART determination mentioned
above. However, EPA's BART decision was modest and only required reductions at Units 1
and 2. Colstrip may have to meet far lower emission limits at all four units in order to
comply with the new health-based sulfur dioxide NAAQS.
Again, these potential costs must be accounted for in the planning process.
V. Mercury and Air Toxics Rule
Montana coal-fired power plants are required to control mercury under a state rule
adopted in2007. While all required facilities have been controlling mercury since
fanuary L,2AL0, the EPA's more recent Mercury and Air Toxics IMATs) rule is slightly
different from the state rule in that it establishes emission limits from coal-fired power
plants for ten non-mercury metals and acid gases in addition to mercury. The rule also
establishes work practices to minimize creation of dioxin and furans. Sources could be
required to control toxic emissions by installing updated air pollution equipment [i.e.,
scrubbers for acid gases and baghouses for metals). Generally, the compliance deadline for
MATs will be 20L5, with an opportunity for a one-year extension for facilities that
demonstrate an inabiliry to comply with MATs by the deadline notwithstanding diligent
efforts. The units with the greatest potential compliance costs are unscrubbed coal units
and those without baghouses. Because the rule does not allow trading, coal units that fail to
comply must cease operation.
No Colstrip units have baghouses or modern sulfur dioxide controls. Colstrip must upgrade
its technology to comply with MATs. Recent stack tests for Colstrip Units 1 and 2
demonstrate particulate emissions at or above the particulate MATs standard of 0.30
lb/MMBtu. While Colstrip is investigating whether upgrades to existing equipment may
suffice, baghouses may be required. PPL submitted an analysis of potential particulate
control technologies to EPA that estimated annual costs of an ESP or baghouse at
$16-ZL million for each unit.e Upfront capital costs would be much higher: Multiplying
PPL's capital cost estimate at PPL's Corette plant by the four Colstrip units, shows the
capital cost of baghouses at two Colstrip units could be $76 million.
7 "Air Dispersion Modeling Analysis For Verifoing Compliance with the One-Hour SOZ and N02 NAAQS: PPL
Montana - Colstrip Power Plant," Prepared by Camille Marie Sears, l:une lL,2072
B Memo to f enny Harbine from Lindsey Sears, Colstrip S02 modeling, Sept.2l,2012
e PPL Montana, Best Available Retrofit Technology (BARTI Assessment, Colstrip Generating Station (Aug.
2007).
November L2,20L3
Page 9 of 11
Again, these potential costs must be accounted for in the planning process.
VI. Coal Combustion Waste
Colstrip has hundreds of acres of wet coalcombustion waste surface impoundments. The
State of Montana has acknowledged that Colstrip's impoundments have been leaking since
they were built in the 1980's. Contamination from these leaking impoundments has
already resulted in multiple lawsuits in which Colstrip's owners paid neighboring
landowners over $25 million. The cost to actually remediate the hundreds of acres of
leaking sludge impoundments will likely be far more expensive.
In June 20t0, EPA proposed two primary regulatory options for regulation of coal waste
disposed of in landfills and/or surface impoundments: (1) regulation of the materials as
hazardous wastes under Subtitle C of the Resource Conservation and Recovery Act
["RCRA"); or (2) regulation of the materials as non-hazardous wastes under Subtitle D of
RCRA. The proposed regulatory requirements of both options likely would lead to the
accelerated closure of all existing unlined landfills and unlined wet suriace impoundments,
although the agency's "D Prime" option would allow for the continued use of existing
landfills and surface impoundments through their uselul life as long as certain
environmental and safety standards were met. Under the naro primary options being
considered by EPA, coalwaste disposal practices will be impacted significantly and likely
result in significant compliance costs and/or may lead to the closure of existing disposal
facilities. EPA's regulations will generally require groundwater monitoring, double lined
landfills, closure of existing facilities, and possible conversion to dry ash disposal facilities,
at a cost of several million dollars to several hundred million dollars at each coal plant.
EPA is expected to finalize the coal waste rule in 2014, Compliance deadlines are expected
in the 2016-2018 timeframe, Puget Sound Energy, a t/3ea owner of Colstrip, already
estimated the costs to comply with EPA's CCW regulations could exceed $42 - 125
million.lo Until EPA finalizes this rule, the total cost of complying with the
regulations at Colstrip remains uncertain.
The State of Montana currently has jurisdiction over the regulation of Colstrip's waste
disposal facilities under the Montana Major Faciliry Siting Act. In luly 2012 the State
entered into an Administrative 0rder on Consent (AOC) with the owners of Colstrip to
address certain issues regarding coal ash disposal. In cooperation with the National
Wildlife Federation, our organizations brought a citizen-based enforcement action
challenging the AOC as inadequate under Montana law. If successful, this litigation
could require upgrades to Colstrip's waste impoundments and cleanup of
contaminated groundwater. These long-known remediation risks and associated
costs must be accounted for in the planning process.
VII. Coal Costs and the Rosebud Mine
t0 Puget Sound Energy's 2013 Integrated Resource Plan, Appendix J
November 12,201,3
Page 10 of L1"
We believe there are fuel cost risks that have not been accounted for in Avista's IRP. Avista
reported that it is currently negotiating a fuel supply extension f,or Colstrip.ll We believe
the results of this negotiation must be accounted for in this IRP in order to ensure that the
costs and risks of Colstrip are accurately represented to ratepayers and the Commission.
As a mine-mouth operation, Colstrip relies entirely on coal from the adjacent Rosebud
Mine. The Rosebud mine is currently owned and operated by Western Energy Company, a
subsidiary of Westmoreland Coal. The Rosebud mine has produced coalfor decades, and its
costs are steadily increasing as the mine moves to new areas with larger volumes o[
overburden. A recent industry report identified the Rosebud Mine as having the
highest production costs for coal in the Powder River Basin, at $16 per ton.12 These
increasing costs could be passed on to ratepayers through cost-plus contracts, which
are set to expire in 2O19. During NorthWestern Energy's most recent IRP process, they
identified the rising costs associated with the Rosebud mine, noting that the mine is
experiencing an $8/ton premium compared to base price forecasts. The cost of coal will
likely increase further if and when the contracts are renegotiated with Western Energy for
coal from the Rosebud Mine.
If the owners of Colstrip seek an alternative supply of coal, most likely from a
different Powder River Basin mine, there will be additional costs associated with the
permitting and construction of a rail unloading facility. The construction of such a
facility would cost tens of millions of dollars, An alternative coal supply may also require
boiler modifications and/or additional planned outages, as the Colstrip boilers were
originally constructed to burn coal from the Rosebud coal seam ffor example, Units 1-2
require coal with a relatively low sodium content).
The Rosebud Mine is also the subject of a recent citizen initiated civil enforcement
action that could further increase the cost of coal to Colstrip. The enforcement action
challenges the adequacy of the State of Montana's coal strip mining regulatory program in
complying with the federal Surface Mining Control and Reclamation Act of L977 ISMCRA).
30 U.S.C. 5$ 1201-1328. Specifically, the enforcement action alleges that the Montana
regulatory program has exhibited a pattern of failing to ensure that mining activity does
not harm water quality or damage the hydrology of streams and groundwater in Montana,
as required by SMCRA,
Conclusion
There are multi-million dollar costs and liabilities that loom for the nation's coal-fired
electricity resources, including Colstrip. Avista's ratepayers could eventually be on the
hook for many of these financial and environmental risks.
rrAvista's20l3ElectriclRP,AppendixA,Technical AdvisoryCommitteemeeting,NovemberT,Z1L?,page6
12 Powder River Basin Coal Resource and Cost Study: Campbeli, Converse and Sheridan Counries, Wyoming;
Big Horn, Powder River, Rosebud and Treasure Counties Montana. Prepared for Xcel Energy by John T. Boyd
Company September 201 1.
November 12,201,3
Page 11 of L1
PPL apparently recognizes the risks associated with its coal assets. In September 2072,it
announced it would "mothball" the Montana-based Corette plant. Pete Simonich, PPL
Montana vice president and chief operating officer, stated in a news release, "[o]ur detailed
analysis has shown that to meet the emission reductions required by EPA's mercury and
air toxics standards, we would need to invest $38 million in the Corette plant," and "[w]e
simply cannot justiff that level of spending in the current wholesale power market in the
Northwest."13
NorthWestern Energy recognized the risks and apparently declined to purchase PPL's
share of its coal generation facilities, and is instead attempting to exclusively purchase the
hydroelectric assets.
Pugel Sound Energy acknowledged the risks last year when its Vice President of Corporate
Affairs, Andy Wappler, said, "[w]e know the end of coal is soon.... We know coal is a dead
end."14
When NV Energy announced its plan to close its Nevada coal generation plants, its CEO
said, "[w]e are looking at the future of Nevada's energy needs and saying that coal is not
part of the long-term future of Nevada.... We think the costs are too great, the
environmental concerns and the costs associated with those environmental concerns are
too great... Coal is a fuel of the past in our state."ls
The Colstrip plant is contaminating groundwater, emitting enormous amounts oFair
pollution, and is one of the nation's largest sources of greenhouse gas emissions. In light of
the above-described risks, the ldaho PUC should work to protect consumers and the
environment by ensuring that all of the above-described risks are included in the planning
process,
Thank you for your careful consideration of the numerous legal and financial liabilities
associated with the ownership of Colstrip.
Sincerely,
4*l<Vfu-,,,*
Zack Waterman
Sierra Club
C,-/aa-r-'0
Anne Hedges
Montana Environmental Information Center
t3 Billing Gazette, September 20,201?
t+ http://www.VoUtube.Comr,ilai:r?,; = jri .j3tsi_,3PVi- ;,1i.:-l: t.:-y,rr,ir ce. See minute 28:22.
" R.lston Reports, 413/L3, News 3 (NBC) Las Vegas