MTPR

Settlement Calls For $10 Million To Mitigate Colstrip Closures

Sep 15, 2017

A legal settlement announced late Friday afternoon could send $10 million to the town of Colstrip to mitigate impacts from the partial shut down of the huge coal-fired power plant there.

"I think it’s a win for the town of Colstrip and a win for the state of Montana," says Eric Sell, a spokesman for Montana Attorney General Tim Fox.

Attorney General Tim Fox negotiated the settlement with Seattle-based Puget Sound Energy, which owns Colstrip Units One and Two. Those two, older and dirtier coal-fired generators are scheduled to shut down in 2022 following a Clean Air Act lawsuit by environmental groups.

Earlier this year some Montana lawmakers tried to pass a bill that would have required Puget Sound to pay shutdown mitigation costs. That bill failed, but Fox was able to negotiate the settlement announced today with the company via regular rate review proceedings that Puget Sound is going through with Washington utility regulators.

"The settlement agreement that we entered into and was filed today, establishes that they will pay $10 million to the town of Colstrip, even though they were not under any legal obligation to do so under Montana Law."

Sell said that while the $10 million settlement is a win for Colstrip, it’s not enough to completely take care of the town losing such an important economic driver.

"We think Puget Sound Energy should do more to cover the economic impacts that shutting down Units One and Two will have. But again, they were under not legal requirement under Montana law to provide this money, so it was really us making the case to them of how important it is that the community of Colstrip has some cushion to mitigate this impact. We have met with folks from Colstrip and Rosebud County. The details of the settlement have been confidential until about an hour ago when this was filed, so we're gonna circle back up with them, we wanna get input from them."

Puget Sound Energy is just one of six partial owners of the entire Colstrip power plant, which includes the newer units three and four, for which there is currently no set shut down date.

Sell said there is a "reasonable expectation," that Montana could reach similar shutdown mitigation settlements with other partial owners of Colstrip.

Below is my interview with Eric Sell, communications director for Montana Attorney General Tim Fox:

Eric Sell: Back in January one of the owners of the Colstrip generating station in Colstrip, Montana, Puget Sound Energy, filed a rate case for the Washington Utilities and Transportation Commission, that's the government body in Washington that regulates Puget utility rates. The state of Montana intervened in that rate case to represent the state's interests in anticipation of a bill passing the legislative session that would have put a brand new requirement on Puget Sound Energy for closing the Colstrip generating station Units One and Two, which they agreed to do in a settlement with a few environmental groups back in 2016. Ultimately that bill failed to pass but we still intervened in the rate case and still negotiated with Puget Sound Energy to provide $10 million for the town of Colstrip to address the economic impact when Units One and Two shutdown.

Eric Whitney: What prompted the rate review?

ES: It happens though every four or five years or so, Northwestern does the same thing in Montana with the Public Service Commission. And essentially what these rate cases are for is to reassess the utilities’ cost to provide service to their customers and what their plans are for the future. And then they adjust how much they charge their customers based off the proceeding. So this is a fairly regular proceeding that happens for utilities and the significance of this proceeding is it’s the first time Puget Sound Energy has gone before the Washington UTC since they entered into that settlement agreement to shut down units one in two by July 2022.

EW: What was Montana’s argument before the Washington regulator to why $10 million needed to come from that company to Montana?

ES: Again, we were positioning ourselves to make the Washington Utilities and Transportation Commission aware of a new legal requirement in the state of Montana that would have imposed requirements on Puget Sound Energy to cover economic impact costs.

But again, ultimately that bill, Bill 338 failed to pass the 2017 Montana legislature. However we were still an intervener in this rate case. So we used our position as an intervener to encourage Puget Sound Energy to still cover some of these costs even though there wasn't a legal requirement for them to do so. And this settlement agreement that we entered into and was filed today establishes that they will pay $10 million to the town of Colstrip even though they weren't under any legal obligation to do so under Montana law. Now, this settlement still has to be approved by the commission so it isn't finalized yet.

EW: What was Montana’s argument, if Montana didn't have the stick of a law saying ‘you must pay these costs,’ what leverage did the state have? How were you successful at getting the company to settle for $10 million?

ES: Well, we encouraged Puget Sound Energy to recognize the impact of them shutting down would have on the town of Colstrip. And apparently they recognized that shutting down Units One and Two will mean a lot of lost jobs, a lot of lost tax revenue, and they recognized that as a company that operated there for decades they have an obligation to the town. They have an obligation to the community to mitigate some of these economic impacts for pulling out,.

EW: So you've convinced Puget Sound Energy to pay those mitigation costs, or pay $10 million dollars toward those mitigation costs, but the agreement still has to be approved by the Washington regulator, correct? Because ultimately it'll be ratepayers in Washington who will be responsible for sending that $10 million to Colstrip right?

ES: Actually $5 million of that is coming from Puget Sound Energy shareholders, not the ratepayers, and the other $5 million is going from production tax credits that they're receiving for wind farm assets that they own. And that's a production tax credit that's under federal law. So this actually won't increase Puget Sound Energy customers’ rates for this $10 million.

EW: But the settlement is still pending? I think you said it was on September 27 that the Washington regulator will have a look at that, and that if they approve then then the $10 million is headed Montana’s way?

ES: Yep.

EW: How does the AG’s office feel about the amount, and have you spoken with folks in Colstrip and is $10 million enough? How would you characterize the amount in terms of the challenge that Colstrip faces?

EW: We think Puget Sound Energy should do more to cover the economic impacts that shutting down Units One and Two will have. But again, they were under no legal requirement under Montana law to provide this money so it was really us making the case to them of how important it is that the community of Colstrip has some cushion to mitigate this impact. We have met with folks from Colstrip and Rosebud County. The details of the settlement have been confidential until about an hour ago when this was filed. So we are going to circle back up with them. We want to get input from them. But again you know there wasn't wasn't any legal requirement or legal argument that the state of Montana could make to compel Puget Sound to pay these costs other than it's the right thing to do.

EW: So how would you characterize the settlement.

ES: I think it's a win for the town of Colstrip, and win for the state of Montana in a sense, and this is important, the position that the state of Montana was in with the fate the failure of Senate Bill 338 in the legislature as we've been discussing here. There wasn't a legal requirement there wasn't a legal stick to require PSC to pay these costs. So we really didn't have a whole lot of leverage other than internal negotiations meeting with them and urging them to put put forth this money to mitigate the impact in the town of Colstrip. And in that sense I think we've been fairly successful and considered

EW: You said that you're still running it by the folks in Colstrip in Rosebud County. Is there any chance that they say, ‘we don't like the settlement and we want to back out,’ or is that pretty much in ink and it just has to go before the Washington regulator?

ES:  Well, essentially this is the state of Montana. You’ve got to view this rate case in the context of it's just one of one of six owners as it relates to Colstrip, or seven owners actually, And there's a lot of other players in the larger Colstrip discussion and this is just one rate case for one owner who owned half of Units One and Two, and 25 percent of Units Three and Four. I think hopefully that the folks in Colstrip will recognize the position that the state of Montana was in in this rate case and hopefully they'll be glad to have that $10 million.

Now, it's also important that the state of Montana is the sole decider of the requirements for de-commissioning and remediating the land of the Colstrip generating station. So when units One and Two shut down some time in 2022, and Units Three and Four shut down some time several decades from now, the state of Montana is the only one who can decide what the owners of Colstrip are liable for for clean-up costs. And that was again re-asserted in this rate case. Puget Sound recognizes that the Washington Utility Commission recognizes that and all of the other parties to the settlement recognize that the state of Montana is the only one that has sold jurisdiction to decide the cleanup costs. So I think that's another important win out of this case as well.

EW: Does that mean that folks in Colstrip or people in Montana can anticipate the state trying to get similar settlements from other part owners?

ES: I think that's a reasonable expectation. I can't predict the future. But this is one of the owners, and there's five other owners. So you could potentially see something similar with those other owners as well.

I do think that it's important to note that there were attempts throughout this rate case to establish shut down dates for the other two units, Units Three and Four. And we were successful in fighting off a lot of those attempts particularly by some of the interveners, the environmental groups, the Sierra Club who was one of the intervenors, or one of the parties who sued to shut down One and Two, were very active in attempting to establish or shut down the Units Three and Four. So I think that's another big win for the state of Montana and the town of Colstrip is preventing establishing a shutdown date for those two units in this case.