Study: 2022 retirement of PacifiCorp Naughton units in customers' best interest

GAZETTE PHOTO / Theresa Davis

Rocky Mountain Power CEO Gary Hoogeveen and Rick Link (Vice President, Resource and Commercial Strategy for RMP) address local elected officials and industry representatives at a meeting on Tuesday, April 23, in Kemmerer. The company outlined potential plans for the Naughton plant.

“The coal study updates on Thursday will show that retiring early the four coal units of Naughton 1, Naughton 2, Jim Bridger 1 and Jim Bridger 2 might be in the customers’ best interest, if they are retired as soon as the end of 2022.”

That’s the news Rocky Mountain Power CEO Gary Hoogeveen delivered to local leaders at a meeting in Kemmerer on Tuesday, April 23.

It was the beginning of a long night of questions — many of which the company said they are only beginning to answer.

The invitation-only meeting included Rocky Mountain Power / PacifiCorp leadership, Lincoln County Commissioners, Diamondville and Kemmerer mayors and council members, Opal council members, Sen. Dan Dockstader, Rep. Tom Crank, Kathy Tomassi and Alayna Zempel from the Wyoming Business Council, Renny McKay from Governor Gordon’s office and local energy industry representatives.

Rocky Mountain Power also presented the coal study updates at a public input meeting in Salt Lake this morning.

The utility executives informed attendees in Kemmerer that the coal study was strictly data, not like the concrete plan that will be included in the company’s 2019 Integrated Resource Plan (IRP).

“The coal studies are intended to inform the IRP,” said Rick Link, RMP’s vice president of resource and commercial strategy. “The coal study is not the IRP.”

Hoogeveen said that the “might” of whether early retirement of coal-fired units would save customers money is what RMP will be examining between now and August 1 as part of the IRP process.

“‘Might’ means that probably at least one of those four units will retire by the end of 2022,” Hoogeveen said. “We’re not at the point yet where we’ve got a plan that says we’re going to do this.”

The CEO said the other three units at Naughton and Jim Bridger could be retired in stages from 2022-2028.

“The IRP is a view from our customers’ perspective, not from the owners, executives or from Oregon, Washington or Wyoming state policy,” Hoogeveen said.

Rocky Mountain Power / PacifiCorp does major updates on its Integrated Resource Plan every two years. The CEO said the IRP process involves examining:

• customer demand for electricity for next 20 years

• RMP’s energy resources

• lifespan of coal units

• ways to supply energy if coal units are retired early

“It’s a complex, sophisticated model that helps inform the IRP,” Hoogeveen said.

Meeting attendees criticized the coal study for its focus on data and not actual impact, but RMP leadership emphasized that the IRP process was far from over.

“We have not started the 2019 IRP in a lot of ways,” Link said. “The focus has been on the coal studies. There’s still a tremendous amount of work to do as far as planning for the actual retirement of units and the impact that will have.”

No resource decision will be made before the 2019 IRP is completed in August. But meeting attendees commented that it seemed like the company “had already made their decision.”

Rocky Mountain Power / PacifiCorp published an updated version of its coal study, saying the utility might be able to provide lower costs to customers by shutting down Naughton 1 and 2 and Jim Bridger 1 and 2 by as early as the end of 2022. Naughton's estimated lifespan at this point goes until the end of 2029. 

How did we get here?

Kemmerer coal mine general manager Rob Piippo had several concerns about the potential for an early retirement date of the Naughton units. The Kemmerer coal mine supplies Naughton Units 1 and 2 with coal. The mine is facing its own uncertainty as the sale of the mine from the bankrupt Westmoreland to Tom Clarke has hit a snag over who pays the reclamation bonds.

“ I have 280 people that I’m terrified for,” Piippo said. “My job is to lead them. I understand that life is about change and all things come to an end, but we need to know what those changes are.”

The coal mine employs nearly 300 people, and the power plant employs about 125.

“Traditionally, we’ve always been told that Naughton was one of the lowest cost providers in the (PacifiCorp) fleet,” Piippo said. “So how did we get from there to retiring early?”

The Rocky Mountain Power executives agreed that it was not an increase of costs that made the units uneconomic, but the comparison to cheaper alternative energies on the market.

“In 2015, coal plants were deep in the money, then the floor dropped out on gas prices,” said Dana Ralston, RMP’s vice president of thermal generation. “It didn’t happen overnight; it’s been progressing since then.”

Link said that the costs of coal agreements compared to other energy options were part of the coal study considerations.

“Those cost comparisons are not unique to Naughton,” Link said. “The Jim Bridger units and others have a similar profile.”

Community Impact

Hoogeveen said the potential early retirement of coal-fired units was not a matter of Rocky Mountain Power’s bottom line. They said they are looking at the future of the entire energy marketplace, not just in Wyoming.

“It’s not what we want. It’s what our customers require,” Hoogeveen said. “We can’t turn a blind eye. We don’t want to run a dispassionate business, so we’re looking at how we can make this retirement process humane.”

The actual estimated end of life for the Naughton units is currently the end of 2029. The coal study examined each of Rocky Mountain Power’s 22 coal-fired units individually to determine whether accelerated retirement would create savings for customers.

“Then we ran different scenarios of different combinations of coal-fired units,” Link said. “But we did not do a good job of managing that part of the message from the coal study.”

Link said it is not true that 60 percent of PacifiCorp’s fleet is uneconomic. Link also said that PacifiCorp doesn’t have to “follow the data precisely” when it comes to making actual plans after the coal study.

“From December to now was the coal study,” Link said. “Now we move on to solving the reliability problem, which is ‘can we keep the lights on even if we accelerate retirement?’”

Link said there are no scenarios in the coal study that do not include an early retirement of Naughton Units 1 and 2.

“For 50 years we’ve dug up coal and produced the power,” said Kemmerer councilman Dave McGinnis. “You don’t have to work at the power plant or the mine to be a loser in this.”

The CEO responded that although the data states that they should “get the hell out by 2022,” RMP is using the IRP to figure out ways they can stay in the community after 2022.

Lincoln County Commissioner Kent Connelly said an early retirement date for the Naughton units meant that the county was already in “disaster planning mode” for budgets.

“The power plant and the mine contribute taxes that constitute well over 50 percent of Lincoln County’s budget,” Connelly said. “If you take these plants down, we’ve got to deal with what you leave us.”

Piippo echoed the concern about what an early plant shutdown would do to funding for the county, communities and school districts that currently benefit.

“There is nothing in these communities to replace that money,” Piippo said.

“We understand the impacts this would have, but we have to provide the lowest cost to our customers in all six states we serve,” Hoogeveen said. “We’re looking at how to soften that blow by staggering the unit retirement dates.”

The CEO did say that at least 1 of the 4 units referenced in the coal study will likely go down at the end of 2022, especially considering the uncertainty at the Kemmerer coal mine.

Senate File 159

Meeting attendees asked RMP executives about the feasability of selling the power plant to another operator. This issue was addressed in Senate File 159, “New opportunities for Wyoming coal-fired generation.” The bill was signed by Governor Gordon in March, and was sponsored by Sen. Dockstader.

The legislation would prevent companies from earning money on new projects if they did not make “good faith efforts to sell” coal-fired power plants rather than close them. The bill was praised as protecting Wyoming jobs. It was also criticized as a band-aid for the energy industry and an overreach into the free market.

Diamondville Mayor Mark Langley said that if Naughton doesn’t fit in with PacifiCorp’s plans, they should try to sell, and the CEO agreed that they would try do so.

“It seems like you’re coming here to us to ‘let us down easy,’ but it’s not good enough,” Langley said. “We have people we’re looking out for, too.”

“We would follow the law of Senate File 159 and try to sell,” Hoogeveen said. “They would have to prove they can operate at lower cost and pay environmental obligations. I’m not being arrogant when I say it would be very difficult for someone to operate and sell power for less than we could. We’ll still go through that process, but I wouldn’t hang your hats on it.”

Naughton Unit 3

Unit 3 at the Naughton power plant was shut down in January 2019. PacifiCorp leadership said that converting the unit to natural gas is still an option that will be explored in the 2019 IRP.

“We’re not done yet,” Link said. “We will look closely at converting Unit 3 to gas.”

Chad Tepley, RMP’s vice president of strategy and development, said that the coal-fired Naughton Unit 3 was facing millions of dollars in environmental retrofits.

“Those compliance costs were not supportable,” Tepley said. “If Unit 3 was converted to gas, it would be a different operation as far as employees and efficiency. But it would be useful for the summer peak.”

Commissioner Connelly questioned the CEO about rate hikes that county residents have brought to his attention.

“We have not raised rates since 2016, so that might be a change in usage,” Hoogeveen said. “We’d have to look at those bills individually to see what’s happening.”

Reliability of Renewable Energy

The executives fielded questions about the utility’s ability to keep up the power grid if the Naughton units were shut down.

“We would need a combination of resources to replace those units,” Link said. “As part of the IRP we look at natural gas, wind, battery tech, solar and pump storage.”

Some of these technologies are not currently included in Rocky Mountain Power’s resource portfolio, 50 to 60 percent of which is coal power.

Piippo asked the executives, “How can you count on the reliability of something you don’t have yet?”

When asked about technologies that could increase Naughton’s efficiency, like carbon capture and coal gasification, Tepley said the feasibility of carbon capture is site specific.

“Naughton is not ideally situated for that opportunity right now, but we never undervalue the infrastructure at Naughton.” Tepley said.

Rep. Tom Crank asked about plans for construction of renewable energy facilities.

“At this point the IRP doesn’t include plans to build,” Hoogeveen said. “That’s what we’re figuring out between now and August 1. We have to maintain power, and we will.”

What’s next?

Rocky Mountain Power will continue to have public input meetings as part of the IRP process. The IRP will be completed August 1 and submitted to the Public Service Commissions of the six states the utility serves.

“As a supplier, if you’re telling me today that by the end of 2022 I will likely not have a plant to supply, I will start taking action,” Piipo said. “We can’t start planning for a 2022 shutdown, and then have you tell us that it will be later.”

Hoogeveen assured the attendees that by August 1, Rocky Mountain Power would have the Integrated Resource Plan finalized.

“We will stick to that plan and the actions and dates we include in it,” Hoogeveen said. “We won’t go back and forth.

“There are a lot of stakeholders in this plan, and you guys are among the most important stakeholders,” Hoogeveen continued. “Kemmerer is still a valuable geographic location in our network.”

“We don’t like everything we’ve heard, but we appreciate you coming here and trying to give us answers,” Kemmerer Mayor Tony Tomassi said.

The CEO encouraged locals to stay involved in the IRP process. He promised that Rocky Mountain Power executives would host another meeting in Kemmerer as the August 1 IRP completion date neared.

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