Montana regulators gave their blessing Tuesday to a Colstrip Generating Station owner’s sale to Ontario-based Hydro One, which shed its Canadian coal-energy assets a few years ago.
The approval by Montana’s Public Service Commission secures $4.5 million to help the town of Colstrip prepare for a future without the four-unit power plant. Hydro One is paying $5.3 billion for Colstrip co-owner Avista Corp., a Spokane, Wash., utility with customers in five states.
Avista owns 15 percent of Colstrip Units 3 and 4 and relies on Colstrip for 10 percent of its power. Its ownership in the power plant has been a point of concern for utility commissions in the four other states in which Avista does business. The utility needs approval from each state before its sale can proceed. In Washington and Idaho, Avista has agreed to be financially ready to shutter the Colstrip Generating Station by the end of 2027 all while assuring Montana regulators that the power plant could continue burning into the 2030s.
Not everyone on Montana’s PSC has been comforted by Avista’s assurances.
“I really find that disingenuous,” Commissioner Tony O’Donnell said of the 2027 target date. “If it wasn’t important, they wouldn’t have thought to put it in there. It’s part of a shift that’s meant to have an effect. It’s not rhetorical.”
O’Donnell said he’s also concerned about Ontario laws banning coal power and the fact that the province is also Hydro One’s largest shareholder with just under 50 percent ownership.
Avista would not be transmitting power to Ontario.
Ontario has been coal-power free since 2014, a goal the province began working toward in 2003 after a sharp increase in smog advisories raised concerns about human health and the environment. According to the province's official website, a 2005 study found the annual cost of coal-fired electricity, seen in health problems and environmental costs, was $4.4 billion.
In May, Hydro One attempted to assure Montana regulators that Ontario values wouldn’t lead to Avista’s departure from Colstrip. O’Donnell wasn’t completely at ease and fellow commissioner Travis Kavulla said Tuesday that if Ontario wanted to flex its muscle on Hydro One, it appeared the province could.
Kavulla also described as dubious the assurance by Avista and another Colstrip owner that financial preparedness for shutting down the power plant had no bearing for when the Colstrip Generating Station might actually close.
Regulated power companies are guaranteed a rate of return on their assets, including power plants. The rate is profitable when the utility is making investments in its assets and not at all profitable when the investment stops. A power plant that is financially ready for closure isn’t good for the utility’s rate of return.
“The reality is, when a facility is fully depreciated, the utility earns no return whatsoever on their continued operation of the plant,” Kavulla said. “That’s just how rate making works.”
Two of Colstrip Generating Station's six owners have plans to be financially ready for closure by December 2027. Seattle-based Puget Sound Energy, the power plant's largest owner, has also agreed to a 2027 schedule.
Puget has also agreed to $10 million in transition funding for Colstrip, a community of 2,300. The Western Washington company also splits ownership of Colstrip Units 1 and 2 with Pennsylvania-based Talen Energy. The companies have agreed to close those units within five years to settle an air pollution lawsuit.
Washington voters and Democratic Gov. Jay Inslee have cited climate change as a reason for getting out of coal power.
In Oregon, Colstrip co-owner Portland General Electric is winding down its coal use, with 2035 as its end date following a phase-out of several years. PacifiCorp, also a Colstrip owner, will stop selling coal power to Oregon customers in 2030. The Oregon citizenry, concerned about climate change, demanded utilities pull the plug on coal power.
Additionally, Westmoreland Coal Co., which owns Rosebud Mine, has indicated the mine will close in 2029. In the immediate future Westmoreland has informed the Securities and Exchange Commission that bankruptcy is possible.
Montana regulators are a small player in Avista’s business. The utility needs PSC approval because it has 32 customers in the northeastern Montana community of Noxon, where it owns a hydroelectric dam. That makes the PSC’s stake in the Avista-Hydro One merger pretty small. Kavulla suggested the commission follow the lead of the regulators in other states, namely Washington and Idaho, where most of Avista’s customers are located.
Not all commissioners agreed.
“To be sure there have been times when we have appealed to those other jurisdictions, specifically Washington, Oregon and without much success because of their strong commitment to the climate change calamity fiction,” said Commissioner Roger Koopman of Bozeman.
While the commission approved the Avista’s sale to Hydro One, it didn’t follow other states in recognizing Hydro One’s plans to be financially ready for Colstrip closure by late 2027.