Colstrip operator Talen Montana says it has been left holding the bag for pension and benefits obligations, as well as environmental cleanup costs that its predecessor, PPL Corp., should have covered.
Talen said in a press release that PPL wrongfully took $733 million from its Montana holdings that should have stayed on the books to cover commitments to Colstrip workers and environmental cleanup costs.
Pennsylvania-based PPL claimed the $733 million as profit from its Montana holdings, which were spun off Talen in 2015. Talen said in its lawsuit the money should have stayed in Montana to cover Colstrip commitments.
PPL responded to news of the Talen lawsuit, saying that it had done nothing wrong.
"We believe that we acted appropriately with regard to the sale of PPL Montana’s hydroelectric generating assets, and that the subsequent distribution of proceeds was in compliance with applicable laws. As such, we will defend ourselves vigorously against these actions," said Ryan Hill, a PPL spokesman, in an email. "The Talen Energy spinoff occurred over three years ago in June 2015, and PPL Montana was part of the collection of assets that was spun out at that time. We are reviewing the matter and are not in a position to comment further at this time."
Talen said it has enough money to pay for its current obligations. It is also legally obligated to cover commitments from the 16 years PPL operated the power plant. When it acquired PPL's Montana holdings in 2015 as Talen Montana, the company said it would have no problem meeting PPL's commitments.
Although Talen initially said Monday that PPL had left "TM without adequate funds to pay its obligations on its own," it later clarified that it would cover its obligations to Colstrip workers and its environmental cleanup costs regardless of whether its lawsuit against PPL is successful.
"Over the last two years, we have worked tirelessly to improve the difficult financial condition of the Colstrip power plant that we inherited from PPL," said Talen Montana President, Dale Lebsack in a press release. "We are asking PPL to fulfill its obligations to the Colstrip plant, the state of Montana, and to the Colstrip plant employees and retirees."
Talen said it is also turning to PPL to cover environmental cleanup costs from PPL years, which it contends PPL didn't fully disclose. Those costs include $198 million to clean up toxic coal ash at Colstrip, plus an additional $500 million in cleanup costs to satisfy state requirements.
"No reasonable cash flow projections showed PPL Montana with adequate future income, or assets to pay its liabilities," Talen said of the cleanup costs.
Talen Energy is a company PPL used to spin off its energy holdings in 2015. In Montana, Talen took over PPL’s interests in the Colstrip power plant, which PPL had attempted to sell but couldn’t, while the parent company’s other Montana assets, namely 11 hydroelectric dams, sold to NorthWestern Energy.
PPL received more than $900 million for its dams. The money was "dividended" upward from PPL Montana to its parent company PPL Corp., Talen said.
Talen owns half of Colstrip Units 1 and 2, as well as 15 percent of Units 3 and 4. The power plant has 320 employees.
In two Montana lawsuits filed Monday, Talen laid out a scenario in which PPL bought 11 dams and two coal-fired power plants from the now defunct Montana Power Company right before regional power prices started to spike. It was 1999. The California energy crisis was a year way and PPL had just bought Montana Power's generating assets for $769 million.
During the next few years, power prices in Montana increased as much as 50 percent, leading to $325 million in profits for PPL, according to Talen.
But things started to sour for PPL in 2012. Pollution regulations tightened up. Power from natural gas and renewable energy sources started selling more cheaply than coal power. Public outcry for cleaner energy increased in Washington and Oregon, two states where Colstrip power serves more than a million customers.
By 2015, PPL was getting out, both by selling its dams to NorthWestern and by spinning off its remaining business to Talen, a company PPL co-owned with Riverstone Holdings until mid-2016 when Riverstone purchased the Talen shares it didn't already own.