A fight over repairs at Colstrip Power Plant spilled into the Montana Legislature on Tuesday, where lawmakers propose empowering the state attorney general to mandate owners pay for maintenance if not doing so means damaging the coal-fired generator.
The proposal comes as owners quarrel over increasing maintenance costs. State Sen. Steve Fitzpatrick, a Great Falls Republican, accused the Colstrip owners from Washington and Oregon of avoiding repairs to run Colstrip into the ground. Fitzpatrick’s Senate Bill 266 makes such behavior a deceptive practice and empowers the state attorney general to force power plant businesses to make necessary repairs.
“It’s kind of like we’re having a divorce here. The West Coast operators, they’re leaving the facility. They don’t want to be part of it anymore for various reasons and that’s it, so be it,” Fitzpatrick told the Senate Business, Labor and Economic Affairs Committee. “But instead of being civil about it and walking away and doing their fair share to keep the property in good condition, it’s like they’re trashing the facility on the way out. So, to take our divorce analogy, what they’re doing is trashing the house and keying the car on their way out the door. That’s what’s going on here and it’s just wrong.”
SB 266 says that if a business with ownership of a power plant in Montana refuses to fund its share of maintenance costs, the Montana government will consider the refusal an unfair or deceptive trade practice and empower the state AG to fine the business $100,000 a day until the maintenance is paid for. Businesses could also be forced through a restraining order to stop objecting to maintenance.
The power plant’s four utility owners from Washington and Oregon — Spokane-based Avista, Puget Sound Energy, Portland General Electric and PacifiCorp — cautioned against the state overriding the owners and operator agreement that has governed Colstrip maintenance and operations issues for decades.
Facing state deadlines to stop selling coal power, the Pacific Northwest utilities have become more surgical about paying for repairs to the power plant, approving them on more of a case-by-case basis, rather than approving a broad maintenance and operations budget.
Parts of Fitzpatrick’s bill defined prudent utility practices and operating costs in ways different than the definitions used in the private business contract governing Colstrip. Those definitions, combined with another Fitzpatrick bill forcing all arbitration to take place in Montana, supplanted terms of the private contract with new terms set by the government, said Thomas Ebzery, a lobbyist for Avista and Portland General Electric.
“The bill sends a bad signal to businesses that may be looking to invest in Montana,” Ebzery said. “That message is the Legislature can change the terms of your agreements. This is not in the best interest of Montana. The bill includes provisions that are clearly intended to impair the existing Colstrip owners’ agreement.”
In a statement issued after the hearing, Gov. Greg Gianforte's office said he would prefer the owners work out their differences, but the state is committed to keeping Colstrip operating for its useful life, most commonly accepted in Montana as 2042, the year NorthWestern customers end their 33-year debt schedule for NorthWestern's Colstrip share.
“Colstrip is a Montana asset, and the governor believes we are all best served if Colstrip is operational, providing affordable, reliable electricity to Montanans. The governor would much rather see a negotiated settlement to resolve this, but he is prepared to take whatever steps necessary to keep Colstrip running through its entire useful life," said Brooke Stroyke, Gianforte spokesperson.
Tuesday’s hearing on the bills comes two weeks after Colstrip co-owner NorthWestern Energy, Montana’s largest monopoly utility, forced the dispute over maintenance costs into arbitration. It was confirmed at the meeting that Unit 4, which is where NorthWestern’s ownership is, was shut down last week because of leaky boiler tubes.
By contract, the arbitration sought by NorthWestern takes place in Spokane, Washington. Since the 1980s, the majority of Colstrip’s ownership has belonged to utilities in Oregon and Washington, which also consume 70% of Colstrip’s electricity.
Those owners now face climate change laws requiring them to abandon coal power, in Washington by 2025, in Oregon by 2030 for PacifiCorp and 2035 for Portland General Electric.
“We do recognize that there’s extreme pressure from regulators and politicians on other Colstrip owners who serve customers in other jurisdictions to close the plant earlier than originally planned,” said David Hoffmann, a NorthWestern lobbyist.
NorthWestern and the power plant’s other utility owners haven’t been on the same page for at least five years, starting with Talen Energy’s announcement in 2016 that it was losing millions of dollars as the power plant’s operator and Colstrip's only merchant generator selling the electricity on an open market where coal power was becoming increasingly uncompetitive. The power plant’s other owners are monopoly utilities with captive customers obligated to pay above market prices in exchange for reliability.
A Texas company with no other power plants within 1,500 miles of Colstrip, Talen gave two-years notice in 2016 that it was done running the southeast Montana power plant. Though it later decided to stay, Talen’s announcement put the other owners on the spot as to whether any of them would step in as operator. All begged off, including NorthWestern.
Melissa Lewis, a lobbyist for Puget Sound Energy, told the committee Tuesday that Talen’s future running the power plant is again uncertain. She pushed back against the allegation that the Seattle-area utility was a bad Colstrip owner. Puget is Colstrip’s oldest owner, one involved in the construction of every Colstrip unit. The company has invested hundreds of millions of dollars in Montana over the last half-century, Lewis said. The utility is the only Colstrip owner to contribute $10 million to the community of Colstrip to help it transition to a post-power-plant era. Puget isn’t leaving Montana, Lewis said. It is close to announcing new investments in the state.
NorthWestern has only been a Colstrip owner for a decade, having bought 30% of Colstrip Unit 4 for $187 million in 2007. With state approval, it has billed its Montana customers $407 million for its Colstrip share, at 8.25% interest to be fully paid by 2042.
Early exits by the other owners could make it difficult for NorthWestern to keep its Montana customers paying down Colstrip debt, should Unit 4 shut down years earlier than planned.
Early exits have changed the way the other Colstrip owners think about spending money at the power plant. They want to spend less, and while they are raising the issue with Talen, they weren't discussing it with NorthWestern, at least not according to a July 2020 report by the utility’s government affairs director, John Hines, to NorthWestern's board of directors.
“In late September, 2018, we received copies of letters addressed to Talen, from each of the other non-Talen owners (Puget Sound Energy, PacifiCorp, Portland General Electric and Avista). These four letters were nearly identical to one another and, referencing ‘changes in (the) regulatory life of the Colstrip units, sought significant additional detail concerning capital projects at Colstrip to justify the projects from a financial and prudency standpoint. Additionally, at the same time, we became aware that these same four non-Talen Owners had jointly retained counsel to advise and represent their joint interests in Colstrip Units 3 and 4.”
At the time NorthWestern learned about the other owner’s letters to Talen, Colstrip was coming off a 77-day stretch during which Units 3 and 4 were malfunctioning and only operating for pollution emissions tests. It was an expensive shutdown in the heat of air conditioning season, when replacement power was at a premium. The sun was shining, but the coal wasn’t reliably burning.
It was during this time that an analysis of the power plant revealed that the super-heated section of the Colstrip Unit 4 boiler was cracked and would cost $20 million to replace. That detail wouldn’t become public for another year when it was disclosed in poorly redacted documents filed in a Puget Sound Energy case in Washington State.
In testimony, Puget’s Ron Roberts told regulators that each owner would have to decide whether the $20 million repair to CU 4 was worth it. It was November 2019. The boiler damage had already gone unrepaired for more than a year after it was discovered.
Weeks after the revelation about the super-heated boiler crack, Puget announced that it had reached an agreement to sell its 25% share of Unit 4 to NorthWestern for the aggregate price of one dollar. The sale would have given NorthWestern a 55% share in the unit and leverage over the other owners when it came to maintenance.
But the sale to NorthWestern fell through after the utility commission in Washington state concluded that the sales terms, which included Puget buying energy from NorthWestern at above market price for several years, weren’t good for Puget customers.
There were still other signs of disagreement. By August 2020, it had been four and a half years since Unit 4 had last received an overhaul that normally takes place every 3 years, according to NorthWestern’s report to its board of directors.
In handwritten notes from the August power plant owners' meetings, NorthWestern’s Mike Barnes, indicated that Puget Sound Energy and PacifiCorp had suggested postponing shutting down Unit 4 in September for repairs.
Puget’s Nancy Atwood “wants to cut budget (operations and maintenance) for rest of year,” Barnes wrote. Barnes finished the subject stating “increase risks is OK w/Puget.”
At the time of the August owner’s meeting, Puget and NorthWestern were still pursuing a sale that would have handed Puget’s Unit 4 share, and all the associated maintenance costs, to NorthWestern by the end of December 2020.
The maintenance and operations budget for Colstrip was coming in 7% higher, an increase of $8.6 million, according to notes from the September owners’ meeting. Atwood informed the group that “Puget cannot accept the budget as presented.” Portland General Electric and Puget reportedly wanted to “maintain production and availability, but reduce expenses” at the power plant.
NorthWestern’s board of directors were told the September repairs had to happen or more expensive repairs and longer shutdown periods would come.
“While it was prudent to delay until this fall to help ensure the safety of the community, the safety of the employees at Colstrip, and the safety of contractors needed to execute the overhaul, further delay could result in a forced outage(s) that are more prolonged and more costly,” according to NorthWestern’s report.