Energy and values: PGE's Boardman brinksmanship [updated]

Boardman plant (photo by Brent Wojahn, courtesy The Oregonian) 

"Because our customers’ values power the way we operate, serving our customers means reflecting their diverse views in the way we do business," reads the Portland General Electric website. "It’s why we consistently lead the nation in renewable power programs and why our company and employees are deeply involved in serving the community."

Oh, and PGE stock is currently trading at about $20.02 per share on the New York Stock Exchange.

No wonder the utility has fought ruthlessly to keep belching coal into the Columbia Gorge.

As the utility has battled regulators over the future of the Boardman coal plant in eastern Oregon, PGE has become an indication of the downside of letting public resources like utilities act as private investor-owned corporations.

And as it happens, this can be detrimental to business. Regions that derive most of their power from coal can be hampered from attracting large corporate interests. Just ask Prineville and Facebook (see the update below).

 

Boardman is Oregon's only coal-fired power plant, producing 585 megawatts of power, enough to serve about 250,000 residential customers. Boardman produces power more cheaply than any other source PGE uses. But that comes with a big environmental cost, too: Boardman is also the state's biggest polluter. That would be unfortunate no matter where the plant's location, but as it happens, it is situated very close to the Columbia River.

PGE has been involved in a multi-year battle with Oregon's Department of Environmental Quality over exactly when this sooty, Dickens-esque behemoth will cease operations.

Under existing regulations, PGE must install between $500 million to $600 million of new controls at the plant by 2017. The company counter-proposed a much smaller investment: $41 million in haze and mercury reduction controls in exchange agreeing to shut the plant down in 2020. DEQ officials rejected that plan, saying it wouldn't meet federal standards, but said PGE could go ahead with the proposed controls immediately (instead of by 2017) if it shut the plant in 2015. Alternatively, the DEQ proposed two other options: either that PGE stick with its 2020 shutdown date but install an additional $320 million worth of new burners and scrubbers by 2014, or make a $100 million investment in new controls and a 2018 closure. 

PGE leadership said both options were economically unfeasible, and estimates it would raise rates by an average of 3.2 to 4.6 percent over the next decade.

The utility also argued that  one of the pollution control technologies proposed, called dry sorbent injection, has never been tested on a plant of Boardman's size and could result in other pollution violations.

And speaking of pollution violations, the Sierra Club wants the EPA to regulate coal ash, which the organization argues has severely polluted groundwater near Boardman. Did I mention Boardman is beside the mighty Columbia River that Lewis & Clark floated down on their way to the Pacific?

PGE proposes to spend about $100 million on new controls at the plant and extend the shutdown date until 2020. But here's the catch: If the State of Oregon doesn't accept its terms, PGE now says it will operate the Boardman plant until 2040.

 
Boardman Power Plant (image courtesy Alliance For Democracy)

"PGE intends to hold Oregon’s clean air—and the Columbia River Gorge—hostage," writes Nick Engelfried of Blue Oregon. "The Portland area’s main utility is throwing a giant-size temper tantrum, employing scary threats and unsubstantiated claims to get its way."

I wouldn't have thought a corporation that is allowed to operate a monopoly in supplying Oregonians with power would even have the right to negotiate with the state over how it can pollute or what pollution controls it can use. Can I negotiate what my tax rates are? Do you ever get to negotiate your vehicle fees at the DMV? But even if PGE has that right, it's also surprising to learn that the utility is trying to play hardball based almost solely on the fact that such pollution mitigation would come with a rate increase for customers.

On the New York Stock Exchange, PGE stock is currently trading at about $20 per share. Any entity with shareholders and a place in Wall Street trading is a machine set up to generate profits. But when a public utility grants the right to a corporation such as PGE, rates are not the only factor in providing service.

According to a report by Bloomberg, agencies like PGE actually are given incentives for clinging to fossil fuels. Governments last year gave $43 billion to $46 billion of support to renewable energy through tax credits, guaranteed electricity prices known as feed-in tariffs and alternative energy credits, the London-based research group said today in a statement. That compares with the $557 billion that the International Energy Agency last month said was spent to subsidize fossil fuels in 2008.

What's more, PGE has some wiggle room with its electricity rates. The average residential price per kiloWatt hour for PGE customers is 10.05 cents. The national average is 11.76 cents. In other words, PGE customers in Oregon already have far cheaper rates than customers elsewhere. That's thanks largely to the presence of Bonneville Dam, although PGE has a diverse mix of generating resources includes hydropower, coal and gas combustion, wind and solar, as well as key transmission resources. Its 13 power plants have a total combined generating capacity of 2,434 megawatts serving 52 Oregon cities and approximately 816,000 customers.

The nature of electrical utilities may be also changing in a way that makes companies like PGE less of a necessity. In the United States utilities are often natural monopolies because the infrastructure required to produce electricity s very expensive to build and maintain. As a result, they are often government monopolies, or if privately owned, the sectors are specially regulated by a public utilities commission. But developments in technology have eroded some of the natural monopoly aspects of traditional public utilities. More than ever, people are generating their own power via solar panels, wind turbines and other methods.

As it happens, PGE's threat to operate Boardman until 2040 if the DEQ doesn't accept its 2020 plan may be a bluff. To do this, PGE needs approval from Oregon’s Public Utilities Commission. And the commission would certainly understand operating Boardman until 2040 would mean gambling that at no point in the next thirty years will federal carbon regulations make operating a coal plant uneconomical. There could also be a state law or ballot initiative mandating the Boardman Plant’s closure.

But again, how have we ever arrived at this point? PGE is a hybrid entity - part private corporation, part public utility. Because of this setup, acting like a greedy corporation only looking out for shareholder profits is not acceptable behavior.

I began this post with a quote from PGE:  "Our customers’ values power the way we operate." If that's the case, Portland General has only heard from customers seeking the cheapest possible power regardless of environmental consequences. That doesn't sound like Oregon values to me. It sounds like PGE may stand for "Prohibitively Gouging the Environment."

UPDATE, 9/2/10: The Associated Press is reporting that Greenpeace International has formally asked Facebook to abandon plans to buy electricity for its new data center near Prineville. The supplying party this time is PacifiCorp, which derives (depending on who issues the figures) 58 to 83 percent of its electricity from coal. How cheap does this power seem now, when it can act as a detriment to investing in Oregon?

Comments

[Alexanepder Craghead]

One minor correx, Brian, PGE was never a publicly owned utility. It and Pacificorp (the once PP&L / Northwestern Electric) both have long and deep roots as privately owned for-profit utilities.

[Floam]

I don't know about the DMV, but other vehicle-related things can be negotiated if the amount is high enough. If you rack up a LOT of tickets you can bundle them, decide not to contest any, and the city/state will negotiate a reduced total. This is how UPS and friends handle parking tickets.

[Stephen]

I thought maybe you were going to comment on the state of power plant architect...but no, you have to get into the whole energy debate.
Maybe you could use this post as a jumping point to talk about how we can incorporate energy production into our homes or businesses and show some good examples around town.
Also, I have a friend who wanted to put solar panels on her house in a historic district and was told she would have to go through design review. She has perfect southern exposure on the back of her house, which should have been good since you can do that in a historic district. However, since she is on a corner lot she was told that she has no "back of house" or something to that effect. So no solar panels for her. This is dumb.
I live in Alameda/Irvington and am waiting to see what happens with the proposed historic distric here. Put the solar panels on now folks.
Also, I tried to tap into all the deals for green energy loans and was denied because I don't make enough money, even though the cost would be another $100 per month or something.
Anyway, maybe you have some time to look into this.

[Rob]

I was going to say it's a shame we don't have a competing power company to choose from... but that would probably make matters worse because the vast majority of people would choose the cheaper option. Cheaper usually means dirtier.

[Jeffg]

I grew up in rural Central Oregon and we had an electrical Co-Op. I don't know how well this would work in urban areas, but there is something nice about being a "member" verses a "customer". If the membership is unhappy with how things are being run, they can always vote to replace the existing board of directors with a new one.

[guild wars 2 gold]

One minor correx, Brian, PGE was never a publicly owned utility.I have a friend who wanted to put solar panels on her house in a historic district and was told she would have to go through design review. She has perfect southern exposure on the back of her house, which should have been good since you can do that in a historic district. However, since she is on a corner lot she was told that she has no "back of house" or something to that effect. So no solar panels for her. This is dumb.

[Cad Tech]

Here's my take on it. I have worked with most of the building jurisdictions (in the Portland Metro Area) over the years and there is always more than one way to go about it. They claim historic protection and all. In the end it is us the customer that decides. There are a lot of solar projects all over the city (even in historic districts). Having designed projects in the historic district(s), it comes down to how you approach the project.