Public comments on Rocky Mountain Power 2019 Integrated Resource Plan

PacifiCorp’s 2019 Integrated Resource Plan (IRP) evaluated the retrofitting of some of the units at its Wyoming coal plants for carbon capture but decided that:

“Given the high capital cost of implementing CCS [Carbon Capture and Storage] on coal fired generation (either on a retrofit basis or for new resources) CCS is not considered a viable option before 2025. Factors contributing to this position include capital cost risk uncertainty, the availability of commercial sequestration (non-EOR) sites, uncertainty regarding long-term liabilities for underground sequestration, and the availability of federal funding to support such projects”.

Instead, PacifiCorp identified eight of its coal-fired units in Wyoming for retirement by 2028, with the earliest retirements coming as soon as the end of 2023 and 2025.2

However, Wyoming’s legislature and governor responded by enacting into law House Bill 200 (HB200) that effectively would force PacifiCorp to retrofit one or more of the units at its coal-fired power plants in the state with carbon capture equipment by establishing a requirement that a “specified percentage” of the utility’s generation come from such resources.

Many of the legislation’s specifics remain to be worked out by state regulators, but the thrust of the new law is clear: giving PacifiCorp almost carte blanche to charge what it wants to retrofit CCS equipment at one or more of its Wyoming coal units, while completely disregarding the potential cost to the state’s ratepayers.

In particular, the legislation would allow PacifiCorp to:

• ask the state utility commission to recover through rates the cost of any carbon capture retrofit, including a higher return on equity, that is “integral or adjacent to a coal-fired generator in Wyoming.”
• seek authorization to keep a portion of any revenues from the sale of the captured CO2 for its shareholders.
• add a surcharge of up to 2% on ratepayers’ monthly bills to cover the cost of a proposed carbon capture retrofit even before any funds are spent.
• enable PacifiCorp to ask the commission for additional cost recovery to ensure that it can recover all its prudently incurred costs connected to a CCS retrofit project.

It seems Wyoming legislators assumed that these costs would be spread across all of PacifiCorp’s ratepayers in its six-state service territory. This is extremely unlikely, particularly given the language in Section 5.8 of PacifiCorp’s Inter-Jurisdictional Allocation Protocol, “State-Specific Initiatives” which states that “Costs and benefits resulting from a State-specific initiative will continue to be allocated and assigned on a situs basis to the State adopting the initiative.” Clearly, HB200 is a Wyoming-specific initiative.

At the same, time, given the mandates to move away from coal generation in Oregon and Washington, those states are not going to be willing to make their ratepayers bear any of the costs resulting from HB200. Thus, Wyoming ratepayers alone will end up bearing all the risks of and paying the bills for this legislation.

One project that is already seeking to benefit from HB200 is a proposal by Glenrock Energy to retrofit at least one of the four units at PacifiCorp’s Dave Johnston coal plant. However, there are several flawed assumptions underlying both HB200, in general, and the Glenrock Energy proposal, in particular:

1.      It is unlikely that any carbon capture retrofit could be completed before 2026, by which time Dave Johnston 1, the oldest of PacifiCorp’s Wyoming coal units, would be 67 years old, while the youngest, Jim Bridger 4, would be 47.

2.      By 2037, which is the last year that a retrofitted unit coming online in 2026 would be eligible to earn federal 45Q tax credits, Jim Bridger 4 would be 58 years old while Dave Johnston 1 would be 78 years old. The median age at which currently retired coal units larger than 100MW have been retired has been 53 years old. The average retirement age for U.S. coal plants has been 51.

3.      Glenrock Energy’s claim that its carbon capture retrofit project would have an operating life of approximately 40 years is preposterous. That would mean Dave Johnston 4 would still be operating until about 2066, when the plant would be 87 years old.

4.      Retrofitting any of PacifiCorp’s Wyoming coal units will be very expensive. Building the 240MW Petra Nova project near Houston, TX, the only project in the U.S. currently capturing carbon from a power plant, cost $1 billion in 2016 which would be almost $5,000 per kW in 2026 dollars. Even assuming a 30% cost reduction, retrofitting individual PacifiCorp units would range from $370 million for the smaller units (Dave Johnston 1&2) to above $1.8 billion for each of its larger units at the Jim Bridger plant.

5.      Glenrock Energy’s claim that it could retrofit Dave Johnston 4 for $480 million is not credible as this would mean a reduction of 70% from the actual cost of building the Petra Nova facility.

6.      Capturing 90% of the CO2 produced at an operating scale coal plant has not been proven over a significant number of years. Petra Nova, which has been in service for only three years, has captured about 83% of the CO2 it has produced.

7.      Tax equity financing, using federal 45Q tax credits, will cover no more than 68% (and perhaps as little as 35%) of the total capital cost of retrofitting PacifiCorp’s Wyoming coal units. The specific amount will depend on how many 45Q tax credits PacifiCorp is able to earn, which in turn depends on how much power the unit produces and how many metric tons of CO2 it produces and captures.

8.      Given the expected shortfall in tax credit financing, PacifiCorp likely would have to invest between $141 million and $1.2 billion into retrofitting one of its Wyoming coal units, depending on the unit. These investments would dramatically increase the company’s rate base and raise the rates paid by its Wyoming ratepayers.

9.      In addition to paying for the projects’ capital costs, the company’s Wyoming ratepayers would have to foot the bill for the incentives included in HB200 including a higher return on equity from PacifiCorp’s carbon capture investments.

10.  Ratepayers also would have to pay more for electricity after a carbon capture retrofit because the unit’s net generation would decline (with some of the gross generation being used to power the capture equipment), increasing the average cost of electricity to ratepayers.

11.  In addition, because the net generation from the retrofitted coal plant would be lower, the company will have to obtain replacement energy from another source – either from another of its own plants or by purchasing from another company. Either way, ratepayers will have to pay for the replacement energy.

12.  Capturing CO2 will entail additional costs beyond those that are regularly incurred when generating electricity at a power plant – additional staff, additional water, etc. Ratepayers will be forced to pay for these additional costs as well.

13.  Glenrock Energy’s assumptions about the cost benefits associated with using the captured CO2 for enhanced oil recovery activities are speculative at best, depending on the assumption that a retrofitted coal plant would continue to operate for 40 years after being retrofitted.

We do not believe that HB200 will achieve its aims, as market changes are rapidly pushing the U.S. electricity sector away from coal to cheaper and cleaner renewables and gas.

PacifiCorp is right, CCS is not a viable option.

What HB200 certainly will do is make the price of electricity much more expensive for PacifiCorp’s Wyoming ratepayers.