Courtesy of The Chronicle
By Amy Nile
TransAlta officials announced Wednesday they have entered into an 11-year purchase agreement to provide power from the Centralia facility to Puget Sound Energy.
The move ensures a customer for much of the electricity produced until the coal-powered turbines are shut down in 2020 and 2025, which is good news for the Canadian power company, officials said.
For competitive reasons the two companies are keeping pricing details confidential.
The Washington Utilities and Transportation Commission will still have to approve the agreement.
If approved, the deal will advance TransAlta’s 2011 agreement with the state government and the environmental community to phase out coal-fired power generation in Washington by 2025.
PSE chose TransAlta’s offer by evaluating the 1,340-megawatt provider against more than 30 power supply alternatives vying for a contract.
“It’s a very competitive source of power to our customers, which is important in these economic times,” said Roger Thompson, a spokesman for Puget Sound Energy.
THE STATE’S OLDEST UTILITY will buy 180 megawatts from Washington’s only coal-fired plant starting in December 2014.
One hundred megawatts of electricity are enough to power from 22,500 to 30,000 typical American homes, according to the American Wind Energy Association.
The contract increases to 280 megawatts the next year. PSE will purchase 380 megawatts from December 2016 through the end of 2024. In 2025, the last year of the contract and the last year TransAlta will produce energy from coal in Centralia, the volume drops to 300 megawatts.
“It provides yet another stable, long-term source of power that is cost-effective for our customers,” Thompson said. “It holds down their rates.”
PSE, which provides electricity in Thurston County and much of the rest of the Puget Sound region, pools different energy sources to determine costs and expects to need additional power supplies for its 1.1 million electric customers beyond what the contract provides. Thompson said the TransAlta deal will provide a significant amount of the energy needed but the utility will continually evaluate other bids to address future demand.
THE SIERRA CLUB’S Beyond Coal Campaign said they support the purchase agreement, but in the same day filed a 60-day federal court notice that they are suing the owners of a coal-fired power plant in Colstrip, Mont., one of which happens to be PSE, for alleged violations of the Clean Air Act.
“It’s really ironic because we’ve slated this retirement for TransAlta and that’s definitely something we support,” said Krista Collard, the associate press secretary for the Sierra Club’s Beyond Coal Campaign in the Pacific Northwest.
TransAlta’s Centralia facility, which currently employs nearly 300 people, will shut down the first 670-megawatt coal-burning unit at the end of 2020, and the other 670-megawatt unit by the end of 2025, as required by Washington State’s TransAlta Energy Transition Law, a 2011 agreement aiming to reduce emissions without unduly harming the local economy.
The contract with PSE significantly reduces TransAlta’s merchant exposure, or need to sell its power throughout the region, the company noted in an announcement. Existing hedges combined with the new agreement will result in about 45 percent of Centralia’s total available production being contracted next year, according to a press release listed on the Wall Street Journal’s Market Watch. From 2014 until 2020, 35 percent of the total production will be contracted and approximately 65 percent is contracted from 2021 through 2025.
The company also pointed to cost-cutting measures in Centralia. “TransAlta has restructured plant operations and taken other steps to improve Centralia’s competitiveness and reduce the facility’s overall operating and capital costs,” TransAlta officials said in a press release Wednesday.
Richard DeBolt, director of USA external relations for TransAlta, said several cost-cutting measures were taken but when asked for specifics referred The Chronicle to the company’s investment office, which did not immediately return calls for comment. Following the contract announcement, TransAlta Corp.’s stock price dropped 3 percent, or 51 cents, to $15.31 at the close of business on Wednesday. The Calgary-based power company’s stocks have been trading between about $22 to $15 a share since the 2008 economic downturn.
THE CENTRALIA FACILITY, which shut down its Centralia coal mine in 2006, is still determining how it will transition away from producing coal-generated energy by 2025.
“We’re looking into cleaner energy production,” said Michael Wagar, a spokesman for TransAlta. TransAlta has established a team of about 15 employees to evaluate transitioning from coal to natural gas in Centralia.
Wagar said the team is looking into where such a facility could be built and what they would need for it.
He said the option is promising. Collard, of the Sierra Club’s Beyond Coal Campaign, said the environmental group would much prefer the company look into cleaner energy sources like solar or wind power.
“Natural gas isn’t exactly part of the solution,” she said. “It’s definitely not our ideal situation. We should be investing into clean, renewable energy.” Still, Wagar said, even with solar and wind energy the region does have a need for baseload power and natural gas could provide that.
The TransAlta team is determining firm costs and the company’s future with natural gas will depend on their analysis of power markets and the overall energy industry.