Washington State Legislation May Facilitate Cost Recovery for Coal Plant Retirement

With a partial veto from Governor Inslee on April 1, 2016, Washington State has enacted legislation that may help Puget Sound Energy (PSE) recover costs associated with the decommissioning and remediation of its interest in the Colstrip coal-fired plant, which is located southwest of Billings, Montana. PSE owns half of the older two units of the Colstrip plant.  Engrossed Substitute Senate Bill (SB) 6248 expressly authorizes the Washington Utilities and Transportation Commission (WUTC), after a hearing, to allow a utility to “to place amounts from one or more regulatory liabilities into a retirement account” for decommissioning and remediation costs for the older two units.  Thus the WUTC now has the express authority to allow PSE to use certain tax credits to help cover decommissioning and remediation costs at the Colstrip plant instead of returning those tax credits to customers over time.

As passed by the Washington Legislature, SB 6248 contained a disincentive for shutdown prior to 2023; Governor Inslee eliminated that disincentive by vetoing Section 3 of the bill.   See http://lawfilesext.leg.wa.gov/biennium/2015-16/Pdf/Bills/Senate%20Passed%20Legislature/6248-S.PL.pdf (final bill, prior to veto).  Governor Inslee’s veto message is available at http://www.governor.wa.gov/office-governor/official-actions/bill-action.

This relatively narrow law is the culmination of two years of legislative activity. Earlier in 2016, and in 2015, much more ambitious Colstrip-related legislative proposals were considered in Washington. During those deliberations, Montana legislators expressed deep concern about the prospect of any Washington State legislation that would promote closure of any units of the Colstrip plant, which generates substantial employment and taxes in Montana.

In parallel with finalization of SB 6248, PSE sought and obtained WUTC approval to delay the filing of its next rate case from March 2016 until January 2017. This request was based in part on the assertion that “PSE has been working, and continues to work, towards developing a plan to address the future of Colstrip Units 1 and 2.  The additional nine months will allow PSE additional time to work with stakeholders and to prepare a proposal addressing these units to include in its general rate case filing.” Joint Petition to Modify Order 07 in WUTC Docket Nos. UE-130137 and UG 130138 (Consolidated) at ¶7 (March 8, 2016).

So, stay tuned.