TransAlta (TSX: TA) (NYSE: TAC) and Puget Sound Energy (PSE) said July 25 that they have entered into a power purchase agreement for transition power from the coal-fired Centralia generating station in Washington state.
If approved by Washington utility regulators, the contract will benefit PSE customers by providing them another source of low-cost power, while advancing a separate TransAlta agreement with state government and the environmental community to phase out coal-fired generation in Washington by 2025. PSE selected the TransAlta offer through a competitive request for proposal (RFP) process, evaluating the Centralia resource against more than 30 competing power supply alternatives.
“I’m delighted that TransAlta and Puget Sound Energy came together to help advance the state’s goal of replacing coal-fired power,” said Washington Gov. Chris Gregoire. “This will help our state move toward more environmentally sustainable energy.”
The state Legislature in 2011 passed a bill codifying a collaborative agreement between TransAlta, lawmakers, environmentalists and labor representatives. The timelines agreed to by the parties enable the state to make the transition to cleaner fuels, while preserving the family-wage jobs and economic benefits associated with the low-cost, reliable power provided by the Centralia plant. The legislation allows long-term contracts, through 2025, for sales of coal transition power associated with the 1,340-MW Centralia facility, Washington’s only coal-fired plant.
“This agreement with Puget Sound Energy provides customers with a stable-priced, low-cost source of power, while advancing TransAlta’s goal of contracting the output of the facility,” said TransAlta USA President Paul Taylor.
“In today’s tough economy, we know our customers need us to keep energy costs reasonable for their homes and businesses,” said Dan Doyle, PSE senior vice president and chief financial officer. “And, over the long-term, we know our customers are also concerned about the environment. This agreement balances both needs.”
Under its power purchase agreement with TransAlta, PSE will buy 180 MW of firm, baseload coal transition power from TransAlta starting in December 2014. In the following 12 months the contract increases to 280 MW. From December 2016 to December 2024 the contract is for 380 MW, and in the last year the contract volume drops to 300 MW.
PSE said it expects to need additional power supplies for its customers beyond what the TransAlta contract provides. The utility continues to review other short-listed bids from its latest RFP process, and anticipates issuing another RFP in 2013.
An adjacent coal mine at Centralia was shut several years ago and the plant is now fired entirely by Powder River Basin coal. U.S. Energy Information Administration data shows the plant getting coal in April from Peabody Energy‘s (NYSE: BTU) Rawhide mine in the Wyoming PRB and Cloud Peak Energy‘s (NYSE: CLD) Spring Creek mine in the Montana end of the PRB.
TransAlta is a power generation and wholesale marketing company that operates a highly contracted portfolio of assets in Canada, the United States and Australia. TransAlta’s focus is to efficiently operate geothermal, wind, hydro, natural gas and coal facilities in order to provide customers with a reliable, low-cost source of power.
Washington state’s oldest local energy utility, Puget Sound Energy serves 1.1 million electric customers and more than 750,000 natural gas customers in 11 counties. A subsidiary of Puget Energy, PSE said it meets the energy needs of its customers, in part, through cost-effective energy efficiency, procurement of sustainable energy resources, and far-sighted investment in the energy-delivery infrastructure.