Utah commission approves Carbon coal plant shutdown accounting

The Utah Public Service Commission on Sept. 19 approved a rate settlement for Rocky Mountain Power that includes cost accounting related to the planned April 2015 retirement of the coal-fired Carbon power plant in Utah.

Rocky Mountain Power, also known as PacifiCorp, had opened a separate case at the Utah commission for the Carbon plant shutdown, which is being forced by the U.S. Environmental Protection Agency’s Mercury and Air Toxics Standards, but issues related to the shutdown accounting got pulled into an overarching settlement in the rate case.

The company is part of MidAmerican Energy Holdings, which is part of Warren Buffett’s Berkshire Hathaway organization.

Also, the settlement covered cost accounting for what Rocky Mountain Power had spent on its now-abandoned plan to install new air emissions controls on the coal-fired Naughton Unit 3 in Wyoming. Its new plan is to convert the unit to natural gas. Other units at the plant would stay on coal. On May 3, Rocky Mountain Power filed an application for a deferred accounting order regarding costs incurred for abandoned Naughton Unit 3 selective catalytic reduction and pulse jet fabric filter installations. The parties to the settlement agree that Utah’s allocated share of the Naughton Unit 3 development costs of $7.9m incurred prior to the company’s decision to convert the unit to natural gas will be deferred and fully amortized by Sept. 1, 2014.

On Feb. 15, Rocky Mountain Power filed an application requesting authority to increase its retail electric utility service rates in Utah by about $172.3m per annum or an average overall increase of 9.7% including a requested return on equity of 10.2%, effective Oct. 12, 2012. Rocky Mountain Power’s request was based upon a forecast test period ending May 31, 2012, using a 13-month average rate base with a historical base period of twelve months ending June 30, 2011.

“The Commission approves a comprehensive, multi-year, uncontested settlement stipulation addressing all components of the three cases entitled above including revenue requirement, revenue spread to classes of customers, rate design, and certain deferred accounting treatment,” said the Sept. 19 final order. “The revenue requirement changes are implemented in two steps. In Step 1, the Commission increases Rocky Mountain Power’s annual revenue requirement by $100 million effective October 12, 2012, based on a forecasted test period of 12 months ending May 31, 2013. This is a 5.64 percent increase in Rocky Mountain Power’s forecast of general business revenue in Utah. In Step 2, the Commission increases Rocky Mountain Power’s annual revenue requirement by $54 million, conditionally effective September 1, 2013. This is a 2.88 percent increase in Rocky Mountain Power’s forecast of general business revenue in Utah. The Commission authorizes a 7.68 percent rate of return on rate base, based in part on an allowed 9.8 percent rate of return on common equity.”

Unit 1 at Carbon was commissioned in 1954 and Unit 2 was added in 1956, with the two units producing a combined 172 MW. Carbon burns about 657,000 tons of sub-bituminous coal per year that is delivered to the plant by truck from local mines.

PacifiCorp earlier this year dropped an effort to add new emissions controls on the 330-MW Unit 3 at Naughton and keep it on coal. PacifiCorp has said there are no plans to switch to gas the 210-MW Unit 2 and 160-MW Unit 1 at Naughton, both of which also currently fire coal. The Naughton plant can burn as much as 2.8 million tons of sub-bituminous coal per year. That coal largely comes from the adjacent Kemmerer strip mine of Westmoreland Coal (NASDAQ: WLB).

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.