Washington regulators approve Centralia power agreement

TransAlta Corp. (TSX: TA)(NYSE: TAC) said in a brief Jan. 10 statement that the Washington Utilities and Transportation Commission has approved, with conditions, a long-term power purchase agreement between Puget Sound Energy (PSE) and TransAlta Centralia Generation LLC.

This deal covers power out of the coal-fired Centralia power plant in Washington state. PSE has ten days from the date of the order to petition for reconsideration or relief of the terms under the order. The proposed agreement would permit PSE to purchase an average 346 MW of coal “transition” power from the Centralia plant.

“State regulators today approved a long-term ‘coal transition’ power purchase agreement between Puget Sound Energy (PSE) and TransAlta Centralia Generation LLC (TransAlta) that sets the stage for closing the state’s remaining coal-fired electric generating plants by 2025,” said the commission in a Jan. 9 statement. “The Washington Utilities and Transportation Commission (UTC) approved the agreement that allows PSE to purchase an average 346 MW of coal transition power from the Centralia coal plant, which will cease coal operations in one of its two generation facilities by 2020, and the other by 2025.”

Washington Gov. Chris Gregoire signed the Coal-Transition Energy Bill in 2011. This bill provides certain deferrals of greenhouse gas emissions performance standards to encourage the early closure of coal plants in Washington. The PSE/TransAlta contract is effective from Dec. 1, 2014, through Dec. 31, 2025.

The commission order requires that PSE file an annual report regarding the contract, which includes detailed plant operation and power-source data from TransAlta to allow the UTC to ensure that the purposes of the Coal Transition Energy Bill are met and that the public interest is protected.

In approving the contract and imposing the reporting requirement, the commissioners said that approval of the contract “provides a transition for citizens living in the communities most directly affected by the closure, maintaining family-wage jobs and promoting economic development that will substitute for the loss of the plant, which remains an economic mainstay in Centralia and surrounding suburban and rural communities…. [T]he state has provided for the broader public interest to benefit from the assured closure of a significant source of air pollution on a definite schedule.”

Puget Sound Energy serves more than 1 million electric customers and nearly 750,000 natural gas customers in parts of Snohomish, King, Pierce, Lewis, Thurston and Kittitas counties.

TransAlta Centralia owns and operates a baseload coal-fired plant of approximately 1,340 MW that consists of two generation units and two boilers. A coal strip mine at the site was shut several years ago and the plant now gets all of its coal from the Powder River Basin. U.S. Energy Information Administration data shows the plant taking coal last year from the Rawhide mine in Wyoming of Peabody Energy (NYSE: BTU) and the Spring Creek mine in Montana of Cloud Peak Energy (NYSE: CLD).

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.