Portland Generation Electric (PGE, NYSE:POR) and the Bonneville Power Administration agreed in late October to discontinue discussions regarding PGE’s potential ownership of approximately 1,500 MW of BPA’s transmission capacity rights because the two entities concluded that they would not be able to reach an agreement on financial terms that benefited both PGE and BPA customers.
PGE announced the end of the discussions in its 3Q13 earnings statement released prior to its 3Q13 earnings call Nov. 1.
The entities had been discussing the arrangement as an alternative to the proposed Cascade Crossing transmission project, for which permitting and development was suspended after the they entered into a memorandum of understanding (MOU) to explore PGE obtaining ownership of approximately 1,500 MW in transmission capacity in exchange for certain PGE assets. Since entering into that MOU, announced June 3, PGE has determined that transmission service offered under BPA’s open access transmission tariff (OATT) is the best option for meeting its current transmission needs.
“We were dealing with one set of circumstances in 2009 [when the Cascade Crossing project was introduced] and a very different set of circumstances four years later,” a PGE spokesperson told TransmissionHub. “We had some good discussions with BPA but ultimately determined the best option for our customers is obtaining service through BPA’s OATT.”
The company’s operations in other areas have remained very strong, Jim Piro, president and CEO, said during the earnings call.
PGE reported progress on three new generation projects, including two new gas-fired facilities and a wind farm.
Construction is underway on Port Westward Unit 2, a 220 MW natural gas-fired generator adjacent to the existing Port Westward Unit 1 near Clatskanie, Ore. Engine pads and building foundations are complete, and the Wartsila reciprocating engines will be delivered in early 2014, Piro said, noting that the project is on schedule and on budget, and is expected to be operational during 1Q15.
Design and engineering are underway for the Carty generating station, a 440 MW natural gas-fired plant next to PGE’s existing Boardman plant in Boardman, Ore. Groundbreaking for the Carty plant is expected in early 2014 with an in-service date of mid-2016.
The company broke ground in September for the 267 MW Tucannon River wind farm located on 20,000 acres in southeastern Washington. Currently, the company is working on design, engineering, and infrastructure development, including road construction and turbine foundations. The project is on schedule and on budget, is expected to be operational during the first half of 2015 and will qualify for a production tax credit, Piro said.
All three projects are being constructed under fixed-price contracts with experienced contractors, so the company is confident that the projects will be completed on time and on budget, he added.
The utility is also dealing with three existing generating plants that tripped off-line due to equipment failures during 3Q13.
The Boardman plant and Coalstrip Unit 4, east of Billings, Mont., went off-line July 1. The Boardman plant came back online at the end of July and has been operating at high availability levels since it returned to service, Piro said. However, the Colstrip Unit 4, which is operated by PPL Corporation (NYSE:PPL) subsidiary PPL Montana, is expected to remain off-line until 1Q14 for repairs to its damaged stator and rotor. Both facilities are coal-fired generation resources.
Repairs are underway to Coyote Springs, a combined-cycle cogeneration plant in Boardman, Ore., that tripped off-line in late August due to a crack in its steam turbine rotor. Coyote Springs is expected to be online later in November, Piro said.
“All three of these plants have been reliable sources of power for many years and, like Boardman, we expect Coalstrip and Coyote Springs to resume their high availability levels once repairs are completed,” he said.
PGE’s share of repair costs for the coal plants, approximately $13m, is expected to be covered by insurance, net of approximately $2m in deductibles. Repair costs for Coyote Springs are estimated to be $2m. In addition to repair costs, the utility is estimating replacement power costs for the three outages are expected to be $16m to $18m during 2013.
Piro announced that the chairman of PGE’s board of directors, Corbin McNeill, retired from the board effective Oct. 31.
“Corbin joined our board in 2004 and has provided outstanding leadership, perspective and guidance during his tenure as chairman,” Piro said, acknowledging McNeill’s “decade of dedication and service to our customers, shareholders, and employees.”
Board member Jack Davis, who joined the board in June 2012, has been elected as the new chairman. Davis has over 35 years of regulated utility experience at Arizona Public Service, including six years as CEO as well as other management positions in generation, transmission, power operations and customer service.
The company reported net income of $31m, or 40 cents per diluted share, for 3Q13, compared to net income of $38m, or 50 cents per diluted share, for 3Q12. In part, the company blamed higher power costs due to plant outages and increased delivery system costs due to service restoration work for the decrease in earnings. The company also reduced its full-year 2013 earnings guidance from $1.25 to $1.40 per share to $1.20 to $1.30 per share.
“While the generating plant outages have been challenging this year, I’m pleased that the balance of the company’s operations have been very strong,” Piro said. “Our performance in distribution reliability and customer satisfaction is top quartile. We reached a reasonable settlement on all issues in our 2014 general rate case, and we made some great progress on the construction of our three new generation resources to meet our customers’ needs.”