Portland General pushes for Carty project completion by July 31

Portland General Electric (NYSE: POR) said in an April 29 earnings statement that, after problems with a contractor, its 440-MW Carty plant is due for operation this summer.

“While we’re disappointed about the setbacks we’ve experienced at Carty related to Abeinsa’s default on our construction contract, we are working hard on the construction of this important new baseload resource and are targeting an in-service date by July 31, 2016,” said Jim Piro, president and CEO. “Despite this challenge, PGE delivered strong operating performance during the quarter. Oregon’s strong economy contributed to solid load growth and we saw our largest growth in the number of customers since the recession. Oregon also passed new clean electricity legislation, and we are on a path to achieve the legislation’s carbon-reduction goals while retaining key affordability and reliability protections for customers.”

Carty Generating Station is a 440-MW natural gas-fired baseload power plant near Boardman, Ore. Total capital expenditures for Carty, including AFDC, are expected to be $635 million to $670 million, before considering any amount that may be received under a $145.6 million performance bond issued by two sureties, Liberty Mutual Insurance Co. and Zurich North America Insurance Co., or from the original Carty contractor or the contractor’s parent company.

On March 9, 2016, the sureties delivered a letter to PGE denying liability in whole under the performance bond. PGE said it disagrees with the sureties’ determination. On March 23, 2016, PGE filed a breach of contract action against the sureties in the U.S. District Court for the District of Oregon, and on April 15, 2016, the sureties filed a motion to stay the proceeding, alleging that PGE’s claims should be addressed in the arbitration proceeding initiated by Abengoa S.A. in January 2016.

As of March 31, 2016, PGE had $501 million, including $50 million of AFDC, included in construction work in process (CWIP) for the Carty project. Construction costs for Carty of $514 million, including AFDC, as well as its operating costs were authorized for the inclusion in customer prices in the company’s 2016 general rate case (GRC), provided Carty is placed into service by July 31, 2016.

In the meantime, the Oregon Clean Energy and Coal Transition Plan (Senate Bill 1547) was effective on March 8, 2016. Most significantly, the legislation requires large utilities in Oregon to increase the percentage of load served by qualifying renewable resources to 50% by 2040, with interim goals every five years until 2040. The law also provides that, after 2035, PGE will not be able to include in customer prices the costs and benefits associated with electricity generated by PGE’s share of the Colstrip coal plant Montana and that Colstrip will be fully depreciated by 2030. The company said it is in the process of evaluating the impacts of the new legislation and is incorporating the effects of the new requirements into its 2016 Integrated Resource Plan, which is to be filed with the Oregon Public Utility Commission in the second half of 2016.

Portland General Electric is a vertically integrated electric utility that serves approximately 856,000 residential, commercial and industrial customers in the Portland/Salem metropolitan area of Oregon. 

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.