In the fall of 2020, one of the largest coal-fired power plants in the West was due for repairs. So the Colstrip Generating Station operator sent a letter to its five co-owners with a $56 million plan to fix it. The proposal quickly went sideways.
Four utilities with a stake in Colstrip declined, saying they could not support spending money on repairs that would keep the plant operational beyond 2025. Instead, they called on the plant’s operator, Talen Energy, to cut the plant’s budget and “successfully implement a strategy that provides a framework for our individual exits from the Colstrip project within the next 60 months.”
The swap, detailed in the federal bankruptcy filings, captures the struggle for Colstrip’s future. The coal-burning giant has long channeled electricity generated on the Montana prairies to Pacific metropolises like Seattle and Portland. Four utilities from Oregon and Washington together own 70 percent of the 1,480-megawatt coal-fired power plant.
But in recent years, Colstrip has become a symbol of the fight for the future of the western power grid. Pacific energy utilities — Avista Corp., PacifiCorp, Portland General Electric and Puget Sound Energy — are trying to shut down the plant to comply with state climate laws. Their efforts were supported by minority owners NorthWestern Corp. and Talen, who argue that the plant’s closure would decimate Montana’s economy and jeopardize the future of the West’s power grid.
But now the fight for the future of Colstrip is on hold. Talen’s energy division filed for bankruptcy protection last month, resulting in an automatic stay of a federal court case designed to set the rules for negotiations over the plant’s future. Talen has resisted efforts by his five co-owners to have the suspension lifted and the case allowed to continue.
Analysts said the bankruptcy has brought a new level of complications to grid planning at a time when the West is grappling with how to address climate change without jeopardizing power supplies.
“The longer we wait, the harder it will be,” said Diego Rivas, a senior policy official at the NW Energy Coalition. “Some utilities have already planned a transition out of ownership, either because they are required to do so or because it is uneconomical, or both. Some of the owners are behind schedule.”
NorthWestern, he noted, still plans to have the facility operational by 2042.
“They have not submitted any notification, formal or otherwise, that has changed,” he said.
Colstrip is one of America’s biggest polluters, emitting 144 million tons of carbon dioxide between 2012 and 2021, according to EPA data. Only eight power plants in the country spewed more CO2 into the atmosphere during that time. A Washington state law requires state utilities to phase out coal-fired power by 2025. Oregon’s utilities are facing a similar deadline of 2030.
Colstrip once had four power generation units, but in 2020 two of its smaller units, built in the 1970s, were shut down as part of a settlement agreement with environmental groups.
More recently, talk of closing the two remaining blocks has been fueled by growing concerns about Western utilities’ ability to keep power going during searing heat waves that have ravaged the West in recent years.
The North American Electric Reliability Corp. recently said the region faces a growing risk of power outages as electricity demand increases while hydropower availability is limited and power lines are damaged by wildfires.
“Overall, there are major concerns about the large shifts in power supplies on the West Coast and the additional reserves required for wind and solar to accommodate their variations,” said John Fazio, senior power systems analyst at Northwest Power and Conservation Council wrote in an email.
As concerns about electricity supply have increased, so have efforts to integrate electricity markets to share power in the West, he said.
“The loss of the Colstrip projects and the uncertainty surrounding the timing of their closure is increasing planners’ concerns, but it’s not the main issue they face,” Fazio said.
Talen’s bankruptcy has strained already strained relations between Colstrip’s owners and opened a rift with its ally NorthWestern. As the two companies look to continue operating Colstrip beyond 2025, NorthWestern is increasingly pushing for a solution on Colstrip’s future.
In the bankruptcy filing, NorthWestern asked the court to lift the automatic stay of the Montana court case triggered by the Chapter 11 filing to clear the way for negotiations to begin.
“Any delay in addressing the closure would seriously harm NorthWestern and result in potential power outages for the citizens of Montana – NorthWestern’s primary customers,” the utility wrote to the U.S. Bankruptcy Court for the Southern District of Texas.
NorthWestern’s position is particularly notable because it supported two bills passed by Montana’s lawmakers last year that aimed to make Colstrip’s closure more difficult.
The first would change where and how arbitrations would take place – moving jurisdiction from Washington to Montana and establishing a three-person arbitration panel in place of the person required by the facility’s operating agreement. The second law fines owners $100,000 per day for refusing to contribute to the upkeep of the facility.
But the future of both laws is now in question. A federal judge in Montana issued an injunction to stay the two laws after they were challenged by the Pacific owners. They argued that the laws violated the owners’ pre-existing contract. In issuing an injunction, the Montana court said the Pacific owners had shown they were likely to prevail in the matter.
NorthWestern, meanwhile, has attempted to force Colstrip’s owners to the negotiating table by attempting to force arbitration in court. At an April hearing in the US District Court for the District of Montana, the company argued that Colstrip’s owners “need help” to set the arbitration rules.
“The delay – and God bless us for supporting the legislation and creating all the chaos that partially brings us here today – but the delay harms us and potentially the citizens of the state of Montana who rely on us to power.” deliver,” NorthWestern attorney David Jackson told the court.
“Another Wrench, Another Hurdle”
A key question for Colstrip’s future is whether the contract will require unanimity among owners to close the facility. If arbitration determines that a unanimous vote to close Colstrip is not required, “We must find another source of power to fulfill our duty and obligation to provide electricity to the citizens and customers of the State of Montana, and that is taking a while plan,” Jackson said.
Talen made no official comment on this story. In lawsuits, it argued that the Montana lawsuit would divert resources at a time when the company is attempting to recover from bankruptcy. It estimated that its monthly legal fees could climb to $300,000 during the arbitration hearings.
Talen secured a $1.76 billion loan to fund its operations during bankruptcy.
A NorthWestern spokesman expressed disappointment that “some Colstrip Power Plant owners have decided to file multiple lawsuits in multiple jurisdictions,” delaying negotiations to close the plant.
“The Colstrip power plant is a reliable, on-demand resource that provides a cost-effective resource for powering our Montana customers during critical times,” wrote NorthWestern spokeswoman Jo Dee Black in an emailed statement.
The Pacific owners said they are committed to keeping the plant safe to operate by 2025, when they begin transitioning to cleaner forms of power generation. A Puget spokesman called Talen’s bankruptcy a “disturbing development” and said the Washington-based energy company was waiting for more information.
Portland General Electric struck a similar tone, saying, “Uncertainty and delays are not in the best interests of co-owners, the community and our customers.” Talen’s bankruptcy proceedings are a significant source of uncertainty that could prevent an agreement on the transition.”
The bankruptcy filings add a new layer of detail to an already bitter public battle over Colstrip.
As operator of the facility, Talen is tasked with proposing a budget for Colstrip. In 2020, Talen’s budget for the following year identified the need for an overhaul of Unit 3 to maintain its safety and compliance standards. Overhauls refer to longer maintenance breaks. Each Colstrip unit was on a four-year overhaul cycle, per Talen’s proposed budget.
In years past, the Pacific owners would likely have sanctioned the repairs. But in 2020 they declined, saying they “could not support any work to be undertaken to extend the life of Colstrip Unit 3 beyond the end of 2025”.
Specifically, the group called for cutting Colstrip’s proposed 2021 operating budget by nearly $15 million, cutting spending on capital projects by $10 million, and increasing the operating budget by $10 million annually over the next three years shorten
The correspondence does not contain precise information on the agreed budget or the scope of the work. However, a follow-up letter from Talen indicates that the Colstrip operator has complied with some of the Pacific owners’ requests, including a $10 million cut in Block 3’s repair budget.
“As an agreement appears to be within reach, please let us put aside our disagreements as to whether any of these investment projects would extend the life of Unit 3 beyond the planned 2025 overhaul and whether this is a reasonable basis to engage in oppose investment project,” said Neil Dennehy. The Colstrip plant manager wrote in a letter dated January 18, 2021.
At the moment, Colstrip continues to produce electricity. According to federal statistics, the plant generated more than 3,000 gigawatt hours of electricity in the first three months of the year – the highest total in the first quarter since 2019. But it is unclear how long it will be in operation.
“Certainty is needed to ensure the facility closes properly,” said Rivas of the NW Energy Coalition. “Not only the utilities but also the community need to know what they are up to.”
Talen’s bankruptcy, he added, is “another wrench, another hurdle in an unfortunately delayed and already complicated process.”