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PGE says it is positioned for steady growth despite Q2 results

Portland General Electric Co. is planning robust procurement of renewable energy resources over the next five years to meet a steady growth in customer demand and is planning a near $3 billion capital spending program over that period, company leaders told analysts.

During an Aug. 2 second-quarter earnings call, Portland General Electric, or PGE, President and CEO Maria Pope and Finance Senior Vice President Jim Lobdell pointed to new construction and customer growth in their company's service territory and PGE's ambitious programs to meet future energy and service demands.

They said the net income of $25 million for the second quarter was down from $46 million in the prior-year quarter, but Lobdell attributed much of that drop to lower hydropower output of the company's Mid Columbia River facilities. That drop prompted an increase in net variable power costs for more expensive replacement generation, but hydro conditions should improve for the rest of the year, he said.

At the same time strong hydro in California drove down power prices PGE received from its own power sales, Pope said. Further, operating costs were up for transmission and distribution largely due to an emphasis on vegetation management to reduce wildfire risks.

Still, both officials maintained that the company will meet its annual revenue targets. Pope pointed to the company's projections of a near 1% annual growth in customer demand, especially in the technology industry. Retail energy deliveries increased at nearly that pace in the last quarter, driven by industrial energy deliveries and Pope pointed to a projected long-term expansion in high tech and data centers for the region.

PGE is planning to conduct a multistage procurement of about 595 MW of capacity by 2025. In addition, a renewable request for proposals of 150 average MW is planned for capacity that is estimated to be online in 2023. Much of new capacity will be added to replace the 585-MW Boardman coal-fired plant.

The company expects to enter cost-competitive agreements with existing capacity resources in the region through bilateral negotiations for the multistage procurement but will address remaining capacity needs with a future request for proposals for nonemitting resources including solar, wind, geothermal and pumped storage, Pope said. PGE is considering submission of a benchmark resource for both requests for proposals.

In addition to the new renewable generation, the company's 2019 Integrated Resource Plan, or IRP, reflects focus on increased energy efficiency, demand response, storage and dispatchable standby generation. PGE expects the state Public Utility Commission will issue an order acknowledging the IRP and action plan in early 2020, Pope said.

Capital planning includes mostly ongoing capital expenditures of $620 million in 2019, $725 million in 2020, $585 million in 2021, $505 million in 2022 and $500 million in 2023 for a total capital investment of $2.93 billion. Those figures include newly added 2020 and 2021 capital costs for the Wheatridge Renewable Energy Facility and construction of the company's Integrated Operations Center in 2020 and 2021.

For new capacity, the company wants to capture as many benefits as it can from the production tax credits before they expire and is continuing to see costs decline in the competitive market, Pope said.

PGE has seen increased interest from high tech and municipal customers for 100% green energy products and noted that its "Green Future" program sold out within minutes of opening, she said.

The $200 million Integrated Operations Center will be operational by 2021 to advance grid integration, improve seismic resilience through monitoring, and improve cyber and physical security. The center will also be used for monitoring, control and optimization of the distribution system and distributed assets, she said.

Investments also include updating and replacing aging generation, transmission and distribution equipment, strengthening of the power grid for earthquakes, cyberattacks and other potential threats,

The company has total liquidity and financing of $654 million available, of which $483 million is in credit facilities.