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PGE pursues gas reserve investment, may speed up renewables RFP

Q2: U.S. Solar and Wind Power by the Numbers

Essential Energy Insights - September 17, 2020

Essential Energy Insights September 2020

Rate case activity slips, COVID-19 proceedings remain at the forefront in August


PGE pursues gas reserve investment, may speed up renewables RFP

Portland GeneralElectric Co. is plotting further investment in renewables and naturalgas as a new Oregon law encourages large generators in the state to shift away fromcoal-fired power.

PGE President and CEO Jim Piro told investors and analysts duringan April 29 earnings callthat the company is continuing to pursue up to $100 million worth of natural gasreserve investments that would supply about 10% of the utility's annual projectedgas burn. The company may eventually own reserves equaling up to 30% of its yearlygas needs but wants "to get some transactions under our belt" before committingto further investment, Piro said.

At the same time, PGE may accelerate a request for proposalsfor up to 175 MW of renewable energy that will help meet Oregon's 2020 and partof the state's 2025 renewable portfolio standard. The company will file an RFP applicationwith the Oregon Public Utility Commission in the next week or so, a PGE executivesaid on the earnings call. PGE hopes to receive and score bids and initiate contractnegotiations in the third quarter before approving a final short list in the fourthquarter.

Piro said moving up the RFP could "produce significant value"for PGE customers by allowing the utility to take advantage of the five-year in the federal wind productiontax credit signed into law in December 2015. If that credit had not been extended,PGE would have likely relied on renewable energy credits to comply with the state'sRPS goals, he added.

"We've talked to the [Oregon PUC] commissioners individuallyabout that, and they want to see the whole filing and the process, but they understandthere is value there for the customers," Piro said.

In addition, PGE can bank renewable energy credits, known as"golden RECs," for future use as part of a newly passed law. Oregon Gov.Kate Brown signed legislationinto law in March that requires the state's large investor-owned utilities to haltreliance on coal-fired generation by the start of 2030 and obtain half of powerfor retail customers from renewable sources by 2040. The law prevents PGE from includingcosts and benefits associated with its share of the Colstrip coal-fired plant in Montana in customerprices after 2035, according to the company's earnings release. PGE is evaluatingthe effects of the legislation and will incorporate them in its 2016 integratedresource plan, which the utility expects to file sometime in the second half of2016.

Uncertainty remains forCarty in service date

PGE is maintaining a July 31 in-service date for the 440-MW,combined-cycle Carty GeneratingStation near Boardman, Ore., but warned that the completion date andcost estimates for the project could vary. The company expects to have a bettersense of timing after completing the plant's first fire in early June.

The utility has blamedcontractor, Abeinsa Abener Teyma GP, a subsidiary of Abengoa SA, for work defects that PGE said have delayed thestart of operations. PGE terminated a construction agreement in late 2015 with Abeinsa,alleging that the latter had gone into default.

If Carty goes beyond its targeted in-service date, Piro said,PGE would work with customer groups and the Oregon PUC on an amended order to extendthe startup date without adding costs. If that approach fails, the company willneed to file a new general rate case to recover costs for placing Carty in serviceor apply to defer costs from when the plant starts operations and the time of costrecovery through customer prices.

Capital expenditures for Carty are estimated to total $635 millionto $670 million before considering potential receipts under a $145.6 million performancebond that may be issued by Liberty Mutual Insurance Co. and Zurich North AmericaInsurance Co., or from the original Carty contractor or its parent company. LibertyMutual and Zurich have denied liability under the performance bond, causing PGEto file a breach of contract against the sureties in the U.S. District Court forthe District of Oregon.