Capacity Constraints, Rolling Blackouts Not Seen As Near-Term Risk To Public Power: Fitch
July 20, 2022
by Paul Ciampoli
APPA News Director
July 20, 2022
Summer capacity constraints and rolling blackouts are not viewed as a near-term risk to public power and electric cooperative credit quality, Fitch Ratings said on July 15.
Fitch noted that its rated portfolio of public power issuers “typically own or contract for sufficient electric generation during the summer months to match or exceed their expected load demand, providing a financial hedge against market scarcity and volatile energy prices.”
However, general economic inflationary pressures “will necessitate rate increases in the sector, and customer tolerance for rate increases could be diminished by recurring rolling blackouts. To the extent utilities cannot pass through needed rate increases, utility financial profiles would likely weaken and could put pressure on credit quality over the longer term,” the rating agency said.
Supply shortages and the potential for rolling blackouts are likely to happen with more frequency across the U.S., Fitch said.
It said that public power and cooperative utilities tend to own or contract for generation supplies conservatively so that they have more than sufficient reserves to meet potential increases in demand “but there may be residual risk if temperatures cause demand to be substantially higher than anticipated.”
Costs of meeting demand in excess of power supply are typically modest in relation to utilities’ overall budgets, Fitch said, adding that most utilities have a power cost adjustment feature in their rate structure that recovers power costs above budget or reduces rates to customers if power costs are below budget throughout the year.
“As a result of the conservative planning in the sector, public power utilities are often net sellers during scarcity events, protecting the financial profile of utilities during shortage or volatile pricing periods,” Fitch said.
The Electric Reliability Council of Texas (ERCOT) earlier this month asked Texas residents and businesses to voluntarily conserve electricity as extreme hot weather created record power demand across Texas.
Fitch noted that the call for voluntary conservation was successful, reducing peak demand to approximately 78.3 gigawatts on two days, and no rolling blackouts occurred.
If rolling blackouts occur during a heat event in Texas this summer, they will likely last for a few hours, not days, as occurred in February 2021 during Winter Storm Uri, and would not impact long-term public power utility credit quality, the rating agency said.
In a recent episode of the American Public Power Association’s Public Power Now podcast, Woody Rickerson, Vice President of System Planning and Weatherization at ERCOT, detailed ongoing efforts by the grid operator to bolster reliability in the state.
Lawmakers Ask EPA To Detail Plans And Actions Tied To Reliability Risks
July 20, 2022
by Paul Ciampoli
APPA News Director
July 20, 2022
House Energy and Commerce Committee Republicans on July 11 sent a letter to Environmental Protection Agency (EPA) Administrator Michael Regan asking for the agency to respond to a series of questions related to EPA plans and actions regarding risks to electric reliability. The letter was signed by all 26 committee Republicans.
Following similar letters on risks to electric reliability sent to both the Federal Energy Regulatory Commission (FERC) and the Department of Energy (DOE), this letter questions many recent actions and proposals by EPA that may impact reliability.
“In recent months, you announced a suite of EPA actions to target fossil fueled electric generating units, an “EGU Strategy,” to drive the Biden Administrations climate agenda,” the House members wrote in their letter.
This strategy includes many major new regulations now under development or proposed: the Interstate Transport Rule, Regional Haze, Risk and Technology Review for the Mercury Air Toxics Rule, a new set of greenhouse gas performance standards, effluent limitations, and a legacy coal combustion residue rule, “all of which directly affect power plants that are essential for reliable electric operations,” the letter said.
“We are concerned that EPA actions threaten to accelerate fossil generation retirements, at the very same time electric system operators report growing shortfalls in such baseload capacity will accelerate blackout risks,” the lawmakers told Regan.
“At a time of widespread economic and inflationary burdens, the last thing this nation needs are agency actions that press headlong into creating a major electricity crisis. Therefore, it is important that Congress have information from EPA to assess how the Agency’s actions are affecting electric grid reliability,” the letter said.
Among other things, Regan was asked to describe what specific actions “you are taking or are prepared to take to address energy or electricity emergencies this summer in the bulk power system.”
In addition, the lawmakers want the EPA to list all waivers or other emergency actions being considered or that have been taken over the past two years in connection with electricity reliability.
They also asked for a list of all regulatory actions “you are considering or have taken over the past two years to alleviate electricity reliability risks.”
The letter also asks Regan to detail the agency’s interactions with the DOE, FERC, grid operators and states.
Regan was asked to reply to the questions by July 26, 2022.
Groups Raise Reliability, Cost And Other Concerns In Response To Idea Of Breaching Northwest Dams
July 20, 2022
by Paul Ciampoli
APPA News Director
July 20, 2022
The idea of breaching the Lower River Snake Dams (LSRDs) in Eastern Washington State fails to take into account a number of potential negative impacts that could result from such a move including an increase in electricity costs for consumers and removing a key pillar of reliable power supply for the region, the American Public Power Association (APPA) and regional public power groups said.
In June, U.S. Sen. Patty Murray, D-Wash., and Washington Gov. Jay Inslee announced the release of an independent draft report intended to help inform the recommendations of their Joint Federal-State Process regarding the Lower Snake River Dams and salmon recovery in the Pacific Northwest.
The draft report notes that the potential for improvements to West Coast salmon populations is one of the main factors prompting interest in breaching the LSRDs. The deadline for comments on the draft report was July 11, 2022.
Among the groups that weighed in on the draft report was the Oregon Municipal Electric Utilities Association (OMEU).
The draft report assumes the LSRDs will be less important in the future, OMEU said. “However, with 100% clean energy mandates in Oregon and Washington this is clearly untrue. With baseload resources being replaced by massive amounts of intermittent generation, the LSRDs’ ability to provide power — on demand — will become increasingly important for reliable grid operations and public safety, especially during extreme weather conditions,” OMEU argued.
It pointed out that during the heat dome events of last summer, the LSRDs provided much-needed energy, balancing and contingency reserves. “Without those four dams, powering through the heat wave could have been much more expensive and operationally challenging,” OMEU said.
For consumer-owned utility ratepayers, losing the LSRDs could increase consumer electricity rates by 25% or more, OMEU said. “Replacing the generating capabilities of the LSRDs, alone, would cost $15 billion in a zero-carbon future. This type of financial hardship threatens to irreparably harm the communities we serve, particularly our low income and vulnerable customers.”
APPA, which supports the comments submitted by the Washington Public Utility Districts Association (WPUDA) and OMEU, noted that many of APPA’s members buy power produced by the LSRDs, which are part of the broader Columbia River Power System, or own and operate their own hydropower projects.
Making full use of the nation’s hydropower resource is key to ensuring that the nation’s — and the Pacific Northwest’s — grid remains reliable and resilient, and that utilities can meet emission reduction goals, APPA said.
“It is difficult to overstate how critical it is to maintain the LRSDs as the region — and the nation — seeks to lower emissions while maintaining electric reliability and affordability over the long-term,” APPA said in its comments. “Moreover, recent extreme weather events have demonstrated that the LSRDs are an irreplaceable resource not just in the future but right now — both in terms of energy, capacity, and other grid services key to maintaining reliable electricity.”
Public power utilities are committed to scientific, cost-effective mitigation for the impacts of the federal hydropower system, APPA noted. It said that costs related to fish and wildlife mitigation, including the cost of lost power generation, comprise a quarter or more of the Bonneville Power Administration’s power rates.
“The LSRDs feature state-of-the-art fish passage technology that greatly improves in-river fish survival, achieving spring juvenile survival at 96 percent and summer migrating fish survival at 93 percent. Removal of the LSRDs is not a clear path to recovery of endangered species or overall abundance of salmon. More attention is needed to the threats of ocean conditions, avian predation, and over-fishing,” APPA said.
Removal of the LSRDs “may prove to be a tipping point, nudging the Northwest system into acute scarcity of electric supply. The Federal hydropower system, and particularly the LSRDs, are in a critical position to maintain grid reliability and prevent blackouts in the West.”
Moreover, no existing alternative technologies can provide the same combination of low cost, reliable, and flexible attributes, and it is far from clear that dam removal will result in meaningful fish recovery commensurate with costs, APPA added.
WPUDA noted that the draft states that three studies found the energy generated by the LSRD could be replaced by a clean energy portfolio. “It is important that the report emphasize that these studies do not demonstrate that an alternative clean energy portfolio can achieve the other electric system services provided by the LSRDs: peaking capacity, clean energy, grid stability, ancillary and grid services, transmission voltage support and low regional energy rates,” WPUDA said.
The draft report indicates the cost of dam breaching to be $10-$27 billion, WPUDA noted. “Given the stated purpose is salmon recovery, WPUDA believes it is worth asking whether this is the best use of this enormous sum of dollars. And if so, could this money be spent in alternative ways that better support salmon abundance (e.g., stream bank restoration, culvert replacement, enhanced salmon migration support)?”
Northwest RiverPartners, which serves not-for-profit, community-owned electric utilities in Oregon, Washington, Idaho, Montana, Utah, Nevada and Wyoming, said that “Our already fragile grid is facing unique challenges and threats. Removing the lower Snake River dams would not only create even greater challenges, but their loss would harm our efforts to keep the power on when we most need it.”
Additionally, losing the lower Snake River dams “makes it virtually certain that grid operators will be forced to continue using coal or natural gas generation for years longer than allowed under Washington’s clean energy laws to avoid blackouts,” Northwest RiverPartners said.
Following the public input period, tribal consultation, and other means of engagement, the report will be updated and released in final form. The senator and governor will then make their recommendations.
New York Power Authority Transmission Project Advances
July 17, 2022
by Paul Ciampoli
APPA News Director
July 17, 2022
The New York Power Authority’s Smart Path transmission project in the North Country is two-thirds complete, New York Gov. Kathy Hochul announced on July 13.
Smart Path, an upgrade of 78 miles of transmission lines which span from Massena in St. Lawrence County to Croghan in Lewis County, is designed to strengthen transmission lines against weather events and enable the reliable transmission of clean energy from northern New York into the state’s electric power grid. Construction on Smart Path upgrades began in early 2020 and are on track to be completed next year.
In addition to the Smart Path Project, the rebuilding of several other large transmission projects are in progress across New York State including NYPA and LS Power New York’s Central East Energy Connect project which project which involves the rebuild and expansion of more than 100 miles of historically heavily congested transmission lines in the Utica/Albany corridor; New York Transco’s New York Energy Solution which involves the rebuild of approximately 54 miles of transmission lines in the Hudson Valley and NextEra Energy Transmission New York’s Empire State Line Project which recently completed approximately 20 miles of transmission lines in Western New York.
Several other New York State transmission line rebuild projects, as well as new transmission projects, are on deck for construction and in various stages of the permitting process.
These include two new major transmission line projects selected by Governor Hochul last year to help transport clean energy to New York City: Clean Path New York, a project developed through a collaboration between NYPA and Forward Power (a joint venture of Invenergy and EnergyRe) and the Champlain Hudson Power Express Transmission Project developed by Transmission Developers Inc
NYPA and National Grid are collaborating on another North Country transmission project known as Smart Path Connect which will run East-West from Clinton to Massena and North-South from Croghan to Marcy.
When completed, the two segments of Smart Path Connect will join the Smart Path project, creating one continuous upgraded transmission line from Clinton to Marcy. The Smart Path Connect project is currently under environmental review with the New York Public Service Commission.
Together these transmission projects total nearly 1,000 miles of new and upgraded New York State transmission lines that will help advance New York’s goal of obtaining 70% of the state’s electricity from renewable sources by 2030 and realizing a zero-emission energy grid by 2040.
Fitch Affirms Southern Minnesota Municipal Power Agency’s Bond Ratings
July 16, 2022
by Paul Ciampoli
APPA News Director
July 16, 2022
Fitch Ratings affirmed its ratings on Southern Minnesota Municipal Power Agency (SMMPA) power supply system revenue bonds. The rating outlook is Stable.
Fitch affirmed the ratings on approximately $520 million power supply system revenue bonds at “AA-“ and an Issuer Default Rating (IDR) at “AA-.”
The ‘AA-‘ rating and IDR “reflects the agency’s very strong revenue defensibility, which is supported by the intermediate- and long-term wholesale customer contracts and the very strong credit quality of the largest purchasers, strong operating risk profile and trend of stable financial results with very low financial leverage,” Fitch said.
The agency’s “consistently low operating cost burden and diversifying portfolio of mainly owned-generation assets drive its strong operating risk profile.”
Fitch said SMMPA’s resource mix is diverse and includes ownership interest in a large baseload coal plant, Sherbourne County Generating Unit 3 (Sherco 3), which is set to be retired in 2030. “The cost burden is expected to rise in 2022 with higher fuel-related costs and higher MISO market pricing, but the cost burden should remain low,” the rating agency said.
The future retirement of Sherco 3 is expected to coincide with the expiration of the power supply contracts of its two largest members, resulting in a re-balancing of resources with expected future customer load, and no meaningful change in SMMPA’s operating profile, it said.
SMMPA’s leverage ratio, as measured by net adjusted debt to adjusted funds available for debt service, has been on a steady decline over the past five years. In fiscal 2021, the leverage ratio declined to 4.6x, reflecting a trend of declining debt, stable financial margins, and ample liquidity.
The agency will amortize $320 million in existing debt through 2026, allowing leverage to remain very low even through a Fitch’s stress scenario.
SMMPA provides wholesale power supply to 18 participating cities, all of which own and operate municipal electric utility systems.
The agency’s load center is concentrated in the southern portion of the state, with the largest member, Rochester Public Utilities representing roughly 40% of energy sales.
Collectively, the participating systems serve approximately 129,000 largely residential and commercial customers and a total population of over 250,000. Power is supplied to the members primarily through a mix of agency and member-owned generation resources and a growing renewable portfolio.
Nebraska Public Power District CEO Details Proactive Approach To Supply Chain Challenges
July 15, 2022
by Paul Ciampoli
APPA News Director
July 15, 2022
In a recent media briefing, Tom Kent, President and CEO of Nebraska Public Power District (NPPD), detailed how NPPD has taken a proactive approach in response to ongoing supply chain challenges facing the utility sector.
“We are seeing, just like any other business, impacts in supply chain and the ability to get needed resources,” Kent said in the virtual press briefing on July 8.
“We do plan ahead and have materials set aside and reserved for emergencies,” he noted.
Kent said that spring is a very active storm season in Nebraska, “and so we typically see damage to our system from tornados, high winds, et cetera, that we have to repair, and we’ve had several cases of that this spring. We were able to get all those facilities repaired expeditiously and in service because we had stocks available and set aside what we call storm stock.”
The reserves have decreased and NPPD is “monitoring the time it’s going to take to get those supplies restocked in our system.”
Kent said that the “supply chain is congested right now, so to get resupplies right now, it’s taking longer. The costs to get materials is higher than it has been traditionally. But again, it’s part of what we manage.”
Kent said that “we saw this coming – even a year ago, as we were planning for power plant maintenance outages,” NPPD started “working very closely with our customers, put special teams together to focus on ensuring we had the materials we need with enough time so that we could do the work we” needed to do.
He went on to say that “in the case of utilities, one of the areas that we are monitoring really closely is transformers and getting transformers to support other activities in the communities.”
Kent said that part of the supply chain story involves inflationary pressures that are being seen “across the nation, quite frankly. We account for that and look at those types of issues in terms of future costs as we forecast what we need for rates in the future. Right now, there’s a lot of uncertainty about future prices, but we are in a really good position financially.”
He noted that “we’ve held our rates stable on the retail side of our business for the last nine years, on the wholesale side of our business for the last five years. We’re currently running with about a $30 million surplus this year.”
APPA Moves To Address Supply Chain Challenges
The American Public Power Association (APPA) is taking a number of actions to address ongoing supply chain challenges.
APPA recently rolled out an additional feature to its eReliability Tracker that is available to all public power utilities and allows for voluntary equipment sharing by matching systems with the same distribution voltages.
In a speech in June at APPA’s National Conference in Nashville, Tenn., Ditto urged member utilities to share their supply chain challenges with APPA so that the trade group can relay details on these challenges to federal partners and discuss how critical burdens on the sector can be alleviated.
In May, APPA convened a supply chain summit that included participation from public power utility officials who discussed their supply chain challenges and mitigation strategies.
APPA also recently finalized a new supply chain issue brief. APPA members can download the issue brief here.
New Mutual Aid Committee Established At APPA National Conference
July 15, 2022
by Paul Ciampoli
APPA News Director
July 15, 2022
A new Mutual Aid Committee (MAC) was established last month at the American Public Power Association’s National Conference in Nashville, Tenn.
Previously, national-level public power mutual aid efforts had been conducted under the auspices of the Mutual Aid Working Group (MAWG), which coordinated and facilitated the mutual aid program for APPA for well over a decade.
“The MAWG had effectively coordinated and facilitated the mutual aid program for APPA for well over a decade,” noted Santee Cooper’s Neil James, who will serve as Chair of the MAC. “The creation of MAC simply reflects an effort to take things to the next level.”
The creation of the MAC formalizes APPA member oversight of the mutual aid program. The MAC remains focused on networking, supporting emergency response, facilitating mutual aid, and sharing ideas and resources.
Acting Co-Chairs of the MAWG, Amy Zubaly (FMEA) and Kenny Roberts (ElectriCities of North Carolina), oversaw establishment of the MAC and the elections for the MAC Executive Council. Neil James was elected as the Chair. Mike Willets (MMUA) was elected as Vice Chair.
JT Flick (NYPA), Brandon Wylie (Electric Cities of GA), and David Hefner (GRDA) were elected as At-Large members.
“I want to personally thank Amy, Kenny, the MAWG/MAC members, and the MAC Executive Council for their service,” said James.
For more information on the MAC and mutual aid processes or becoming an active member of the MAC, contact mutualaid@publicpower.org.
Court’s Emissions Rule Decision Will Not Halt Public Power’s Shift Away From Fossil Fuels: Fitch
July 14, 2022
by Paul Ciampoli
APPA News Director
July 14, 2022
The recent U.S. Supreme Court ruling that limits the Environmental Protection Agency’s (EPA) authority to cap greenhouse gas emissions will not materially affect public power utilities’ credit quality or the move away from fossil fuels, Fitch Ratings said on July 8.
The Supreme Court on June 30 reversed a U.S. Court of Appeals for District of Columbia Circuit ruling striking down the Trump administration’s Affordable Clean Energy rule, which repealed the Obama-era Clean Power Plan and replaced it with the ACE rule, a more limited regulation of carbon dioxide emissions from existing power plants.
The ruling “is mildly favorable for those public power utilities that own and operate coal- and gas-fired units, as they will have more time to develop transition strategies and amortize investments in coal and gas plants,” the rating agency said. “However, any benefits should be short lived.”
Moreover, the decision “may slow decarbonization trajectory but will not reverse its course, as state and local government directives, investor preferences, and increased affordability continue to drive the transition toward renewable energy and lower carbon-emitting strategies,” Fitch said.
The rating agency said that decarbonization strategies have for the most part been driven by states that have set their own clean energy standards.
Fitch noted that the National Conference of State Legislatures reports that 23 states and territories adopted renewable energy standards or goals that apply to public power and/or cooperative utilities. “The transition could accelerate for these issuers if states with no standards or expired standards adopt new or expanded rules,” Fitch said.
In addition, Fitch said that carbon reduction strategies “will also continue to be driven by policies aimed at limiting investment in thermal coal and investors’ increasing concerns over the environmental effects of coal-related assets.”
It said that higher natural gas and market power prices “could also drive issuers toward lower carbon strategies as the comparative economics of renewable energy resources improves and access to these resources better positions public power systems to avoid or mute the effect of higher energy costs.”
Fitch’s forecast assumption for 2022 US natural gas prices is $6.25/thousand cubic feet (mcf), up from $3.25/mcf in December 2021. “While natural gas prices are expected to moderate toward $2.75/mcf over the longer term, sustained high prices could steer utilities to accelerate the addition of renewable resources, notwithstanding current inflationary pressures and supply chain challenges related to green energy.”
TVPPA Develops New Supply Chain Toolkit to Support Its Member Utilities
July 13, 2022
by Vanessa Nikolic
APPA News
July 13, 2022
The Tennessee Valley Public Power Association (TVPPA) developed a new supply chain toolkit to provide support to its member utilities across the Tennessee Valley. The toolkit includes talking points, social media posts, and sample letters that can be used by key accounts and communications teams.
The electric utility industry continues to experience a materials shortage. In an effort to seek a deeper understanding of challenges that Tennessee Valley utilities encounter, TVPPA took steps to develop a communications-focused supply chain toolkit for its members.
Last fall, TVPPA attended a regional meeting of utility executives where one of the roundtable discussions among its members focused on supply chain concerns. The idea of developing a toolkit emerged from a subsequent internal discussion about how TVPPA could proactively provide tools and services to address its members’ needs.
In November 2021, the need for supply chain messaging continued to grow and TVPPA started gathering information and pooling resources in order to make a toolkit available before the holidays.
TVPPA says its Communications Advisory Group (CAG) was a beneficial component during the toolkit development phase since the group helps the association keep up with the resources that its members need most. The group, which is reflective of TVPPA’s membership, is comprised of communicators and customer service representatives from member utilities of all sizes. TVPPA’s team works closely with CAG members to create and refine content.
Launched in December, TVPPA’s Supply Chain Communications Toolkit enables it members to effectively discuss supply chain disruptions with their key audiences, particularly as they relate to transformers and other materials critical to servicing the needs of consumers and communities. The toolkit can be customized according to each utility’s unique circumstances and includes messaging that can be used by key accounts and communications teams in written and verbal communications, ideas for how and where to share the messages, and sample letters to send to developers and partners.
The toolkit also includes materials that were shared by TVPPA members that had already begun addressing supply chain challenges in their communities.
TVPPA Vice President, Communications and Marketing Nathalie Strickland was involved in the development of the toolkit and has received positive feedback from members.
“It has been well received by our members from both large and small systems,” Strickland said. “They’ve appreciated the ability to see what other power companies are using to communicate effectively with their customers and business and community leaders. The easy-to-use format enables them to focus more of their energy on managing customer expectations and creatively solving materials shortage challenges.”
TVPPA says its team is open to expanding the kit to accommodate the growing needs of utilities who may request additional resources in the future. The toolkit is free of charge and is one of the many benefits that utilities can access on the members section of TVPPA’s website.
“We have incredibly talented power company leaders in the Tennessee Valley who offer great thought leadership, and we know that when we harness their collective wisdom and maximize the capabilities of our staff to address their pain points, we support their businesses success regardless of what our ever-changing industry brings,” Strickland said. “That’s the approach we took with the Supply Chain Communications Toolkit, and we think that’s why it has been valuable to so many power companies in our region and now to others across the country.”
TVPPA will host its annual Valley Rally in Washington, D.C. on July 18-20 and will continue to raise awareness of supply chain issues during the event with members of the Valley Congressional delegation and discuss potential solutions that could provide short-term relief with an eye towards mitigating long-term consequences.
In addition to the supply chain toolkit, TVPPA plans to release three new toolkits this year focused on the value of locally-owned power, the power restoration process, and crisis communications.
APPA Supply Chain Efforts
The American Public Power Association (APPA) is taking a number of actions to address ongoing supply chain challenges.
Joy Ditto, President and CEO of APPA, recently noted that APPA has been working with the federal government “to partner with us on getting the manufacturers in a room to really suss out what this could look like and how we could get to a point where we reduce these lead times and, secondarily, really address the pricing issue.”
She made her comments during a virtual press briefing held by the U.S. Energy Association (USEA) related to supply chain issues and the electric utility industry.
A tiger team has been formed under the auspices of the Electricity Subsector Coordinating Council, led by the various electricity trades and select CEOs from the industry, including several from public power.
The objective is to enable the Department of Energy (DOE) “to talk to us and to hopefully bring the manufacturers in to address the issue for the medium term.” In the short term, the industry has been speaking across sectors about equipment sharing.
APPA recently rolled out an additional feature to its eReliability Tracker that is available to all public power utilities and allows for voluntary equipment sharing by matching systems with the same distribution voltages.
In a speech in June at APPA’s National Conference in Nashville, Tenn., Ditto urged member utilities to share their supply chain challenges with APPA so that the trade group can relay details on these challenges to federal partners and discuss how critical burdens on the sector can be alleviated.
In May, APPA convened a supply chain summit that included participation from public power utility officials who discussed their supply chain challenges and mitigation strategies.
APPA also recently finalized a new supply chain issue brief. APPA members can download the issue brief here.
Ariz. Public Power And Cooperative Groups Urge PG&E To Extend Nuclear Plant’s Operating Life
July 12, 2022
by Paul Ciampoli
APPA News Director
July 12, 2022
In a recent letter to the CEO of California investor-owned utility PG&E, groups representing public power utilities and electric cooperatives in Arizona made the case for extending the life of the California nuclear power plant Diablo Canyon Power Plant past its existing license.
“While we understand that the history of the plant is long and complicated, we hope that you will agree that the benefits of extending the operating license outweighs the cons,” wrote officials with the Irrigation & Electrical Districts’ Association of Arizona (IEDA), the Arizona Municipal Power Users’ Association (AMPUA) and the Grand Canyon State Electric Cooperative Association (GCSECA) in their June 27 letter to Patricia Poppe, CEO of PG&E.
“The development of carbon-free replacement power is not keeping pace with California’s decision to eliminate fossil fuel generation by 2045,” the letter said. With ongoing supply chain and solar tariff issues, most new plant construction has been pushed out at least two years, the letter said. “If PG&E were to take a plant that provides roughly 9% of California’s energy offline in an environment of already limited capacity, rolling blackouts worse than those in 2020 are sure to follow.”
The letter was signed by Ed Gerak, executive director of IEDA, AMPUA’s Russell Smoldon, and Dave Lock, CEO of GCSECA.
In June 2016, PG&E said it planned to retire Diablo Canyon nuclear power plant in California under a joint proposal with labor and environmental groups. The California Public Utilities Commission in 2018 signed off on a request by PG&E that it be allowed to retire the Diablo Canyon nuclear plant by 2025. The two units at Diablo Canyon together produce approximately 2,300 net megawatts of power.
In their letter, Gerak, Smoldon, and Lock noted that in the Long-Term Reliability Assessment released in December 2021 and developed by the North American Electric Reliability Corporation, Diablo Canyon’s retirement was highlighted as further impacting the reserve margin, which it described as insufficient to manage region-wide heat waves like seen in 2020. “With the existing capacity constraints and the rapid increased cost for natural gas, companies are returning to coal for economic and reliability reasons. Closing Diablo Canyon would exacerbate this issue in the future,” the letter said.
Gerak, Smoldon, and Lock also noted that the Bipartisan Infrastructure Law has $6 billion in a Civil Nuclear Credit Program that could be used to help retrofit the plant and extend the license.
The U.S. Department of Energy (DOE) on June 30, 2022 announced an amendment to the Civil Nuclear Credit Program Guidance for the currently open award cycle. To incorporate these changes and give potential applicants the time they need to respond, DOE also extended the application period another 60 days to September 6, 2022. PG&E had requested an extension for the deadline.
In April, California Gov. Gavin Newsom told the Los Angeles Times editorial board that the state “would seek out a share of $6 billion in federal funds meant to rescue nuclear reactors facing closure,” the newspaper reported.
“With the ongoing drought, hydropower production has been severely impacted,” the letter from the IEDA, AMPUA and GCSECA officials said. “There is a real possibility of some plants losing power production completely. Nuclear power is the only carbon-free base load generation in the West that we can still count on. We hope that includes Diablo Canyon in the future.”