PPL Montana officials discuss potential shutdown of Corette plant

After PPL Montana announced a plan to mothball its J.E. Corette power plant in Billings, likely eliminating 35 jobs and dealing a blow to the local economy, some blamed federally subsidized wind power as the culprit.

On Friday in Billings, PPL officials said state and federal laws designed to encourage the use of renewable energy are part of the issue. But the decision to idle the 154-megawatt coal-fired power plant can also be attributed to the high cost of meeting federal environmental regulations as well as sluggish demand for electric power.

In the wake of PPL's announcement, Big Sky Economic Development, Yellowstone County's economic development agency, invited company officials to Billings to discuss the issues and determine how best the community can respond.

Electricity costs have fallen by about half in the wake of the recession. But unless market conditions improve, company officials said they couldn't justify spending $38 million on pollution control equipment in order to meet new Environmental Protection Agency pollution regulations that are scheduled to go into effect in April of 2015.

Pete Simonich, PPL Montana's vice president and chief operating officer, said power companies all across the country are idling coal-fired power plants because of market conditions. The U.S. Energy Information Administration expects coal-fired generation to decrease by 27,000 megawatts nationwide by 2015, PPL officials said.

"Real-time market price for energy today is just shy of $25 per megawatt," about half of the selling price before the recession hit in 2007, Simonich said. "What's causing that price to fall? The recession, the lack of demand, and the oversupply of electricity in the West," he said. "Because of the oversupply and the slow recovery, these prices are expected to remain sluggish."

In an effort to boost renewable energy, several states in the Northwest, including Montana, passed laws that require utilities to buy a certain percentage of their power from renewable sources.

The production tax credit, a federal subsidy of $22 per megawatt hour on wind energy, has helped spur the development of 8,500 megawatts of wind energy throughout the Northwest. However, the subsidy is scheduled to expire at the end of the year unless Congress acts.

Since 2009 the production tax credit for wind producers has amounted to $14 billion, according to the Joint Committee on Taxation and the Treasury Department.

PPL officials said renewable energy subsidies are disrupting the energy market.

"Wind farms can make a profit even in low demand time of the season, which is the spring when we have a lot of hydro power, because they can pay people to take their electricity," Simonich said.

He said the Corette plant didn't operate from March to July because of low demand for electricity.

Republican presidential candidate Mitt Romney and several members of Congress have advocated allowing the tax credit to expire. PPL officials were asked whether an end to the subsidy would improve the situation for the Corette plant.

"There's nothing wrong with wind. It's a good, clean energy source," Simonich said. "What we want to see is a level playing field for our plants. What bothers us is that there are actually companies paying people to take their power."

Some contend that cheap natural gas, not wind energy, is mainly responsible for the decline in coal-fired electricity generation. David Hoffman, PPL's director of external affairs, said that may be true in other parts of the country, but there is very little natural gas generation in the Northwest.

PPL officials also acknowledged that sluggish economic conditions have played a part in soft demand for electric power. When Smurfit-Stone Container shut down its plant in Missoula, that reduced electrical demand by the equivalent of about one-third of the Corette plant's output.

PPL officials said its Colstrip power plants are better able to handle new EPA regulations because they were fitted with sulfur dioxide scrubbers and other pollution control equipment.

Steve Arveschoug, executive director of Big Sky Economic Development, asked whether shutting down the Corette plant could lead to future power disruptions if market conditions change.

"Are we creating a long-term economic problem for ourselves?" Arveschoug asked. "It wasn't that long ago that we were experiencing brownouts and blackouts."

Others weighed in on PPL's announcement.

Bob Winger, president of the Boilermakers Local 11, criticized the federal subsidy for wind energy, calling it a boondoggle.

"I've been on this for two and a half years, talking about the threat to our electrical supply from subsidies on wind," Winger said in a telephone interview.

"The wind was brought in to create jobs and to clear carbon emissions, but they've done neither," Winger said. "We're subsidizing a type of industry that can't make it on its own and replacing jobs with unsustainable work."

"We're never happy to hear an announcement of potential job losses," said Ed Gulick, chairman of the Northern Plains Resource Council. "There is a transition under way in this country to cleaner sources of energy, and there are going to be some bumps along the way. In some respects it's good in terms of giving ample notice. But the timing of the announcement could be politically motivated, coming 45 days before the election."

In response to criticism of wind energy subsidies, Gulick said, "Coal actually gets a number of subsidies as well. Pretty much all forms of energy get some fairly high subsidies."

Meanwhile, Rep. Denny Rehberg, R-Mont., announced that the Republican-controlled House of Representatives passed a series of bills designed to "stop the war on coal."

"President Obama campaigned on a platform of destroying coal jobs, and his Senate allies have been willing accomplices as he uses executive authority to fulfill that disastrous effort," Rehberg said.