Ratepayers to foot $2M bill for coal-power mandate

Electric utilities in Wyoming are already incurring costs to comply with legislation that requires them to pursue retrofitting coal-fired power plants with carbon capture, utilization and sequestration facilities, despite preliminary analyses that CCUS technology is cost-prohibitive. 
Those initial costs to comply with state law — which involved hiring engineers to analyze and collect bids from contractors to build the facilities — will soon be passed on to Wyoming ratepayers.
The Wyoming Public Service Commission on Thursday approved a 0.3% “carbon capture compliance” surcharge for Rocky Mountain Power customers in the state. The new charge will generate an estimated $2 million in 2023, according to filings to the commission, and will be included in customers’ bills beginning in February. The commission may consider a similar request by Black Hills Energy — also subject to the state law. But so far that utility has not requested a carbon capture compliance rate hearing.
The new surcharge stems from House Bill 200 – Reliable and dispatchable low-carbon energy standards. The law passed in 2020 — the only one of its kind in the nation — is intended to delay the early retirement of coal-fired power plants by mandating they be retrofitted with CCUS technology. CCUS has yet to prove economically viable at commercial scale in the U.S. despite multiple attempts and hundreds of millions of dollars from taxpayers and ratepayers.
If a utility proves that applying a CCUS retrofit at an individual coal-burning unit is cost-prohibitive, the commission may grant an exemption to the HB 200 mandate. None of the costs to analyze or implement CCUS at Wyoming coal plants can be passed on to the utilities’ ratepayers outside the state, according to the commission.
The surcharge approved Thursday is based on utilities’ costs for meeting preliminary compliance — such as analyzing the potential to capture carbon emissions and collecting actual bids to retrofit coal plants with CCUS.
But the actual implementation — building and operating CCUS facilities at a utility’s coal-fired power plant — may be too costly to justify, according to preliminary analyses by Rocky Mountain Power — part of the western utility giant PacifiCorp — and Black Hills Energy. It would cost $400 million to $1 billion to retrofit a single coal unit with CCUS, according to Rocky Mountain Power’s initial estimate in March 2022.
To comply with the state law, PacifiCorp is collecting bids to potentially retrofit Jim Bridger units 3 and 4, as well as one of four units at the Dave Johnston coal-fired power plant near Glenrock.
Cost estimates to implement CCUS are likely to change, according to utilities and state officials, based on actual bids and potential federal tax credits.
“The [Wyoming Office of Consumer Advocate] does not believe that the initial report and application submitted are sufficiently comprehensive or refined to reasonably estimate what the implementation of a low-carbon portfolio standard might mean in terms of ratepayer bill impacts at this time,” Wyoming Office of Consumer Advocate Administrator Anthony Ornelas told WyoFile.

Though hesitant to make a final determination at this point, both utilities have indicated their initial estimates for CCUS retrofits would be considered too costly to justify to ratepayers.
“We’re fully supportive of [coal carbon capture],” Black Hills Energy Director of Regulatory and Finance Kyra Coyle told the commission during a public hearing in October. “But we feel like we’re not quite there yet.”
“The major reason for the [request for proposal] for carbon capture in the first place has been to determine a realistic cost estimate based on what vendors will actually bid for projects,” PacifiCorp and Rocky Mountain Power spokesman David Eskelsen told WyoFile. “Even then, an evaluation of the impact of potential tax credits and other financial and regulatory treatment will be necessary before an estimate of customer rate impact can be calculated.”
The tax credits that Eskelsen referred to — primarily the federal 45Q tax credit for carbon capture at industrial facilities — are risky, Coyle told the commission in October. The federal government, historically, has clawed back about half the 45Q tax credits it doles out, Coyle estimated, due to failures to meet stringent technological and performance requirements in storing and utilizing captured CO2.
The law requires regulated utilities in Wyoming to provide the commission with a comprehensive analysis of the cost to retrofit with CCUS, including issuing a request for proposals to prospective developers. PacifiCorp had already incurred some $300,000 by July to meet the compliance requirements, and could spend an estimated $1 million to $2 million to comply with the initial phases of the law, according to filings and testimony submitted to the commission.
That’s what Rocky Mountain Power’s Wyoming ratepayers will pony up via the new 0.3% carbon capture compliance surcharge in 2023. Black Hills Energy’s Wyoming ratepayers may incur a similar charge. Whether either or both utilities ultimately move forward with CCUS retrofits depends on pending bids and cost analysis, as well as consideration of the Wyoming Public Service Commission.
It’s unfortunate that Wyoming ratepayers are saddled with even the cost of analyzing CCUS retrofits, Powder River Basin Resource Council Attorney Shannon Anderson said, because there are technologically proven, more affordable options for replacing electrical generation capacity lost by retiring coal plants.
“Lower-cost power options like wind and solar are readily available now,” Anderson said. “We remain concerned about how much this [state mandate] will end up costing [Wyoming] customers.”
 
WyoFile is an independent nonprofit news organization focused on Wyoming people, places and policy.