Deal falls through to sell Puget Sound Energy’s stake in Montana’s Colstrip coal plant

The future of Colstrip, the Northwest’s largest coal plant, got more uncertain Monday as a deal fell through to sell Puget Sound Energy’s stake in one of the four generating units in Montana.

Puget Sound Energy is required by a 2019 Washington law to have a coal-free energy supply by 2025. And, in announcing the deal in December of last year, PSE said the sale of generating capacity in Colstrip Unit 4 to two other companies – NorthWestern Energy and Talen Montana – would help to meet that deadline.

But the transaction, which also included the sale of PSE’s interest in a Montana transmission line, needed the approval of the Washington Utilities and Transportation Commission. And in early October its staff recommended the sale be rejected by the commissioners because PSE had not shown this was the lowest, reasonable cost option for meeting the requirements of the 2019 law.

The deal also was opposed by environmentalists concerned that the sale would extend the life of the coal plant since NorthWestern has hoped to keep Colstrip operating into the 2040s.

“It’s time for Colstrip’s owners to work together to guide the plant toward an orderly transition that takes care of workers and cleans up the decades of toxic coal ash pollution in the community,” said Doug Howell, senior campaign representative with the Sierra Club.

Colstrip’s first two older, smaller units – 1 and 2 – owned by PSE and Talen Montana – shut down earlier this year.

Under the terms of the sale, PSE would have sold its ownership in Unit 4 and then bought back some power from the unit until 2025, while continuing to hold a stake in Colstrip’s Unit 3.

Now, PSE and other companies with an ownership in Colstrip must develop a new plan for what happens after 2025.

“It became increasingly evident that there was enough opposition or misplaced opposition to this transaction that it necessitated withdrawing the application at this time,” said Janet Kim, a PSE spokeswoman. “PSE wants a solution and we want to get off coal as quickly as possible. We remain no less committed to this and will immediately return to the negotiating table to explore options with the other owners.”

NorthWestern, which provides electricity in Montana, said that the sale would have addressed a “critical capacity shortage” when power demand is high and called the cancellation a “huge loss for Montana and our customers.”

Colstrip has been a major source of family-wage jobs in southeast Montana, and has strong political support in the state, and in the community of Colstrip, which has long relied on the plant’s jobs.

But the plant has been buffeted by changing energy markets as natural gas, wind and solar power have ramped up generation, and coal has struggled to compete. Meanwhile, much of the plant’s generation has gone to Washington, where the Legislature has set the 2025 date for ending coal-fired electrical generation and Oregon, where coal-fired generation must end by 2030.