Utah power agency warns against bill to keep coal plant alive

An effort by Utah lawmakers to keep a coal-fired power plant in operation poses risks to the Intermountain Power Agency (IPA), which issued bonds to finance its transition to cleaner fuels and has asked the governor to veto the legislation.  

Senate Bill 161, which was passed by the legislature in late February would require IPA to participate in efforts to operate the plant near Delta, Utah, beyond its July 1, 2025, shutdown deadline, and threatens the completion of a new power facility and control of the agency by municipalities in the state, IPA Board Chair Nick Tatton wrote in a March 8 letter to Gov. Spencer Cox, who has until the end of Thursday to decide whether or not to veto it.

Bloomberg News

"IPA has issued nearly $2 billion in bonds to date and has committed to expend billions of dollars more in construction, service, and sales contracts," Tatton wrote. "SB 161 puts those bonds at risk and jeopardizes IPA's ability to perform under those contracts." 

IPA sold $797.6 million of tax-exempt and taxable power supply revenue bonds in 2022 to begin financing its transition from a coal-fired plant to more environmentally friendly electricity generation using natural gas and hydrogen. Last year, another $835 million of bonds, rated Aa3 by Moody's Ratings and AA-minus by Fitch Ratings, were sold.

At a House Public Utilities, Energy and Technology Committee meeting in February, bill sponsor Republican State Sen. Derrin Owens said the legislation's aim is to aid Utah's coal industry and preserve the state's largest coal-fueled power plant for energy security purposes, particularly during IPA's transition to a new generating facility.

"The intent is not to disrupt construction or anything going forward with the new natural gas and hydrogen plant … but just create a process to preserve the existing plant," he said, adding the bill includes a option for the state to buy the facility if a purchaser with "the ability, experience, and financial means" does not materialize.

Tatton's letter noted there is a lack of buyers for electricity produced using coal, and said the measure, if enacted into law, would lead to delays and higher costs for IPA's "renewed" project due to conflicts with U.S. Environment Agency regulations and permits.

The Salt Lake City Tribune reported the bill's passage in the House and Senate fell two to three votes short of a veto-proof majority. 

The Los Angeles Department of Water and Power, the nation's largest municipal utility, is the IPA's biggest power purchaser, as well as its operating agent and project manager. An IPA official has said the transition to natural gas and hydrogen will allow the agency's California power purchasers to meet their state and local renewable and clean energy targets and requirements. 

IPA, a state of Utah political subdivision organized in 1977, has 23 Utah municipalities as members.