Development of New Natural Gas-Fueled Generating Units on Track
as Project Evolves into Hub for Energy Development
Press Release
Faced with the loss of existing customers, a weak market for coal-fueled electricity in the western United States, and environmental regulatory issues that rendered continued operation uneconomical, owners of the Intermountain Power Project (“IPP”) announced today that they will cease electricity generation using coal in 2025.
“We are saddened to announce this decision, but factors beyond our control make continued operation of the coal units unfeasible after their current power purchase agreements expire,” said Ted Olson, Board of Directors Chairman for Intermountain Power Agency (“IPA.”) “We are mindful of the substantial economic contribution IPP makes to rural Utah and we will vigorously continue efforts we began years ago to diversify and provide project benefits for its employees and surrounding communities for as long as feasible.”
IPP participants are already moving forward with plans to develop new natural gas-fueled electricity generation at the project site. Thirty-two municipal power systems and rural electric cooperatives have subscribed to participate in the gas project and engineering has begun. The project envisions about 1,200 megawatts of new natural gas-fueled electricity generation at the site, to become operational in 2025.
The Intermountain Power Project began commercial operations in 1986. The Project includes a two-unit, 1,800-megawatt coal-fueled generating station located near Delta, Utah, two transmission systems, a microwave communication system and a railcar service center, all built as a joint undertaking by 36 utilities in Utah and California. The Project generates enough electricity to supply the needs of more than 1.5 million homes.
Changes in electricity markets and environmental regulation in recent years have combined to make future operation of the coal units untenable. Specifically: Page 2 of 2
Loss of Existing Customers. Since the Intermountain Power Project’s inception, nearly all of the electricity generated has been consumed by six municipal power systems located in southern California. Under California state law, these municipalities are prohibited from purchasing coal-fueled electricity after their existing power purchase agreements expire.
Weak Market for Coal-fueled Electricity. Persistently low natural gas prices and declining costs for renewable energy have combined to make coal-fueled electricity less competitive across western United States power markets. Utilities in the region are closing other coal-fueled generating stations and shifting resource portfolios away from coal, blocking IPA’s efforts to secure replacement customers for IPP’s coal-fueled electricity.
Environmental Regulatory Issues. For IPP’s coal units to continue operating beyond 2025, power purchasers would incur significant additional expenses for compliance with new coal combustion residuals regulations and likely additional air emissions controls.
“We are proud of the Intermountain Generating Station’s performance over more than 30 years of continuous operation,” said Olson. “Our focus now will be planning for our dedicated and skilled workforce, as well as the communities they call home. We will use the next eight years to plan a transition that potentially provides new opportunities while recognizing the substantial contributions that these people and the project have made over the last three decades.”
Over the life of the Project, Intermountain Power Agency has contributed more than $620 million in direct tax payments to the State of Utah and local communities. The generating station employs 440 people with an annual payroll exceeding $46 million. Development of the new natural gas-fueled generation at the IPP site is expected to continue some of those same contributions for several more decades.
In addition to the new natural gas project under development, other energy projects have been attracted to the area by IPP’s substantial infrastructure. For instance, 306 megawatts of generating capacity from 165 wind turbines located in Millard and Beaver counties connect to the grid at the Intermountain Power Project’s switchyard. Salt dome caverns have been constructed immediately adjacent to IPP and are currently in operation for storage of natural gas liquids. (Future cavern development can provide storage capacity for other materials, such as natural gas or other fuel products, or for compressed air energy storage.) Solar energy project developers are also pursuing potential projects near the IPP site.
The addition of new natural gas-fueled generating capacity, the addition of wind generation projects, and the potential for new solar and energy storage projects are clear indications of continued economic developments in the central Utah region.
Certain statements included in this news release constitute “forward-looking statements” within the meaning of the federal securities laws. Such statements are generally identifiable by the terminology used such as “anticipate,” “plan,” “envision,” “become,” “expect,” “future,” “potential,” “continue” or other similar words and include statements regarding future operations of IPA. The achievement of certain results or other expectations contained in such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements described to be materially different from results, performance or achievements expressed or implied by such forward-looking statements. Such risks include the ability to design, permit, finance and construct natural gas facilities at IPP, the continued payment by power purchasers under the contracts pursuant to which they purchase such power, the ability of third parties unrelated to IPA to continue to develop power and industrial facilities in the immediate area and other risks, uncertainties and other factors discussed from time to time in filings made by IPA pursuant to its continuing disclosure obligations through the Municipal Securities Rulemaking Board’s Electronic Municipal Market Access system (“EMMA”), currently located at https://emma.msrb.org. IPA does not undertake any obligation to correct or update any forward-looking statements whether as a result of changes in internal estimates or expectations, new information, subsequent events or circumstances or otherwise.