An Algonquin Power & Utilities Corp. utility will be able to securitize nearly $290 million in costs related to the early retirement of a coal-fired power plant and to Winter Storm Uri, producing an estimated $65.6 million in savings for ratepayers under a Missouri Public Service Commission decision issued earlier this month.
Empire District Electric Co. will be able to issue bonds to recover $199.6 million in costs from Winter Storm Uri and $81.2 million for shutting down its Asbury power plant early, plus $7.9 million in financing costs, the PSC said Monday.
Utility securitization requires state legislation, but the just-enacted Inflation Reduction Act offers other financial pathways that could spur early fossil-fuel plant retirements across all states, analysts with Energy Innovation, a climate policy think tank, said Wednesday.
The PSC’s Aug. 18 decision was the first approval of a utility request to issue securitized utility tariff bonds to recover qualified extraordinary costs and energy transition costs since Missouri enacted a securitization law last year.
The law allows investor-owned utilities to take debt related to unusual weather events and power plant retirements and recover those costs via ratepayer-backed, low-interest bonds. States including New Mexico and Wisconsin have used securitization as a way to finance the early retirement of coal-fired power plants.
The Joplin, Missouri-based Empire District, which operates as Liberty Utilities, wanted to securitize $221.6 million related to Winter Storm Uri, according to the PSC. The frigid spell in February 2021 drove up natural gas prices and led to rolling blackouts in some areas of the central United States. The PSC allowed Empire District to recover $199.6 million.
The agency also allowed Empire District to issue securitized bonds to cover $81.2 million in costs related to retiring its 200-MW Asbury power plant in 2020, about 15 years ahead of schedule.
Running the 50-year-old plant had become uneconomic and a drain on the utility and ratepayers, the PSC said. Empire District’s decision to shut the plant down was prudent, according to the commission.
Utilities will have more options for paying for a shift away from aging fossil-fuel power plants under the Inflation Reduction Act, according to Energy Innovation.
The new law provides the Department of Energy’s Loan Program Office with $5 billion to facilitate low-cost loans of up to $250 billion in principal, Michael O’Boyle, director of Energy Innovation’s electricity program, and Michelle Solomon, a policy analyst in the program, said in a Forbes article published Wednesday.
“With over $176 billion still on the books from fossil plants around the country, this could make a serious dent in zeroing out coal-powered emissions,” they said.
Also, the Inflation Reduction Act establishes a Department of Agriculture program with $9.7 billion in assistance for cooperative utilities to reduce power plant emissions, according to O’Boyle and Solomon.
Up to 20 GW of coal capacity could retire through that program, they estimated.