A Tale of Depreciation and Coal Plants

ICL is looking to keep costs reasonable while hastening the closing of coal plants.

Up to half of Idaho’s energy comes from coal power plants. Not only are these dirty plants polluting our air, water and climate, but they also drain energy dollars from Idaho since they are located in neighboring states.

But good news is here! Last year, ICL helped convince Idaho Power to divest of one coal plant, the North Valmy plant near Battle Mountain, NV. Last week, Idaho Power asked state regulators to take the first steps toward closing this plant. Below, I tell you why this is actually news for Idahoans and their pocketbooks.

Closing Coal Saves Idahoans Money

Burning coal costs money, and these costs increase every day. For the Valmy plant, one of the largest costs is transporting the coal from mines to the Nevada plant by rail. By contrast, clean energy sources like wind and solar don’t have these transportation costs.

Burning coal also produces loads of pollution, which is expensive to clean up. Wind and solar don’t pump out air pollutants or make huge ash piles. Because coal is increasingly more expensive than other options, Idahoans may benefit from divesting from coal plants.

To understand the benefits, ICL worked with Idaho Power and other stakeholders to develop a long-term plan for meeting our electricity needs. Known as an integrated resource plan or IRP, the 20-year forecast compares energy needs to available resources.

In 2015, Idaho Power’s IRP compared closing the Valmy coal plant in the 2020s against continuing to operate the plant until at least 2035. Turns out that closing half of Valmy in 2019 and the other in 2025 is the least expensive option for Idaho.

Due to other concerns, Idaho Power elected to close both halves in 2025, saving Idahoans $103 million over running the plant through 2035. According to our proposal for the IRP, phasing out Valmy in 2019 and 2020 would have saved Idahoans an additional $75 million. Still, the important part is that Idaho Power recognizes that it’s time to close coal.

Why You Can Appreciate “Depreciation”

As you may know, ICL’s energy work gets pretty wonky pretty fast. So forgive me if this explanation gets a bit wonky! But I’ll try my best to keep it simple.

When a utility builds a power plant, it invests the money upfront and then recoups this investment over time from customers. The length of time is called a “depreciation schedule” and should match the time over which the plant provides useful service. For Valmy, which went online in the 1980s, that schedule stretched to 2035. If a utility seeks to close a plant before the end of this depreciation schedule, it must decide how to recoup the initial investment. This is the issue we face now.

Last week, Idaho Power asked to accelerate the depreciation of the Valmy coal plant by about ten years. This could raise energy bills by shortening the time over which we repay investment in the plant. Under Idaho Power’s proposal, electric bills would go up by 3% or about $3 a month for most homes.

All told, ratepayers would invest roughly $24.5 million to reap $103 million of benefits from avoiding future costs for coal and pollution. That’s a good deal for Idaho—but maybe we can get a better one.

ICL Is on the Case

ICL is looking to keep costs reasonable while hastening the closing of coal plants. Our work in 2015 showed that closing Valmy even sooner would save Idahoans even more money by avoiding the costs of coal and pollution. So we may advocate for accelerating the closure date even more.

At the same time, we are also looking at whether it’s fair to accelerate the depreciation schedule so much. The theory behind accelerating depreciation is that the customers who benefit from an investment should repay that investment. For the normal power plant, that timeline aligns with when the plant operates. But when we are talking about closing coal and avoiding air pollution, Idahoans in the future benefit from a cleaner system. Maybe it’s fair to speed up the plant closure but slow the depreciation schedule to allow those future beneficiaries to share some of the costs. 

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