MODESTO -- Electricity customers eventually could get some sort of rate relief when the Modesto Irrigation District sheds part ownership of a smoke-belching, coal-fired New Mexico energy plant.
The MID expects to save about $25 million a year replacing that power source with less expensive options.
Spokeswoman Melissa Williams said "cost savings will be passed on to our customers," but balked at predicting what form that might take when the change occurs in about 2017. Pressed for details, she said the move might "help keep our rates consistent."
"Other factors go into rates," Williams said Wednesday. Costs of producing power are "the biggest part of our budget, and the budget drives our rates. That's the best I can do," she said.
The MID spends $234 million each year producing electricity, including $50 million at the New Mexico plant and the rest at other facilities burning natural gas or relying on wind, hydropower and solar power.
Transmission lines from New Mexico bring power to the district's 113,000 customers in Modesto, Salida, Empire, Waterford and Mountain House and parts of Oakdale, Riverbank, Escalon and Ripon via Southern California Edison and Pacific Gas & Electric Co.
Those customers pay more than a fair share to keep irrigation rates low for the MID's 3,100 farmers. The farmers could face a 10 percent hike in April, while leaders pledged in the fall not to meddle with power rates.
The MID had touted its $84.5 million investment 30 years ago in the San Juan Generation Station as a cheap, reliable energy source. The district owns 14.4 percent of one coal-burning unit among four at the plant.
But burning coal is a dirty business, and hazy air prompted new rules requiring expensive air-scrubbing equipment at a cost of up to $900 million.
After a year of legal negotiations, federal environmental officials agreed to a cheaper solution for two of the station's four coal-burning units. The other two will be shut down, and its California investors — avoiding state legislation prohibiting further investment in coal — will go away.
The MID's partners, Santa Clara and Redding, will pull out, as will other utilities including Anaheim and several other cities in the Southern California Public Power Authority.
Greg Salyer, the MID's acting assistant general manager of electric resources, called the resolution "prudent" and "a cost-effective exit strategy for MID."
Also, the district could save an additional $7 million per year in greenhouse gas costs. However, the MID will have to pay about $8 million as its share of $150 million in shutdown costs for tearing down units and salvaging parts.
The MID will explore selling its interest in Southwest transmission lines, Williams said.
"San Juan has provided MID customers with cheap, reliable power for the last 30 years," she said, "and 30 years is the typical life of a power plant."
The district gets 29 percent of its power from clean, renewable sources — primarily wind, with some solar such as the new plant on McHenry Avenue between Modesto and Escalon. Those sources usually are more expensive than coal, which is cheap but filthy.
About 10 percent of MID electricity comes from turbines at Don Pedro Reservoir, which doesn't emit greenhouse gases although the state doesn't recognize hydropower as renewable energy.
The district is "well on our way to meeting California's 33 percent renewable energy mandate" by 2020, Williams said.
The Turlock Irrigation District's largest plant, called the Walnut Energy Center, produces 85 percent less emissions compared with older natural gas-fired plants, spokeswoman Michelle Reimers said.
Both districts participate in the state's cap-and-trade program, which requires that large companies buy a portion of emissions credits at state-run auctions. Utilities get preferential treatment because their customers already are being charged to address climate change under the renewable sources mandate.
Bee staff writer Garth Stapley can be reached at gstapley@modbee.com or (209) 578-2390.
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