PGE Sues Insurers Over Cost Overruns at New Power Plant

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Portland General Electric (PGE) will attempt to recover cost overruns at a new natural gas-fired power plant in eastern Oregon, according to The Oregonian.

The damages stem from a financially-troubled contractor that was removed from the project last December. PGE is suing insurers who backed the contractor, but says it will be forced to recoup losses from ratepayers if this effort fails.

In a filing with securities regulators, PGE says the cost of its 440-MW plant in Boardman could increase by $156 million over the projected $514 million price tag approved by utility regulators last year. These overruns are due to construction defects and expenses to remove liens on the property and repair equipment damaged by poor storage and maintenance practices by the contractor.

PGE has sued Liberty Mutual Surety and Zurich North America for $180 million, after both insurers failed to follow through on a $145.6 million performance bond they provided the contractor as part of a construction agreement. They deny liability because the contractor maintains PGE wrongfully terminated the construction contract and is seeking arbitration regarding the agreement.

Oregon utility regulators already authorized PGE to increase rates by 4.8 percent when the plant enters service. This price hike was expected to be partially offset by an unrelated credit from the U.S. Department of Energy, which would hold net customer rate increases to 2.4 percent.

If it can’t recover cost overruns from the contractor or insurers, PGE maintains it will seek to recover them from ratepayers, though it is uncertain if state regulators would allow this.

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