FERC rejects TransAlta's $19.9 million Centralia cost recovery

The Federal Energy Regulatory Commission has rejected TransAlta's proposal to recover $19.9 million in expenses from the California Independent System Operator and the Southwest Power Pool. FERC ruled the cost recovery plan, tied to a Department of Energy emergency order, extended too far geographically. The commission rejected the plan on Thursday.

TransAlta sought to recover the sum for costs incurred during the first 90-day emergency order issued in mid-December. That order prevented the company from retiring the 730-megawatt, coal-fired Centralia power plant in Washington at the end of 2025 as planned. The first DOE directive took effect December 16, 2025, requiring Centralia Unit 2 to remain available until March 16, 2026. FERC rejected the proposed method to collect the costs, rather than ruling TransAlta could recover nothing at all. Neither the $19.9 million nor a separate $23 million estimate represents reimbursement already received.

Sierra Club and environmental opposition

Environmental groups argue the Department of Energy has unlawfully stretched its emergency authority to override Washington's long-planned energy transition. The Sierra Club and its partners have challenged the Trump administration's emergency orders keeping Centralia open. Ben Avery, the Sierra Club's Washington State Director, stated that FERC was right to reject the attempt to make consumers pay for the administration's costly coal bailout. He argued Centralia was slated for retirement, yet the administration has illegally forced it to keep running, racking up more than $50 million in costs with little to show. Northwest families should not have to pay for keeping an aging, uneconomic coal plant on life support, he added. According to the Sierra Club, it has cost about $583 million to keep generating units under similar 202(c) orders from retiring. The group applauded FERC for standing up for ratepayers and vowed to continue fighting what it calls a reckless abuse of emergency authority.

Plant status and operational reality

The Centralia plant has not generated electricity this year. It has not run once since the first emergency order was received last year. U.S. Energy Information Administration data shows the facility produced zero electricity through July. The Trump administration has repeatedly forced Centralia to remain available after its planned retirement, despite the plant never being called on to generate electricity under the emergency orders.

DOE emergency orders and broader context

The Department of Energy justified its initial emergency order based on a North American Electric Reliability Corporation winter reliability assessment. That assessment showed the Northwest assessment area, covering Montana, Oregon, Washington, and parts of northern California and northern Idaho, faced elevated risk during extreme weather. Using a novel interpretation of its 202(c) authority, the DOE has issued emergency orders since May 2025 to keep generating units from retiring at seven power plants. All but one of the affected units is coal-fired.

A federal appeals court last month vacated the DOE's first emergency order for a plant in Michigan, finding the agency took an overly expansive definition of 'emergency'. Since that September 11 court decision, the DOE has reissued orders affecting units owned by several utilities. It issued an additional 90-day emergency order to TransAlta under section 202(c) on that same date, September 11. That order extended the availability directive for Centralia Unit 2 from September 13 through December 11, 2026. The extension continues an availability obligation but does not specify a volume of electricity for TransAlta to deliver. The Trump administration has now issued multiple 202(c) emergency orders for Centralia.

TransAlta's future conversion plans

TransAlta plans to convert the Centralia unit to burn natural gas. The company is targeting a roughly $600 million conversion expected in the second half of 2028. The converted facility would have a capacity of about 700 megawatts. Power from the converted unit would be sold to Puget Sound Energy under a 16-year agreement running through December 31, 2044. Under the agreement, Puget Sound Energy would hold dispatch rights once the converted unit operates. TransAlta anticipated a final investment decision after required approvals in early 2027.

FERC's rejection means TransAlta cannot recover the proposed $19.9 million from the broad payer group of California ISO and Southwest Power Pool. The plant's future now hinges on its planned conversion to natural gas.