Microsoft will bypass Puget Sound Energy to secure carbon-free power on wholesale markets under an agreement that state regulators approved Thursday.
This electricity will continue to be delivered through PSE transmission lines, and supply 80 percent of Microsoft’s Puget Sound power demand.
The settlement approved by the state Utilities and Transportation Commission marks a major change in the relationship between PSE, the state’s largest energy utility, and a software giant that has been its largest customer.
The agreement calls for Microsoft to pay a $23.6 million transition fee to PSE, which the utility will pass on to its Western Washington customers.
Microsoft also will keep making payments to several PSE programs, including one that offers assistance to low-income customers.
But the settlement does not address one major financial issue that hangs over PSE and its customers — how to handle the costs of shutting down coal-fired units in the Colstrip, Montana, power station, where PSE is a major stakeholder.
The agreement was spurred by Microsoft’s quest to lower its consumption of fossil fuels that — when combusted — generate carbon emissions that are a major contributor to climate change.
In 2015, 60 percent of PSE electricity came from coal and natural-gas plants, according to company statistics. Microsoft seeks to secure its power from sources that emit no carbon emissions.
“This agreement is good for our business, but more important it’s good for residents, the environment and the state of Washington,” said Brad Smith, Microsoft’s president, in a statement Wednesday.
“We’re proud to be a part of Microsoft’s response to renewable-energy demands,” said Kimberly Harris, PSE’s president.
In the order filed Thursday, the Utilities and Transportation Commission said Microsoft’s move fits a trend of large power users across the country seeking clean power to reduce greenhouse gas emissions.
The commissioners said they have determined that Microsoft is legally responsible for a share of the Colstrip costs, and would have preferred that the company acknowledge that in the settlement. The current estimate of PSE’s share for decommissioning and remediation of the first two of Colstrip’s four units is $103 million.
Commissioner Jay Balasbas wrote that approval of the agreement should have been conditioned on Microsoft accepting liability to assist in those costs to ensure that other ratepayers are protected.
“The language in the settlement agreement … allows Microsoft to argue it owes nothing” when Colstrip’s future is determined, Balasbas wrote.