Consumers Energy outlines clean-air plans in ongoing rate case

During the discovery process in an ongoing rate case at the Michigan Public Service Commission, Consumers Energy Co. has revealed plans for $400m in near-term air emissions control spending for its coal-fired plants, according to Patricia Richards, a senior consultant for La Capra Associates.

The Natural Resources Defense Council, which would prefer that utilities shut coal capacity instead of retrofitting expensive emissions control on that capacity, on Nov. 29 filed with the commission testimony from Richards. Consumers Energy is a unit of CMS Energy Corp. (NYSE:CMS).

In discovery, Consumers Energy reported that it intends to install various controls in order to comply with the Michigan Mercury Rule, National Ambient Air Quality Standards and the Electric Generating Unit Maximum Achievable Control Technology (EGU MACT) rule released in draft form in May by the U.S. Environmental Protection Agency, Richards said.

Those controls include: Campbell Unit 1, pulse jet fabric filter, $104m cost, 2014 or later in-service date; Campbell Unit 2, pulse jet fabric filter, $135m, 2013 or later in-service date; Campbell Unit 3, pulse jet fabric filter, $235m, 2015 or later in-service date; Karn Unit 1, pulse jet fabric filter, $90m, 2011 or later in-service date; and Karn Unit 2, pulse jet fabric filter, $90m, 2011 or later in-service date.

In addition, Consumers Energy reported that it intends to install the other controls in order to comply with the EGU MACT, the Clean Air Interstate Rule and its replacement, the Cross-State Air Pollution Rule, and also the NAAQS, Richards said. They are: Campbell Unit 3, spray dry absorber, $235m, 2016 or later in-service date; Karn Unit 1, spray dry absorber, $107.5m, 2014 or later in-service date; and Karn Unit 2, spray dry absorber, $107.5m, 2014 or later in-service date. A spray dry absorber is a form of SO2 scrubber.

Consumers Energy is projecting to spend more than $400m on environmental compliance in 2011 and the first nine months of 2012, Richards noted.

Asked if there are any indications that Consumers plans to retire coal-fired capacity, Richards said: “The Edison Electric Institute provided a compilation of announced coal-fired plant retirements across the country related to the impact of pending environmental regulation. Included in this summary table is a reference to CEC’s J.R. Whiting Units 1-3, totaling 345 MW of generating capacity. While this is not evidence of a binding commitment to retire the units, it does illustrate that plant closure of the facilities is possible and therefore calls into question environmental, capital, and O&M expenditures projected for this rate case.”

Before authorizing big new investments in the utility’s aging coal units, there should be a detailed analysis of options such as retirement or curtailment of at least some of those units and whether these options would be a lower cost option in light of alternatives such as demand side management, renewables, customer sited generation, utilization of other generation resources, etc., said Richards. “For example, higher utilization of gas-fired units may be more cost effective than incurring large capital and O&M investments in some of CEC’s coal units. In fact, as natural gas prices fall and continue at current low levels, CEC should be exploring the total costs or the all-in costs of its coal plants, including the cost of environmental compliance, fuel, O&M and capital investments, and comparing that to the cost to utilize its natural gas facilities.”

In its opening June 10 testimony in the rate case, Consumers said its coal-fired capacity is: JH Campbell Units 1-2, 615 MW; JH Campbell Unit 3, owned share of unit is 769.8 MW; DE Karn Units 1-2, 515 MW; BC Cobb Units 4-5, 312 MW; JR Whiting Units 1-3, 322.5 MW; and JC Weadock Units 7-8, 310 MW. Consumers owns 93.31% of JH Campbell Unit 3, with other parties owning the rest.

David Kehoe, the Director of Staff, Electric Generation at Consumers Energy, said in the June 10 testimony that the decision to invest new money in the existing coal units is justified. “The early decision to implement plant combustion modifications and switch to western coal has allowed the Company to reduce emissions, reduce fuel costs and approach post-combustion controls in a more deliberate manner,” Kehoe said. “While plant modifications are the most important part of our balanced approach, they are not the only option as the Company can rely on the existing emission markets to supplement our compliance strategy. This balanced approach is one of the strengths of the Company’s strategy. The Company’s resources are allocated to provide safe, reliable, and environmentally compliant generation for our customers.”

Also within this rate case, Consumers is looking to recover some of the costs it incurred for a new coal unit. That unit had been in the works for some time, but a surplus of projected capacity in the MISO region, slumping projections for future power demand and lower-than-expected natural gas prices put that coal unit on the shelf. In May 2010, Consumers announced plans to defer the development of the proposed 830-MW coal unit, to be built at the Karn/Weadock generating complex.

Fair and timely regulatory relief should be given for the planning and expenses necessary for the shelved coal unit, Kehoe said. “Furthermore, when Consumers Energy realized the economic conditions that changed the load projections identified in the Plan had long term implications, the Company deferred further planning of the proposed Clean Coal Plant – sparing our customers from the unnecessary burden of increased energy bills,” he added.

CMS Energy said in a November presentation at an Edison Electric Institute conference that the Consumers Energy capital spend for the 2012-2016 period for environmental controls would be about $1.5bn. Out of that, $700m would be for SO2 control, $100m for NOx reductions and $400m for mercury control. Then there will be $100m spent to meet water standards and $200m for solid waste projects.

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.