In December 2011, the Connors Creek (239 MW) and Marysville (84 MW) generating plants and Unit No. 5 at the St. Clair plant (250 MW) were retired consistent with Detroit Edison‘s operational plan, said parent DTE Energy (NYSE:DTE) in its Feb. 16 Form 10-K annual report.
The Form 10-K didn’t mention the fuel for that retired capacity. A DTE spokesman said Feb. 24 that Marysville and St. Clair Unit 5 involved coal-fired capacity, while Conners Creek was a coal plant that was converted to natural gas about a decade ago.
In September 2011 testimony filed at the Michigan Public Service Commission about long-range capacity forecasting, a Detroit Edison official outlined the basics of the operational plan that DTE was apparently referring to in the Form 10-K. The official was Angela Wojtowicz, Manager of the Wholesale Power group in the Generation Optimization department of the Regulated Marketing Organization at Detroit Edison.
Said Wojtowicz about available capacity figures over the next few years: “The projected capacity decrease in 2013 is associated with the retirement of the Dayton and Conners Creek diesel peakers. The projected capacity increase in 2014 is associated with the Ludington Unit 4 upgrade that is partly offset by a decrease associated with auxiliary power usage from flue gas desulfurization units (a/k/a scrubbers) proposed for installation in late 2013 and early 2014 on Monroe Units 1 and 2 respectively. The projected capacity decrease in 2015 is associated with possible retirement of Harbor Beach, River Rouge Units 2 and 3, St. Clair Unit 7, and Trenton Channel Units 7, 8, and 9 which are offset by the assumed addition of a combined cycle unit and the Ludington Unit 5 upgrade. The projected capacity increase in 2016 is associated with the Ludington Unit 1 upgrade.”
Wojtowicz said Detroit Edison has been testing dry sorbent injection (DSI) SO2 scrubber technology to determine if it could be technologically and economically feasible on some of the company’s coal-fired units. If feasible, it is expected to be implemented on some units as a viable alternative to retirement. The company in the September 2011 filing assumed the use of DSI on St. Clair Units 1, 2, 3, 4, and 6 and Belle River Units 1-2. Harbor Beach, River Rouge Units 2-3, St. Clair Unit 7, and Trenton Channel Units 7-9 are assumed, for planning purposes, to be retired in 2015.
DTE said in the Form 10-K that Detroit Edison expects to obtain the majority of its coal requirements through long-term contracts, with the balance to be obtained through short-term agreements and spot purchases. It has long-term and short term contracts for the purchase of about 29 million tons of low-sulfur western coal to be delivered from 2012 through 2014 and approximately 6 million tons of Appalachian coal to be delivered from 2012 through 2014. Detroit Edison has approximately 95% of its 2012 expected coal requirements under contract.
Detroit Edison battles clean-air complaints
In July 2009, DTE Energy received a notice of violation/finding of violation (NOV/FOV) from the U.S. Environmental Protection Agency alleging, among other things, that five of Detroit Edison’s power plants violated New Source Performance Standards, Prevention of Significant Deterioration requirements, and operating permit requirements under the Clean Air Act. In June 2010, the EPA issued a NOV/FOV making similar allegations related to a recent project and outage at Unit 2 of the Monroe coal plant.
In August 2010, the U.S. Department of Justice, at the request of EPA, brought a civil suit in the U.S. District Court for the Eastern District of Michigan against DTE Energy and Detroit Edison, related to the June 2010 NOV/FOV and the outage work performed at Unit 2 of the Monroe plant, but not relating to the July 2009 NOV/FOV. Among other relief, the EPA requested the court to require Detroit Edison to install and operate the best available control technology at Unit 2 of the Monroe plant. Further, the EPA requested the court to issue a preliminary injunction to require Detroit Edison to (i) begin the process of obtaining the necessary permits for the Monroe Unit 2 modification and (ii) offset the pollution from Monroe Unit 2 through emissions reductions from Detroit Edison’s fleet of coal-fired plants until the new control equipment is operating. On Aug. 23, 2011, the U.S. District Court judge granted DTE Energy’s motion for summary judgment in the civil case, dismissing the case and entering judgment in favor of DTE Energy and Detroit Edison. On October 20, 2011, the EPA caused to be filed a notice of appeal to the U.S. Sixth Circuit Court of Appeals.
“DTE Energy and Detroit Edison believe that the plants identified by the EPA, including Unit 2 of the Monroe Power Plant, have complied with all applicable federal environmental regulations,” the Form 10-K added. “Depending upon the outcome of discussions with the EPA regarding the two NOVs/FOVs, Detroit Edison could be required to install additional pollution control equipment at some or all of the power plants in question, implement early retirement of facilities where control equipment is not economical, engage in supplemental environmental programs, and/or pay fines. DTE Energy and Detroit Edison cannot predict the financial impact or outcome of these matters, or the timing of its resolution.”
Detroit Edison is subject to the EPA ozone and fine particulate transport and acid rain regulations that limit power plant emissions of SO2 and NOx. Since 2005, the EPA and the state of Michigan have issued additional emission reduction regulations relating to ozone, fine particulate, regional haze and mercury air pollution. These rules will lead to additional controls on fossil-fueled plants to reduce NOx, SO2 and mercury emissions. To comply with these requirements, Detroit Edison has spent approximately $1.7bn through 2011. DTE Energy estimates that Detroit Edison will make capital expenditures of approximately $255m in 2012 and up to about $1.9bn of additional capital expenditures through 2021 based on current regulations.
DTE Energy also owns and operates nine reduced emissions fuel facilities that blend a proprietary additive with coal used in coal-fired power plants resulting in reduced emissions of NOx and mercury. Qualifying facilities are eligible to generate tax credits for ten years upon achieving certain criteria. DTE placed in service five facilities in 2009 and an additional four facilities in 2011. To optimize income and cash flow from the reduced emissions fuel operations, it sold membership interests in 2011 at two of the facilities that are located at Detroit Edison sites, which in substance, represented a sale of production tax credits. DTE continues to optimize these facilities by seeking tax investors for facilities operating at Detroit Edison and other utility sites. “Additionally, we intend to relocate certain underutilized facilities, located at Detroit Edison sites, to alternative coal-fired power plants which may provide increased production and emission reduction opportunities in 2012 and future years,” the Form 10-K added.