The Georgia Public Service Commission on March 20 approved Georgia Power’s August 2011 request to decertify two coal units at the Branch plant in Putnam County and one oil-fired unit at the Mitchell plant in Mitchell County in southwest Georgia.
Georgia Power, a subsidiary of Southern Co. (NYSE:SO), wants to shut these units due in part to pending U.S. Environmental Protection Agency regulations. The decision allows the company to replace the generation from these three units with energy from three power purchase agreements (PPAs), the commission noted in a March 20 statement. The PPAs will allow the company to purchase additional generation from three Southern Power generation plants (Harris, West Georgia and Dahlberg).
The commission also approved the company’s request to initiate construction of baghouses at Bowen Units 1-4, Wansley Units 1-2 and Hammond Units 1-4.
The Sierra Club, which participated in this case, issued a quick March 20 press release praising the commission decision. “Sierra Club welcomes the news of the retirements, which will close some of the dirtiest coal burners in Georgia,” it said. “However, the Sierra Club views Georgia Power’s choice to defer a decision on the retirement of additional old and polluting coal burners as saddling ratepayers with unnecessary expenses which keeps Georgians tied to old, dirty, forms of power.”
The decision retires two coal-burning units at Branch, with a total of 569 MW of capacity, and one oil-fired unit at Mitchell, with 33 MW of capacity. Georgia Power chose to defer a decision to retire an additional 2,000 MW of coal capacity, largely from the Yates plant, despite extensive company analysis which indicated that continued operation of existing coal units was uneconomical, the club stated.
MATS rule a big factor in coal actions
Georgia Power said in its final brief in this case that the retirements were largely due to the EPA’s Utility Maximum Achievable Control Technology Rule (Utility MACT), also known as the Mercury and Air Toxics Standards (MATS).
“Based on its current understanding of the impact of the final rule, the company believes that it is reasonable to assume that, in addition to the retirements of Plant Branch Units 1 & 2 and Plant Mitchell 4C, which together total about 500 MW, approximately 2,000 MW of additional capacity will be unavailable beginning in 2015 because environmental controls will not have been installed as required,” said the final brief. “The company is making no request in this proceeding with respect to the 2,000 MW of additional capacity assumed to be unavailable beginning in 2015 because no final decision has been made. “
The brief added: “However, even beyond the 2,500 MW of capacity that will likely be unavailable, there remains significant (though less quantifiable) uncertainty regarding the level of capacity that will be available in the 2015-2017 timeframe. In order to comply with Utility MACT, Georgia Power currently anticipates that it will need to embark upon a significant slate of construction projects on several of the company’s key generating units. As the company grapples with the prospect of executing numerous construction projects and the related operational and schedule challenges, along with the significant transmission upgrades needed, it will be doing so in an environment in which many utilities will be facing similar challenges. The combined impact of these efforts are expected to place strains on the finite labor and material resources available for such projects, and will also significantly limit the amount of emergency reserves available for purchase. Additionally, in light of further review of the final Utility MACT rule and related actions of the President, the Company now believes that it is inappropriate to rely upon any extensions beyond the fourth year under the rule.”
The retirement of Branch Units 1-2 is driven by environmental control requirements imposed by the Georgia Multipollutant Rule. Under the Multipollutant Rule, Branch Units 1-2 are required to have selective catalytic reduction and scrubbers in place by Dec. 31, 2013, and Oct. 1, 2013, respectively. However, the financial analysis performed by the company demonstrates that installation of these controls is significantly more costly than securing replacement generation.
Mitchell Unit 4C is a 33-MW unit that experienced a significant equipment malfunction in late 2009. In light of the age of the unit and the challenges associated with repair and continue operation, it is also in the best interest of customers to retire Plant Mitchell Unit 4C at this time.
Georgia Power initially thought it would be able to fuel switch McIntosh Unit 1 from coal to gas and assumed the continued operation of Kraft Units 1-4 on gas with oil back-up. Subsequent to the preparation of the company’s initial application, and based upon developments in the natural gas market, the company concluded that it was no longer likely that these units would be available in 2015. However, the company also concluded that Yates Units 6-7 could be fuel switched to natural gas and made available by 2015.These two changed assumptions largely offset each other and thus do not have any substantive impact on the company’s recommendations, the final brief noted.
Given the short three-year timeline for Utility MACT compliance, coupled with the effective unavailability of extensions for the fifth and sixth year, it is imperative that work begin now in order to preserve the possibility that Bowen, Wansley and Hammond will be available to serve customers, the final brief said. It is clear that it will be extremely difficult to have all needed baghouses online by the end of the fourth year. In light of these challenges, the company must begin construction as soon as possible.
Furthermore, EPA has indicated that the state agencies that are delegated authority to grant extensions under Utility MACT should take into account early baghouse work as one factor in determining whether to grant an extension. Therefore, the commission should approve these expenditures at this time. The company’s request only relates to the initial work on the baghouses. In early 2013, the commission will have opportunity to review the company’s next integrated resource plan filing and, at that point, the company said it will have a more clear picture about the magnitude of costs that will be associated with Utility MACT compliance.