The Georgia Public Service Commission is expected to vote in March on a Georgia Power integrated resource plan (IRP) that calls for the retirement and repowering of coal-fired capacity, said Georgia Power parent Southern Co. (NYSE:SO) in its Feb. 24 annual Form 10-K report.
In August 2011, Georgia Power filed an update to its IRP at the commission. The filing included Georgia Power’s application to decertify and retire the coal-fired Branch Units 1-2 (total capacity of 569 MW) as of Dec. 31, 2013, and Oct. 1, 2013, the compliance dates for the respective units under the Georgia Multi-Pollutant Rule, and to decertify and retire the oil-fired Mitchell Unit 4C in March 2012. Georgia Power also requested approval of expenditures for certain baghouse project preparation work at the coal-fired Bowen, Wansley, and Hammond plants.
“However, as a result of the considerable uncertainty regarding pending federal environmental regulations, Georgia Power is continuing to defer decisions to add controls, switch fuel, or retire its remaining fleet of coal- and oil-fired generation where environmental controls have not yet been installed, representing approximately 2,600 MWs of capacity,” said the Form 10-K. “Georgia Power is currently updating its economic analysis of these units based on the final [Mercury and Air Toxics] rule and currently expects that certain units, representing approximately 600 MWs of capacity, are more likely than others to switch fuel or be controlled in time to comply with the MATS rule.”
The Form 10-K added: “If the updated economic analysis shows more positive benefits associated with adding controls or switching fuel for more units, it is unlikely that all of the required controls could be completed by April 16, 2015, the compliance date for the MATS rule. As a result, Georgia Power cannot rely on the availability of approximately 2,000 MWs of capacity in 2015. As such, the 2011 IRP Update also includes Georgia Power’s application requesting that the Georgia PSC certify the purchase of a total of 1,562 MWs of capacity beginning in 2015, from four [power purchase agreements] selected through the 2015 request for proposal process.”
Georgia Power filed a final brief on Feb. 28 with the commission in the IRP case that said about 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. 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.”
Georgia Power noted in the final brief that it had initially concluded that 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 the coal-fired 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.
Under the Georgia Multi-Pollutant rule, Branch Units 1-2 are required to have selective catalytic reduction and SO2 scrubbers in place by Dec. 31, 2013, and Oct. 1, 2013, respectively. However, the financial analysis performed by the company demonstrates that installation of such controls is significantly more costly than securing replacement generation. Mitchell Unit 4C is a small, 33-MW unit that experienced a significant equipment malfunction in late 2009 and isn’t worth fixing, the final brief said.
As for the coal-fired Bowen, Wansley and Hammond plants and planned baghouse installation, the company’s economic analyses for these units show that customers will likely benefit from installing these controls, and the final brief said it is essential that the company begin work at this time for a number of reasons. First, given the short three-year timeline for Utility MACT/MATS 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 company said it has significant experience with the addition of baghouses and, based on this experience, 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 final brief said.
To be clear, the company’s request only relates to the initial work on the baghouses, the final brief added. These costs represent only those expenditures that will be necessary between January 2012 and June 2013. In early 2013, the commission will have opportunity to review the company’s next IRP 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/MATS compliance.