Mississippi Power plans to switch two coal units to gas in 2015

Though its environmental compliance plans are in constant flux due to changing state and federal emissions mandates, Mississippi Power currently plans to install SO2 scrubbers by 2015 on the coal-fired Daniel Units 1-2 and by 2019 on the coal-fired Watson Units 4-5.

The Mississippi Public Service Commission is due to hear at its March 14 meeting further details of an updated environmental compliance plan filed by the utility with the commission on Feb. 14. That plan lays out the installation schedule for SO2 scrubbers, selective catalytic reduction (SCR) for NOx control and baghouses for particulate control. The filing was part of the commission’s Environmental Compliance Overview Plan (ECO) cost review program begun in 1992.

The Daniel Units 1-2 scrubbers are due for completion around December 2015. Mississippi Power has 50-50 co-ownership of those units with fellow Southern Co. (NYSE:SO) subsidiary Gulf Power.

SCR is due for installation in 2017 on Daniel Unit 2, in 2018 on Daniel Unit 1, in 2019 on Watson Unit 4 and in 2020 on Watson Unit 5. Baghouses are due for installation on Watson Units 4-5 in 2020. There are plans by 2015 to install natural gas operations at Watson Units 4-5. Mississippi Power spokesman Jeff Shepard confirmed March 8 that this means these units would be takken off coal in 2015 for at least the time being.

The immediate need for installing scrubbers at Daniel and gas operations at Watson is driven by the U.S. Environmental Protection Agency’s new Mercury and Air Toxics Standards (MATS) rule, which has a compliance date in 2015, said the compliance plan. If, or when, Watson Units 4-5 are converted and retrofitted back to coal in 2020, it is anticipated that a scrubber and baghouses will be needed there for MATS compliance. The SCR plans are driven by expected new ozone rules, but the recent Presidential decision to drop reconsideration of the 2008 standard delays this potential compliance requirement to a later year than previously thought. There are various other drivers for scrubber and SCR installations, including the Clean Air Visibility Rule and the Cross-State Air Pollution Rule.

Southern Co. outlines planning up to now

Southern Co. reported in its Feb. 24 annual Form 10-K report that in 2009, Mississippi Power filed its 2010 integrated resource plan (IRP) with the Mississippi PSC. The filing was made in connection with the Mississippi PSC certification proceedings relating to the coal-fired, in-construction Kemper (also known as Ratcliffe) IGCC power project. The 582-MW Kemper/Ratcliffe plant is due in-service in 2014.

In the 2010 IRP, Mississippi Power projected that it will have a need for new capacity in the 2013-2015 timeframe. The 2010 IRP indicated a need range of approximately 200 MW to 300 MW in 2014, which reflects growth in load and the anticipated retirement of older gas steam facilities, Eaton Units 1-3 and Watson Units 1-3, in 2012 and 2013, respectively. In addition, due to potential retirements of existing coal units, the Mississippi PSC found a need in 2015 that ranges from 304 MW to 1,276 MW.

“The range of needs for 2015 is based on Mississippi Power’s preliminary analysis of the MATS rule, as well as potential legislation or regulations that would impose mandatory restrictions on greenhouse gas emissions,” said the Form 10-K. “Depending on Mississippi Power’s final assessment of the MATS rule, the final requirements in the anticipated EPA regulations, and any legislation or regulation relating to greenhouse gas emissions, as well as estimates of long-term fuel prices, Mississippi Power may conclude that it is more economical to discontinue burning coal at certain coal-fired generating units than to install the required controls.”

Mississippi Power’s 2010 IRP indicated that Mississippi Power plans to construct the Kemper IGCC to meet its identified needs, to add environmental controls at Daniel Units 1-2, to defer environmental controls at Watson Units 4-5 and to continue operation of the combined cycle Daniel Units 3-4.

The Form 10-K noted about Mississippi Power environmental cost projections: “With respect to the impact of the MATS rule on capital spending from 2012 through 2014, the company’s preliminary analysis anticipates that potential incremental environmental compliance capital expenditures to comply with the MATS rule are likely to be substantial and could be up to $430 million from 2012 through 2014. Additionally, capital expenditures to comply with the proposed water and coal combustion byproducts rules could also be substantial and could be up to a total of $121 million over the same 2012 through 2014 three-year period, based on the assumption that coal combustion byproducts will continue to be regulated as non-hazardous solid waste under the [EPA’s] proposed rule.”

The Form 10-K added: “As of December 31, 2011, the company had total generating capacity of approximately 3,156 MWs, of which 1,450 MWs are coal-fired. As a result of the EPA’s final and anticipated rules and regulations, the company is evaluating its coal-fired generating capacity and is developing a compliance strategy which may include unit retirements, installation of environmental controls, and changing fuel sources for certain units.”

In July 2010, Mississippi Power filed a request with the commission for a certificate of public convenience and necessity to construct a scrubber on Daniel Units 1-2. The estimated total cost of the project is around $660m, with the Mississippi Power portion being $330m, the Form 10-K said. The company’s portion of the cost, if approved by the Mississippi PSC, is expected to be recovered through the ECO plan. In May 2011, in conjunction with a prior ECO plan approval, the Mississippi PSC approved up to $19.5m in additional Mississippi Power spending for 2011 for the scrubber project. As of the end of 2011, total project expenditures were $45.6m, with Mississippi Power’s portion being $22.8m. “During the Mississippi PSC’s open meeting held on January 11, 2012, the Mississippi PSC requested additional information on the scrubber project and updates to the filing have been made,” the Form 10-K said. “The ultimate outcome of these matters cannot be determined at this time.”

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.