In light of the U.S. Environmental Protection Agency’s recently-final Mercury and Air Toxics Standards (MATS), Progress Energy Florida (PEF) told the Florida Public Service Commission on March 29 that it will need to convert the largely oil-fired Anclote Units 1-2 to 100% natural gas.
The final MATS rule establishes limits of emissions of various metals and acid gases from both coal and oil-fired electric generating units (EGUs), including, potentially, the coal-fired units at PEF’s Crystal River plant (Units 1-2 and 4-5), Anclote (Units 1-2) and Suwannee River (Units 1-3). The Clean Air Act generally provides a three-year time frame to comply with MATS, although the permitting agency has the authority to add one year, and the President has the authority to add up to two additional years.
Anclote Units 1-2 currently have a maximum summer rating of 500 MW and 510 MW, respectively. The current natural gas firing capability for each unit is limited to 40% of the total heat input. Because the balance of the heat input is from heavy fuel oil, the units would be subject to MATS limits for oil-fired EGUs. However, PEF has determined that the most cost-effective compliance option is to convert the units to fire 100% natural gas and thereby remove the units from MATS regulation.
PEF, a subsidiary of Progress Energy (NYSE:PGN), said it considered two compliance alternatives for the Anclote units. The first option would achieve compliance with MATS through use of emissions controls, specifically low-NOx burners and an electrostatic precipitator (ESP). The second option is 100% gas. PEF determined that the natural gas option has economic benefits in terms of both capital costs and fuel savings. Based on conservative cost estimates associated with the emissions controls that would be necessary to achieve oil-fired compliance, the capital cost of the gas conversion is expected to be at least $12m less than those capital costs.
PEF also estimated the fuel cost differential of the two options, primarily to ensure that implementation of the gas conversion would not cause an increase in system fuel costs. The analysis demonstrates that the net impact on system cost is positive, indicating an additional benefit.
Preliminary studies indicate that the addition of three levels of fuel gas burners in combination with the existing natural gas burners will be required to provide full output on 100% natural gas. Thermal analysis of the boiler for operation on 100% natural gas indicates that a portion of the lower horizontal superheater will need to be removed to limit heat absorption and manage superheater tube metal temperatures. The gas supply line measurement and regulation facilities will require upgrades to support operation on 100% gas. Finally, the finishing horizontal superheater for each unit will require metallurgy upgrades to accommodate the peak temperatures resultant from the gas conversion.
PEF expects to incur approximately $79m in total capital costs to convert the Anclote units to fire 100% natural gas. PEF expects to incur around $26m in 2012 and the remainder of about $53m in 2013. PEF currently anticipates that both converted units will be placed in service by the end of 2013. To ensure that actual expenditures are reasonable, PEF will competitively bid procurement of major boiler equipment to boiler original equipment manufacturers.
These new costs were not covered in the PEF’s last rate case, the utility noted. The March 29 filing was with an annual environmental cost passthrough case that PEF goes through. PEF said it does not seek to change the environmental cost case factors currently in effect for 2012. The company proposes to include in its estimated true-up filing for 2012 all program costs incurred subsequent to the filing of this petition through the end of 2012.
The filing didn’t mention any changed compliance plans for the Crystal River coal units or the oil- and gas-fired Suwannee River units.
Progress Energy’s Feb. 29 annual Form 10-K report said that the Anclote units were placed into service in the 1974-1978 period, so they are relatively new. The summer net capability and in-service years for the other plants and units mentioned are: four Crystal River coal units, 2,295 MW, 1966-1984; and Suwannee River’s three units, 129 MW, 1953-1956.