Fitch says Colorado Springs spend on coal capacity is workable

Fitch Ratings, in rating some Colorado Springs Utilities (CSU) bonds, said Aug. 10 that the municipal utility’s 2012-2016 capital needs are considerable, totaling $1.34bn, including $483m in upgrades to the utility’s coal-fired generation.

Fitch said it views the capital pressure to be manageable given CSU’s plan to fund 55% of capital needs from revenues and future rate increases.

The electric system provides the largest share of CSU’s operating income. The 2011 fuel mix consisted of: coal (61.6%), natural gas (24.4%), hydroelectric (10.4%), and wholesale purchases (3.6%). The coal-fired assets require capital investments to comply with new environmental standards but CSU anticipates making these investments in its near-term capital plan and retaining its coal-fired plants.

Fitch noted that CSU is well positioned to meet the state’s relatively modest renewable portfolio standard through the purchase of renewable energy credits. In time, coal is expected to fall to about 50% of CSU’s fuel mix, Fitch added.

Part of the heavy capital spend is at the Martin Drake plant, where the currently operating units are Units 5-7 (254 MW of capacity in total). They were brought online in the 1960s and 1970s and currently provide approximately one third of Colorado Springs’ power needs.

On July 18, the Colorado Springs Utilities Board voted 7-2 to move forward with the installation of NeuStream emissions control at Martin Drake, said the CSU website. The agenda for that board meeting shows that the board was also being asked to consider a retirement analysis for the Martin Drake plant, a continued slowdown in the SO2 control project installation and the transfer of this SO2 project to the Ray Nixon coal plant. The reasons for these changes to be considered include near-term cost savings for the utility during rough economic times and as a response to public pressure to emphasize renewable energy and energy conservation initiatives.

In 2011, Units 6 and 7 at Martin Drake were tested to burn 100% Powder River Basin coal, the website added. “This is a significant saving for the utility in fuel cost and a more environmentally-friendly fuel option for the plant,” the CSU website said. “Each of the three generating units is able to produce electricity using coal or natural gas. Powder River Basin coal from Wyoming is currently the most economical fuel choice for the plant.”

The Martin Drake plant is equipped with low NOx burners and baghouses that collect more than 99.8% of fly ash. Beginning in 2007, CSU began testing innovative clean technology, developed by local company Neumann Systems Group, to reduce emissions and comply with stricter emissions control rules at a lower cost than conventional power plant emissions technology.

By early 2008, testing was underway and yielding promising results for removal of SO2, NOx and particulates from flue gas at Martin Drake. Each subsequent stage of testing proved NSG’s NeuStream technology’s ability to comply with future SO2 requirements in a cost-effective manner.

In 2011, CSU signed an agreement with NSG to design and procure full-scale emissions control equipment for the Martin Drake power plant. CSU said it expects to avoid up to $100m in emissions control costs compared to other available technologies at its coal-fired power plants over the next several years.

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.