Opposing parties that say replacing the coal-fired Flint Creek power plant with natural gas-fired generation instead of adding expensive new emissions controls to the existing plant are wrong on several counts, said several witnesses from Southwestern Electric Power (SWEPCO).
Earlier this year, SWEPCO asked the Arkansas Public Service Commission for approval to add the new emissions controls, including an SO2 scrubber, at Flint Creek. Since then, some intervenors, including the Sierra Club, have claimed that simply replacing the plant with gas-fired generation would be the wiser course.
On July 30, rebuttal testimony from several SWEPCO witnesses was filed with the commission, including testimony from Scott Weaver, employed by American Electric Power Service Corp. (AEPSC) as Managing Director-Resource Planning and Operational Analysis. SWEPCO is a unit of American Electric Power (NYSE: AEP).
“The purpose of my rebuttal testimony is to respond to certain issues pertaining to the long-term economic analyses performed by the Company that were raised by Arkansas Attorney General (AG) witness Kevin Woodruff, Sierra Club (SC) witness Paul Chernick, and Arkansas Public Service Commission Staff (Staff) witness Richard Hahn in their respective direct testimonies,” Weaver wrote. “As described in detail in my direct testimony, these analyses sought to compare the relative economics of various alternative options for the disposition of the Company’s Flint Creek coal-fired facility by the year 2016; namely to retrofit the unit with required environmental controls, versus options that would either convert the unit to a natural gas-fired steam unit, or retire the unit and replace it contemporaneously with like-sized natural gas combined cycle (CC) generation.”
SWEPCO said alternatives offered by others won’t work
In regards to Woodruff, Weaver addressed certain aspects of his testimony that suggest that Flint Creek alternative economic analyses performed in the Strategist model should be re-considered. “Specifically, I will clarify assumptions around modeled reliability must run (RMR) status for certain of these alternatives (an issue also raised by Mr. Chernick) as well as confirm Mr. Woodruff’s spreadsheet analysis of an option that would focus on a long-term purchase of (generic, i.e., non-asset or counterparty-specific) market capacity and energy that would indicate it is more costly over the study period than the Flint Creek retrofit solution,” Weaver wrote. “For Mr. Chernick, I will rebut his contention that significant resource contributions from incremental energy efficiency initiatives—i.e., levels over-and-above those already assumed by SWEPCO as part of this filing—could be achieved. Also, I will address certain anecdotal ‘corrections’ to the Company’s relative option-specific Strategist-based economics that were offered by Mr. Chernick.”
Some opponents said SWEPCO should have assessed additional resource alternatives, namely the possible acquisition of existing gas-fired generation (ostensibly, natural gas combined cycle assets). SWEPCO refuted Hahn’s and Chernick’s specific contention that New York Mercantile Exchange (NYMEX) forward prices are appropriate to use for the purpose of a long-term resource modeling and planning exercise.
Said SWEPCO witness Judah Rose: “Using the NYMEX futures price is the wrong approach and biases the results against the coal retrofit option. At any given time, the NYMEX futures price for gas primarily reflects the then current spot prices and is not a reliable indicator of future long-term average gas prices. Spot natural gas prices are temporarily low due to extremely warm winter weather, weather that, in fact, was the warmest ever recorded; uncommonly poor economic conditions, economic conditions that include the worst recession and slowest recovery from recession since the 1930s; and disequilibrium in the natural gas market due to increased shale gas supply. One should not base a long-term decision on market prices reflecting extreme conditions that are temporary.”
A SWEPCO witness also rebutted the use of significantly higher CO2 pricing parameters—recommended by staff witness Hahn—for the purpose of the company performing additional, post-filing scenario Strategist modeling as requested by staff. Weaver’s rebuttal testimony countered the results of this additional, staff-requested modeling with the company’s view of the parameters required to execute those additional alternative scenarios.
Weaver said two important points here are that:
- none of the opposing witnesses appear to dispute the company’s need for the capacity (and attendant energy) represented by its share of Flint Creek in order to achieve its Southwest Power Pool minimum capacity margin criterion; and
- setting aside, of course, issues around the inherent assumptions employed, none of the parties witnesses appear to raise any issues associated with either the modeling approach, detailed algorithmic process/execution, or output reporting associated with both the Strategist least-cost optimization model as well as the AuroraXMP risk assessment model utilized by the company.
The fact that SWEPCO is still supporting the scrubber project is worthy of note since AEP’s Kentucky Power unit recently withdrew an application at the Kentucky Public Service Commission for a new scrubber on the coal-fired Big Sandy Unit 2, saying the economics of the project needed further evaluation.
Planned controls include scrubber, fabric filter baghouse
On Feb. 8, SWEPCO had filed a petition for a declaratory order seeking a commission finding that installation of environmental upgrades at Flint Creek is in the public interest. Flint Creek is a 528-MW unit located in northwestern Arkansas near Gentry. This generating unit was originally placed in service in 1978 and is fueled by Powder River Basin coal.
SWEPCO and Arkansas Electric Cooperative (AECC) each own 50% of Flint Creek, with SWEPCO acting as lead owner and operator.
On April 2, AECC filed its petition seeking a finding that the installation of the proposed environmental upgrades is in the public interest. The projected cost of these upgrades is approximately $508m, or about $960 per kW of capacity.
The utilities propose to install a Dry Flue Gas Desulfurization (DFGD) system with fabric filter baghouse to reduce SO2 emissions, low NOX burners with overfire air (LNB) to reduce NOX emissions, and an activated carbon injection (ACI) system to reduce mercury. The proposed in-service date is Jan. 1, 2016.
The installation of an SCR to further reduce NOX emissions is also being considered, although the installation of the SCR is not included in the petition for a declaratory order. Alternative installation dates for the Flint Creek SCR are 2016 and 2020.