The Kentucky Public Service Commission on Nov. 9 issued an order laying out a case schedule for its review of an Oct. 25 application by Louisville Gas and Electric for a Certificate of Public Convenience and Necessity for a new wet flue gas desulfurization system on Unit 3 of the Mill Creek plant.
LG&E, a unit of PPL Corp. (NYSE: PPL), had previously gotten an approval from the PSC to rehabilitate the existing WFGD at Unit 4 for use at Unit 3. But now the utility wants to build an entirely new WFGD at Unit 3.
The case schedule includes a Nov. 16 deadline for any party that wants to intervene in the case to file notice, and a Dec. 21 deadline for intervenor testimony.
In the prior order, the commission granted certificates for LG&E to:
- build two WFGD units (one to serve both Mill Creek Units 1 and 2, another to serve Mill Creek Unit 4); and
- to tie Mill Creek 3 into the existing (but rehabilitated) Mill Creek Unit 4 WFGD, and then to remove the existing WFGDs on Mill Creek Units 1, 2, and 3.
“These new and rehabilitated facilities continue to be needed to comply with the one-hour SO2 National Ambient Air Quality Standard (‘NAAQS’) and the Mercury and Toxic Air Standards (‘MATS’) Rule (formerly known as the Hazardous Air Pollutants (‘HAPs’) Rule),” said the Oct. 25 application.
A 2010 Black & Veatch study, which LG&E utilized to develop its 2011 Environmental Compliance Plan, recommended new WFGDs for all units at Mill Creek, including Unit 3. At the time LG&E filed its application in the prior case, based on preliminary information, it believed a viable compliance option and a more cost effective solution would be to rehabilitate the existing WFGD at Unit 4, and therefore did not include a new Unit 3 WFGD as part of its plan. Instead, LG&E sought and obtained approval to rehabilitate the existing WFGD at Unit 4, then tie Unit 3 into the rehabilitated facility.
But, more recent evaluation shows that the total current estimated costs associated with rehabilitating the existing WFGD at Mill Creek Unit 4 for an additional twenty-plus-year life, which, through a tie-in, would serve Mill Creek Unit 3, exceed the costs of constructing a new WFGD to serve Mill Creek Unit 3.
“To complete the environmental compliance projects in the most cost effective manner, LG&E is requesting the Commission modify its Certificate with regard to rehabilitating the existing WFGD at Mill Creek Unit 4 and instead permit LG&E to construct a new WFGD to serve Unit 3,” the utility said. “LG&E is also proposing to demolish the existing WFGD at Unit 4 to provide space for the new WFGD.”
When LG&E proposed rehabilitating the existing WFGD at Unit 4, it had preliminary information from Babcock Power Environmental regarding the costs to increase the WFGD SO2-removal efficiency via rehabilitation and replacement of equipment and components of the existing WFGD, based upon an engineering study completed in February 2011. Those costs were combined with structural steel estimates provided by Black & Veatch in its Phase II report and thought to be the most cost-effective approach at the time.
Inspection showed Unit 4 FGD in worse shape than thought
While that prior case was underway, LG&E began receiving bids for the projects it had proposed. As part of that process, in December 2011, Babcock presented to LG&E the Mill Creek Unit 4 WFGD Upgrade Study developed after a detailed internal component inspection during an outage of Unit 4 and its WFGD. That report identified more significant levels of repair were necessary beyond the components of the WFGD that affected SO2 removal performance that the initial conceptual study contemplated. After this later report, a comprehensive inspection and estimate were developed to identify all existing components of the existing Unit 4 WFGD that would need refurbished or replaced to provide a twenty-plus year life as that of a new WFGD.
“Based upon further engineering assessments and revised rehabilitation costs, which are approximately $161 million, LG&E began evaluating the cost of building a new WFGD instead of rehabilitating the existing Unit 4 WFGD,” the utility wrote. “LG&E contacted Zachry Holdings, Inc. (‘Zachry’) in July 2012 to obtain an estimate of the total expected construction costs to construct a new WFGD for Unit 3 similar to what was contracted to them to construct for Units 4 and the combined WFGD for Units 1 and 2, as well as the cost to demolish the existing WFGD at Unit 4. Zachry is performing the majority of the other environmental compliance projects at Mill Creek. [O]n September 11, 2012, Zachry provided its estimated cost to complete these projects, which is approximately $132 million, roughly $29 million less than the updated cost from Babcock to rehabilitate the existing WFGD at Mill Creek Unit 4. This estimate is consistent with the cost for the other two WFGDs which Zachry is contracted for at Mill Creek, both of which are significantly lower than the estimated cost in the 2011 filing. The refurbished and new WFGD option values represent the installed cost with a Level I engineering accuracy.”
Although the total estimated capital cost for all of the compliance projects on Mill Creek Unit 3 has increased from the 2011 Environmental Compliance Plan estimate by about $21m, the anticipated fixed and variable operating expenses have decreased largely because of the lower-than-expected cost of operating the baghouse, including the lower cost of sorbent injection for mercury and sulfuric acid, the utility noted.
When the 2011 Environmental Compliance Plan was developed, LG&E based its projected baghouse operating costs on the Black &Veatch studies for high-sulfur coal applications and its limited experience with operating a similar facility at Trimble County Unit 2. As its experience has developed, LG&E has further revised the projected costs, resulting in a reduction in operating expenses. As such, the decision to construct a new WFGD, even at a higher capital cost than contained in the 2011 Environmental Compliance Plan, does not affect the fiscal prudency of LG&E’s decision to retrofit, instead of retire, Mill Creek Unit 3, LG&E argued.
If LG&E constructs a new WFGD, but is unable to complete construction prior to the April 2016 compliance date or obtain a second year extension of the Mercury and Air Toxics Standards compliance date, the savings from doing this project steadily decline because LG&E will no longer be able to operate Mill Creek Unit 3 and thus will have to purchase power from a third party to replace its capacity, the utility. That timing is why it is asking the commission for a quick approval of this amended project.
Located in southwest Jefferson County, Mill Creek began commercial operation in 1972. The plant’s net summer capacity is 1,472 MW. All four units are fully scrubbed and the plant normally burns about 5 million tons of coal annually.