MidAmerican spends heavily on new wind, retrofitted coal

MidAmerican Energy‘s forecasted utility construction expenditures, which exclude amounts for non-cash equity allowance for funds used during construction (AFUDC) and other non-cash items, are about $631m for 2012 and include various emissions controls for coal-fired capacity.

MidAmerican, in a Nov. 2 Form 10-Q quarterly financial report filed with the SEC, said the 2012 capital projects are:

  • $197m for 407 MW (nominal ratings) of wind-powered generation, excluding about $400m of payments deferred until December 2015. MidAmerican Energy placed in service 214 MW of this capacity during the third quarter of 2012, and the remaining 193 MW are expected to be placed in service during the fourth quarter of 2012:
  • $180m for emissions control equipment at George Neal Energy Center Units 3 and 4 and Ottumwa Generating Station primarily to meet air quality targets, including the reduction of SO2, NOx and particulate emissions;
  • $27m for transmission system investments; and
  • $11m for other generation development projects.

Remaining amounts in the capital budget are for ongoing investments in distribution, generation and other infrastructure needed to serve existing and expected demand.

MidAmerican Energy said it has implemented a planning process that forecasts the site-specific controls and actions that may be required to meet emissions reductions mandated by the U.S. Environmental Protection Agency. The plan, which under Iowa law must be filed with and approved by the Iowa Utilities Board (IUB) and updated every two years, is designed to effectively manage MidAmerican Energy’s expenditures required to comply with emissions standards.

In April, MidAmerican Energy submitted to the IUB an updated plan, which increased its estimate of required capital expenditures. The plan estimated that the cost of capital expenditures for emission control equipment included in the plan for compliance with current air quality requirements would total $337m for Jan. 1, 2012, through Dec. 31, 2015. Those etimates may change significantly at any time as a result of, among other factors, changes in related regulations, prices of products used to meet the requirements and company strategies for achieving compliance with the regulations.

The Clean Air Mercury Rule (CAMR), issued by the EPA in March 2005, was overturned by the U.S. Court of Appeals for the D.C. Circuit in February 2008. In March 2011, the EPA proposed a new rule that would require coal-fueled facilities to reduce mercury emissions and other hazardous air pollutants through the establishment of Maximum Achievable Control Technology standards rather than a cap-and-trade system. This final rule, called the Mercury and Air Toxics Standards (MATS), had an effective date of April 16, 2012. Existing sources are required to comply with the new standards by April 16, 2015. Individual sources may be granted up to one extra year, at the discretion of the Title V permitting authority, to complete installation of controls or for transmission system reliability reasons.

“While the final MATS continues to be reviewed by MidAmerican Energy, MidAmerican Energy believes that its emissions reduction projects completed to date or currently permitted or planned for installation, including scrubbers, baghouses and electrostatic precipitators, are consistent with the EPA’s MATS and will support MidAmerican Energy’s ability to comply with the final rule’s standards for acid gases and non-mercury metallic hazardous air pollutants,” the Form 10-Q said. “MidAmerican Energy will be required to take additional actions to reduce mercury emissions through the installation of controls or use of sorbent injection at certain of its coal-fueled generating facilities and otherwise comply with the final rule’s standards. MidAmerican Energy is evaluating whether or not to close certain units. Incremental costs to install and maintain emissions control equipment at MidAmerican Energy’s coal-fueled generating facilities and any requirements to shut down what have traditionally been low-cost coal-fueled generating facilities will likely increase the cost of providing service to customers. In addition, numerous lawsuits are pending against the MATS in the D.C. Circuit, which may have an impact on MidAmerican Energy’s compliance obligations and the timing of those obligations.”

In August 2012, the U.S. Court of Appeals for the D. C. Circuit vacated EPA’s Cross-State Air Pollution Rule (CSAPR) in a 2-1 decision after it determined that the CSAPR exceeded the EPA’s statutory authority. The CSAPR was promulgated by the EPA as the replacement rule for the Clean Air Interstate Rule after it was struck down by the D.C. Circuit in July 2008. It was designed to reduce interstate transport of emissions of ozone and fine particulate matter from downwind states in the eastern U.S. In a petition filed in October 2012, the EPA sought a full review of the CSAPR ruling by the entire D.C. Circuit. “Until such time as the challenges to the CSAPR are resolved or the EPA proposes and adopts a new rule, MidAmerican Energy will continue to operate in compliance with the Clean Air Interstate Rule, which has remained in effect since the D.C. Circuit stayed the CSAPR in December 2011,” the company said.

MidAmerican signs two new coal-haul contracts

In another area related to coal-fired generation, in April 2012, MidAmerican Energy entered into a multi-year coal transportation agreement with BNSF Railway, an affiliate of MidAmerican Energy, for long-haul delivery of coal to MidAmerican’s generating facilities that are not solely served by a single railroad. The new contract provides delivery for the majority of the coal anticipated to be delivered to MidAmerican-operated coal facilities beginning Jan. 1, 2013.

“While prices for this rail service are significantly higher than those contained in MidAmerican Energy’s legacy long-haul rail contract, which expires December 31, 2012, the BNSF Railway Company proposal was the lowest cost and best overall bid,” the Form 10-Q said.

Also, in August 2012, MidAmerican entered into a multi-year coal transportation agreement with the Union Pacific Railroad for long-haul delivery of coal to its Neal Energy Center near Sioux City, Iowa, beginning Jan. 1, 2013. Neal is solely served by Union Pacific for rail deliveries.

“Rates under the new contract are significantly higher than those contained in MidAmerican Energy’s legacy long-haul contract expiring December 31, 2012,” the Form 10-Q noted about the UP deal.

MidAmerican and BNSF are both affiliates of Berkshire Hathaway (NYSE: BRK.A and BRK.B).

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.