The Southwestern Electric Power unit of American Electric Power (NYSE: AEP) didn’t offer the purchase of an existing natural gas combined cycle plant as what would apparently be a viable alternative to its plan to retrofit and continue the life of the coal-fired Flint Creek power plant, said a witness for the General Staff of the Arkansas Public Service Commission.
Richard Hahn, a principal consultant with La Capra Associates, provided Nov. 9 testimony in a case begun in February at the Arkansas Public Service Commission over SWEPCO’s plan to install flue gas desulfurization (FGD) and other emissions controls on Flint Creek instead of shutting it. Both SWEPCO and a Flint Creek co-owner, Arkansas Electric Cooperative (AECC), have filed testimony in this case supporting the retrofit as cost-effective and in the long-term interests of ratepayers.
Based on his review of the supplemental direct testimony of SWEPCO, Hahn offered the following overall observations:
- The rate impact analysis provided by SWEPCO shows that the proposed Flint Creek retrofit option has rate impacts in the first year that are very similar to all other options. SWEPCO’s cumulative rate impacts through the first 20 years show that the retrofit option is virtually identical to the acquisition of an existing natural gas combined cycle (NGCC) plant and additional wind resources. “Thus SWEPCO’s rate impact analysis confirms the conclusion reached in my Surrebuttal Testimony that there are other options that are equally economic as the proposed retrofit,” Hahn added.
- In its supplemental direct testimony, AECC did not evaluate all of the scenarios specified in commission Order Nos. 8 and. 9. “Specifically, AECC did not evaluate the acquisition of an existing NGCC plant,” Hahn wrote. “Had it done so, AECC’s analysis would likely have shown that the acquisition of an existing NGCC plant would have rate impacts that were similar to, and even lower than, the retrofit option. Also, AECC did not consider any incremental wind resources. Nothing in the Supplemental Direct Testimonies of SWEPCO and AECC has caused me to change my recommendation that the Commission deny the Petitioners’ request for a declaratory order finding that it would be in the public interest for SWEPCO to install environmental controls at Flint Creek.”
In its supplemental direct testimony, AECC examines only three scenarios: retrofit Flint Creek; retire Flint Creek and install a new NGCC plant at the Flint Creek site; and convert Flint Creek to burn natural gas, Hahn noted. AECC analyzes the retrofit option with and without selective catalytic reduction (SCR) for NOx control, and it analyzed a new combined cycle plant with two different amortization periods of existing Flint Creek capital costs. AECC did not examine the acquisition of an existing NGCC plant, nor did it include any incremental wind resources, Hahn wrote.
Witness for state Attorney General wants more data
Kevin Woodruff of the consulting firm of Woodruff Expert Services, in Nov. 9 testimony filed on behalf of the Arkansas Attorney General, said: “Consistent with my prior testimonies, I still believe it possible that the Project will be the least costly option for meeting SWEPCO and AECC loads. But I also still do not believe that either SWEPCO’s or AECC’s analyses are sufficiently complete for the Commission to make a fully informed decision about the Project’s value necessary to justify the transfer of risk from shareholders to ratepayers inherent in SWEPCO’s request for a declaratory order that the Project is in the public interest. I thus continue to recommend the Commission withhold judgment on the applications until the utilities perform the additional analyses described in my Direct Testimony.”
The Sierra Club can of course be counted on in these kinds of cases to advocate against any life-extension for a coal plant and for some greener alternative. Paul Chernick said in Nov. 9 testimony filed in this case on behalf of the Sierra Club that SWEPCO’s assumption of a 15-year depreciation period for the emissions retrofits is not a valid way to go.
“In other words, SWEPCO chose this ratemaking treatment to make the coal option look better,” Chernick wrote. “Were the Company truly interested in reducing costs for ratepayers and fairly comparing the alternatives, it could have used the 15-year recovery period for all of the alternatives that it considered and explicitly urged the Commission to use faster recovery for ratemaking, rather than concealing its depreciation assumption.”
Chernick added: “The Company has not offered any rationale for assuming accelerated depreciation for the coal option but not for the other options. It has conceded that there is no benefit in the real world from its biased assumption in this proceeding. Hence, it is clear from SWEPCO’s testimony that its principal purpose in selecting the depreciation schedules for various capital expenditures was to favor the coal option. Thus, the depreciation assumption is added to a list of other assumptions (e.g., overstating gas forecasts, ignoring combined-cycle purchase options, understating control costs, understating energy-efficiency potential) that SWEPCo used to bias its analysis towards the coal option.”
SWEPCO on Feb. 8 asked the Arkansas commission for a declaratory order approving installation of $408.7m worth of controls on Flint Creek. The planned controls include: dry FGD equipment for SO2; activated carbon injection (ACI) for mercury; and Low NOx burners and over-fired air for NOx. The DFGD system selected by the project engineers will also include a pulse jet fabric filter, commonly called a baghouse. SCR is considered an optional project at this point. SWEPCO has been planning, pending regulatory approvals, on commencing site construction activities on or about Jan. 1, 2014.
Flint Creek is a single-unit, pulverized coal plant with a net capacity of 528 MW and was placed in service in 1978. SWEPCO’s ownership portion of this unit is 264 MW net, and it is responsible for operating and maintaining the plant.