WPS: with so much power market turmoil, Weston 3 lends stability

Wisconsin Public Service (WPS) is currently “challenged” to maintain a balance of technology, fuels and resulting risks in its generation portfolio under extraordinary circumstances, and its effort to add new emissions controls at and save the coal-fired Unit 3 at its Weston plant is a key to that portfolio.

“WPS will lose 335 MW of base load, no-emission capacity and energy from the Kewaunee Nuclear Power Plant when the power purchase agreement (PPA) with Dominion terminates at the end of 2013,” WPS said in Jan. 25 testimony filed at the Wisconsin Public Service Commission in a case begun last year for the Weston Unit 3 emissions project. “WPS’s purchase of 500 MW of natural gas-fired capacity and energy from the Fox Energy combined cycle facility is scheduled to terminate in full by 2016. New environmental regulations require WPS to evaluate alternatives for the 467 MW of coal-fired generation represented by its smaller coal units. And under the EPA settlement, Weston 3’s 330 MWs must be controlled by the end of 2016. Taken together, these developments put in play fully half of WPS’s 3,200 MW of capacity and energy.”

WPS is referring to a settlement announced Jan. 4 with the U.S. Environmental Protection Agency that calls for a series of coal unit retrofits and shutdowns.

WPS is seeking a Certificate of Authority (CA) from the commission to install Regenerated Activated Coke Technology (ReACT), a multi-pollutant air emission control technology, at WPS’s wholly-owned 330-MW Weston Unit 3, at an estimated cost of $275m. The utility, a subsidiary of Integrys Energy Group (NYSE: TEG), filed its initial application for approval of this project in May 2012.

The Kewaunee nuclear plant shutdown by Dominion Resources (NYSE: D) and other matters come at a time that 79,000 MW, or fully a quarter of the nation’s coal generating capacity, is expected to retire due to EPA air rules and low gas prices, WPS told the commission. The Midwest ISO now forecasts a capacity shortfall of up to 11.7 GW relative to target reserves, and recently announced that it has “resource adequacy concerns” for 2015-2016.

“WPS has prudently responded to this challenge,” the utility said. “The company’s investments in its larger and more efficient coal units, including the installed scrubbers on Weston 4, the approved scrubbers on the jointly-owned Columbia Units 1 and 2 and the proposed ReACT on Weston 3, will ensure the availability of approximately 1,000 MW of coal-fired base load capacity and energy. WPS’s acquisition of the Fox Energy Center will add 600 MW of dispatchable natural gas-fired combined cycle capacity and energy to a generation portfolio that also includes gas-fired combustion turbines, an array of renewable resources and one of the best demand response programs in the country.”

WPS said it is evaluating the refueling, repowering or retirement of its smaller coal units at Weston and Pulliam. “WPS’s strategy of maintaining a balanced generation portfolio will capture benefits of the current low natural gas price environment, yet also protect customers in the likely event that gas prices rise in the future,” it added.

WPS eventually rejected Weston Unit 3 shutdown option

In evaluating its alternatives for Weston Unit 3 in the context of the EPA settlement negotiations, WPS said it considered retiring the unit and replacing it. The only practical build alternative to replace Weston 3’s capacity and energy is a natural gas-fired combined cycle facility like the Fox Energy Center. However, replacing Weston 3 with such a resource would be more expensive than ReACT, and it would make WPS too dependent on natural gas as a fuel, the utility said. Other risks of replacing Weston 3 with combined cycle units include the loss of an unconditional interconnection with ATC and unknown transmission limitations or construction requirements for a new facility, and the unknown availability or cost of firm gas service to support new large gas generators.

As to power purchases as an alternative to retrofitting Weston 3, recent changes in the MISO Resource Adequacy Tariff create too much uncertainty as to the deliverability of capacity from outside WPS’s capacity zone (the ATC footprint) and there is currently no way to hedge against the risk of non-deliverability, the utility said As a utility with an obligation to serve, WPS said it cannot rely on capacity that may not be available when it is needed.

ReACT is an advanced, proven multi-pollutant technology that uses activated coke (AC) to reduce SO2 emissions, with a coincident reduction of NOx, mercury and other pollutants. ReACT can reduce emissions of sulfur oxides (SO2 and S0x) by more than 90%, NOx from between 20% to 60%, and mercury emissions by more than 90%. “ReACT is capable of meeting the emission limits required by the EPA settlement, and the vendor will guarantee it,” WPS told the commission.

WPS also responded to a contention by an outside witness that the EPA settlement could change as it moves through a current federal court review and approval process, creating legal risk. The utility pointed out that all prior EPA settlements in New Source Review cases like this one have been approved by the courts. Also, even if the court did not approve the settlement, WPS said it would proceed to install ReACT because any subsequent settlement would in all likelihood include ReACT.

In the EPA settlement, WPS agreed to retire, refuel or repower its coal-fired Weston Units 1-2, as well as Pulliam Units 5-6 by June 1, 2015. The settlement included a provision for WPS to install ReACT environmental controls at Weston Unit 3. In addition, WPS agreed to more restrictive limits on emissions than current air permits require for Pulliam Units 7-8, as well as at its other coal-fired generators systemwide. It may result in some coal-fired generators operating less. WPS has previously installed controls at both Weston and Pulliam to reduce emissions of SO2, NOx, mercury and particulate matter.

Weston Units 1-2 have a combined nameplate generating capacity of 135 MW, while the capacity of Pulliam Units 5-6 is 112.5 MW. The Pulliam units were built around 1950, while Weston Unit 1 became operational in 1954, with Weston Unit 2 following in 1960.

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.