PSNH battles critics of Merrimack coal plant scrubber project

Despite the fact that Public Service Co. of New Hampshire in 2011 completed an SO2 scrubber installation at its coal-fired Merrimack plant, it is still battling with parties like TransCanada over the prudence of that investment, said PSNH parent Northeast Utilities (NYSE: NU) in its Feb. 28 annual Form 10-K report.

The “Clean Air Project,” a wet flue gas desulfurization system (scrubber), was constructed and placed in service by PSNH at Merrimack in September 2011. The cost of the scrubber is expected to be recovered through PSNH’s Default Energy Service (ES) rates under New Hampshire law. By November 2011, both of Merrimack’s coal-fired units were integrated with the scrubber. PSNH completed remaining project construction activities in 2012 and the final cost of the project was approximately $421m.

The Clean Air Project was placed in service and began operations nearly two years before the statutory deadline of July 1, 2013. Tests to date indicate that the scrubber reduces emissions of SO2 and mercury from Merrimack by over 90%, which is well in excess of state and federal requirements.

“Notwithstanding the Clean Air Project’s environmental successes well in advance of the statutory deadline, competitors and environmental groups continue to challenge PSNH’s right to recover the costs of this legally-mandated project,” Northeast Utilities said. “In particular, TransCanada, a Canadian energy company that is pursuing the transcontinental Keystone XL pipeline across the United States and is a participant in the U.S. competitive electricity market, and the Conservation Law Foundation, an environmental group which initially supported the law requiring installation of the Scrubber and which formally notified PSNH that it intended to sue PSNH under the Clean Air Act for not installing such emissions control technology, both now claim PSNH was imprudent for pursuing the Clean Air Project. PSNH is vigorously defending its constitutionally protected right to recover the costs of the Clean Air Project, which were invested to comply with the express mandates of state law.”

In November 2011, the New Hampshire Public Utilities Commission (NHPUC) opened a docket to review the Clean Air Project, including the establishment of temporary rates for near-term recovery of project costs, a prudence review of PSNH’s overall construction program, and establishment of permanent rates for recovery of prudently incurred project costs. In April 2012, the NHPUC issued an order authorizing temporary rates, effective April 16, 2012, which recover a significant portion of the project costs, including a return on equity. The docket will continue for a comprehensive prudence review of the project and the establishment of a permanent rate. The temporary rates will remain in effect until a permanent rate allowing full recovery of all prudently incurred costs is approved. At that time, the NHPUC will reconcile recoveries collected under the temporary rates with final approved rates.

“PSNH expects hearings to commence in this proceeding on or about the third quarter of 2013,” the Form 10-K added. “PSNH believes that its actions related to Clean Air Project construction will be deemed prudent. The project was completed for $421 million, approximately $36 million below budget, and has reduced mercury and sulfur emissions by more than 90 percent. On September 6, 2012, a consultant for the NHPUC filed a report with the NHPUC concluding that PSNH had effectively managed the Clean Air Project.”

Northeast Utilities pointed out in the Form 10-K that the scrubber puts Merrimack in a good position to comply with the U.S. Environmental Protection Agency’s Mercury and Air Toxics Standards (MATS), due to go into effect in April 2015. PSNH owns and operates approximately 1,000 MW of fossil-fueled units subject to MATS, including the two units at Merrimack, Newington Station and the two coal units at Schiller Station. “We believe the Clean Air Project at our Merrimack Station, together with existing equipment, will enable the facility to meet the MATS requirements,” the Form 10-K said. “A review of the potential impact of MATS on our other PSNH units is not yet complete. Additional incremental controls may be required for the two coal fired units at Schiller Station. To date, the financial impact of this potential control has not been determined.”

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.