Sierra Club targets Ameren coal plants, Meramec in the bullseye

The Sierra Club on May 15 slammed the 2013 integrated resource plan (IRP) of Union Electric d/b/a Ameren Missouri, saying the utility has done little serious work to find ways to get its “aging” coal fleet out of the picture.

By the way, the word “aging” was pretty much the preferred adjective from the Sierra Club any time it mentioned Ameren Missouri’s coal plants, particularly the Meramec plant, Ameren’s oldest coal plant and the club’s prime target for early shutdown.

The 2013 IRP update was filed ahead of a full-blown 2014 IRP, which will be filed later on with the Missouri Public Service Commission. The Sierra Club is an intevenor in the 2013 update review case and launched into the utility in its May 15 testimony.

The Ameren Missouri coal plants are Meramec (833 MW net), Sioux (972 MW net), Rush Island (1,182 MW net) and Labadie (2,374 MW net). Parent Ameren (NYSE: AEE), incidentally, has a pending deal to sell its non-regulated coal plants in nearby Illinois.

“Despite a major change in Ameren’s preferred resource plan to increase investment in demand-side management (‘DSM’) programs pursuant to the Missouri Energy Efficiency Investment Act (‘MEEIA’), as well as significant ongoing changes in energy markets such as further declines in current and projected natural gas prices (and relatedly, Ameren’s revenue from off-system sales (‘OSS’) on the wholesale power market), Ameren’s 2013 annual update report fails to grapple seriously with changing conditions and fails to address unresolved issues from the company’s 2011 IRP,” the club said. “Ameren’s 2013 annual update report is thus an ‘update’ in name only, as the company has punted to its 2014 IRP any re-evaluation of its aging fleet of coal-fired generating units at a time when those units are generating fewer OSS and changing market conditions are leading to a growing number of decisions by utilities to retire decades-old coal units that would need significant pollution control investments to continue long-term operations.”

The club added: “Ameren’s delay in re-evaluating the wisdom of investing billions of dollars in continuing to operate its aging coal fleet in its 2013 annual update report raises the risk that over the next year the company will throw good ratepayer money after bad by continuing to invest in coal-fired units that would be more economical to retire.”

Sierra Club says DSM could be pushing Meramec beyond the margins

At a minimum, Ameren’s 2013 annual update should have addressed the impact that the company’s change in its preferred resource plan has had on the analysis from its 2011 IRP of whether to retire Meramec, the club said.

“Now that Ameren has changed its preferred resource plan to one that incorporates DSM investments at [Reasonable Achievable Potential] levels through 2030, according to the company’s own analysis in its 2011 IRP, the Meramec plant can be cost-effectively retired without any need for new supply-side resources through the 2030 planning horizon,” the club added. “Moreover, in the 2011 IRP, Ameren’s base case assumed annual load growth of 1%, whereas in the 2013 report Ameren notes that ‘recent data suggests that current economic conditions and efficiency have slowed load growth somewhat’ since that time. Yet in its 2013 annual update report, Ameren fails to refresh its analysis of Meramec to reflect lower load growth due to its expanded DSM investments and changing economic conditions. Instead, Ameren repeats in the 2013 report its claim that if the company were to retire the Meramec plant by 2020, it may have a need for additional supply-side resources in the 2021-2025 timeframe. This was Ameren’s finding under the preferred resource plan in its 2011 IRP, however – not its new preferred resource plan.”

The commission should reaffirm its order on Ameren’s 2011 IRP directing the company to analyze whether expanded DSM investments render any of its coal-fired units uneconomic, the club argued.

“Ameren’s need to evaluate retiring its excess coal-fired capacity is especially true in light of the fact that Ameren’s ability to generate additional revenue through OSS from its aging coal fleet has declined markedly in recent years as the plants have become less competitive on the wholesale market,” the club added. “As the Commission found in December in Ameren’s most recent rate case, ‘annual average wholesale prices decreased approximately $3 per megawatt-hour (MWh), or approximately 10 percent since February 2011…caus[ing] a $30 million decrease in annual off-system sales revenues despite comparable sales volumes.’ These declines in OSS revenue have become even more pronounced in recent months, so that in Ameren’s most recent Fuel Adjustment Clause filing in March 2013, the company sought over $51 million in additional cost recovery from Missouri ratepayers. Ameren has stated publicly that this additional rate increase request ‘is mostly the product of slumping wholesale power prices, which have led to lower off-system sales.’”

The club also said Ameren isn’t fully taking into account the threat of greenhouse gas regulation and carbon pricing related to the coal plants. Ameren does claim that it has built a carbon price starting in 2025 into its analysis, but the company does not disclose in either its 2013 or 2012 annual updates the assumed starting price, rate of increase, and other relevant details that would be critical to understanding the impact that a carbon price would have on the economic viability of the coal plants, the club added.

Ameren says Meramec should be okay, for now

Said Ameren’s 2013 IRP update, filed with the commission on March 15, about air emissions pressures on the coal fleet: “In December 2011, EPA released its final Mercury and Air Toxics Standards (‘MATS’). … Ameren Missouri has put in place plans for compliance with MATS at each of its existing coal-fired plants, which includes upgrading some of our electrostatic precipitators (‘ESP’) at our coal-fired power plants. As a result of these environmental regulations, as well as other potential environmental regulations, we continue to carefully evaluate compliance options at the Meramec plant, our oldest coal-fired generating plant. At this time, should no additional environmental regulations be promulgated that affect Meramec, continued operation of the plant may still be in the best interest of our customers and the state. However, much uncertainty continues to exist with respect to future environmental regulations as well as long-term market conditions. Further monitoring and analysis of this issue will be conducted as part of the Company’s 2014 IRP development.”

The update later added: “The 2011 IRP indicated that if environmental regulations are expected to result in significantly higher costs of compliance than those currently assumed, retirement of Meramec may be preferred and replacement with a new combined cycle could be a preferred option. Our 2012 update indicated that retirement of Meramec or conversion to gas-fired operation may be viable alternatives to costly environmental retrofits should environmental regulations require such mitigation measures and that gas-fired combined cycle generators remain a viable resource option among several.”

Among the future options being evaluated are small modular reactors (SMR), which are part of a new generation of nuclear technology that promises lower capital costs than conventional, larger-scale nuclear plant construction. The update said Ameren and Westinghouse didn’t make the cut on a first round of U.S. Department of Energy demonstration funding for SMRs, but that there is DOE money left in the program that could be available.

“On March 11, 2013, the DOE announced that it would accept applications through July 1, 2013, for up to $226 million in investment funding,” Ameren noted in the March 15 filing. “The program, contingent on continued funding by Congress, aims for SMR deployment by 2022 and will cover up to 50% of the chosen projects’ costs. Ameren Missouri and Westinghouse are currently studying this opportunity.”

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.