South Carolina Electric & Gas (SCE&G) filed a July 12 petition at the Public Service Commission of South Carolina for an accounting order related to the impending shutdown of the coal-fired Units 2 and 3 at the Canadys power plant.
The shutdown is in part needed due to the federal Mercury and Air Toxics Standards (MATS), which take effect in April 2015, with two one-year extensions possible under certain conditions, the utility noted.
To comply with MATS and in accordance with its 2012 Integrated Resource Plan, SCE&G retired the coal-fired Canadys Unit 1 and decommissioned the coal handling facilities at Urquhart Unit 3 and converted that unit to run solely on natural gas in 2012. The 2012 IRP also called for the retirement of the remaining coal-fired Canadys units upon the commercial operation of V.C. Summer nuclear Unit 2, and the retirement of the coal-fired Urquhart Unit 3 and the coal-fired McMeekin Units 1 and 2 upon the commercial operation of V.C. Summer Unit 3.
“The capacity and energy provided by the Canadys Units and the McMeekin Units are necessary to satisfy demand for electric power by SCE&G’ s customers and to maintain the reliability of the Company’s electric system,” the utility wrote. “The capacity from these units allows SCE&G to maintain a minimum planning reserve margin of 14% until the new nuclear units come online. If SCE&G’s reserve margin fell below this level, then the reliability of the Company’s electric system would be in jeopardy. However, under the MATS regulations, the Canadys Units and McMeekin Units cannot run on coal after April 15, 2015, unless SCE&G receives an extension of the MATS compliance deadline.”
SCE&G said it received a 1-year extension of the MATS compliance deadline from the South Carolina Department of Health and Environmental Control on March 8. SCE&G has not applied for a second 1-year extension because it said it is doubtful such an extension request would be granted by the U.S. Environmental Protection Agency.
Canadys gas conversion costs too high for such a short remaining life
Due to the uncertainty surrounding the receipt of extensions of the MATS compliance deadline, SCE&G indicated in its 2012 IRP that it was analyzing the possibility of operating the Canadys units and the McMeekin units exclusively on natural gas by as early as April 2015.
The costs associated with transporting natural gas to Canadys and converting those units to run exclusively on natural gas were prohibitively expensive given that the units are to be retired when V.C. Summer Unit 2 goes commercial. The costs of upgrading the infrastructure necessary to convert the Canadys units exclusively to natural gas exceeded $40m. The cost of the generation at Canadys is among the highest on SCE&G’s system, and this investment would only drive unit generating expenses higher, the utility noted.
SCE&G said it also investigated the possibility of entering into a Purchase Power Agreement with another supplier to meet SCE&G’s system’s capacity and energy needs until V.C. Summer Unit 2 comes online. Those needs are in part currently being met by the Canadys units. This investigation revealed that SCE&G could procure power at a lower cost than it can generate power at the Canadys units.
“Given the costs associated with converting Canadys Station to natural gas, the likelihood that the EPA would not grant a second 1-year extension of the MATS regulation, and more cost-effective generation capacity in the market, SCE&G has decided to retire the Canadys Units by the end of 2013,” SCE&G wrote.
To replace the capacity associated these two units, SCE&G said it has entered into Purchase Power Agreements with Southern Co. Services and Calpine Energy Services LP.
- The agreement with Southern Co. Services, a unit of Southern Co. (NYSE: SO), is for 103 MW of capacity with the flexibility for an additional 102 MW of capacity to be provided to SCE&G from Southern’s system resources. The agreement with Southern runs from January 2014 to December 2016, and SCE&G may elect to extend the agreement through 2017 or 2018.
- The agreement with Calpine is for 200 MW of capacity to be provided from the natural gas-fired facility owned and operated by Columbia Energy LLC and known as the Columbia Energy Center located in Gaston, S.C. The agreement with Calpine will run from January 2014 to December 2016.
SCE&G is a unit of SCANA Corp. (NYSE:SCG).
SCE&G has six small coal-fired units in its fleet totaling 730 MW that range in age from 45 to 57 years old that cannot meet the emission standards set by MATS without further modifications to the units. Those units, as identified in a Feb. 28 IRP filed with South Carolina, are:
- Canadys Unit 1, 90 MW, went commercial in 1962;
- Canadys Unit 2, 115 MW, commercial in 1964;
- Canadys Unit 3, 180 MW, commercial in 1967;
- Urquhart Unit 3, 95 MW, commercial in 1955;
- McMeekin Unit 1, 125 MW, commercial in 1958; and
- McMeekin Unit 2, 125 MW, commercial in 1958.
SCANA has said that the two new reactors at V.C. Summer, at 1,100 MW apiece, remain on schedule for commercial operation in 2017 and 2018. There is an existing Unit 1 at the V.C. Summer site.