MidAmerican Energy‘s forecasted utility construction expenditures, which exclude amounts for non-cash equity allowance for funds used during construction (AFUDC) and other non-cash items, are about $1.1bn for 2013, the utility said in its Aug. 2 Form 10-Q report.
The targeted spending is:
- $356m for the construction of 1,050 MW (nominal ratings) of wind-powered generating facilities expected to be placed in service in 2013, 2014 and 2015.
- $203m for emissions control equipment, primarily at the coal-fired George Neal Energy Center Units 3 and 4 and Ottumwa Generating Station to meet air quality targets, including the reduction of SO2, NOx and particulate emissions.
- $60m for transmission system investments, including $22m for Multi-Value Projects (MVP) approved by the Midcontinent Independent System Operator (MISO) for the construction of 245 miles of 345-kV transmission line located in Iowa and Illinois. In July, MidAmerican entered into a contract totaling $342m related to its MVPs approved by MISO with minimum payments of $17m in 2013, $140m in 2014, $149m in 2015 and $36m in 2016.
- $19m for other generation development projects.
- Remaining amounts are for ongoing investments in distribution, generation and other infrastructure needed to serve existing and expected demand.
In May, MidAmerican filed with the Iowa Utilities Board (IUB) an application for ratemaking principles, and, in July, filed with the IUB a settlement agreement with the Iowa Office of Consumer Advocate for ratemaking principles, related to the construction of up to 1,050 MW (nominal ratings) of additional wind facilities.
The settlement agreement, which is subject to IUB approval, establishes a cost cap of $1.9bn, including AFUDC, for the construction of 1,050 MW (nominal ratings) of wind facilities and provides for a fixed rate of return on equity of 11.625% over the proposed 30-year useful lives of those facilities in any future Iowa rate proceeding. The cost cap ensures that as long as total costs are below the cap, the investment will be deemed prudent in any future Iowa rate proceeding.
Until such time as these generation assets are reflected in rates, and ceasing thereafter, MidAmerican proposes reductions in the energy adjustment clause recoveries proposed in its current Iowa electric rate request of $3m in 2015, $7m in 2016 and $10m for each calendar year thereafter, conditioned upon MidAmerican having completed at least 350 MW (nominal ratings) of wind facilities pursuant to the settlement agreement. MidAmerican has requested IUB approval in the third quarter of 2013. In July, MidAmerican entered into contracts totaling $1.1bn related to these projects. Minimum payments are expected to be $199m in 2013, $431m in 2014 and $490m in 2015. In order to qualify for federal production tax credits, construction of the facilities must begin by Dec. 31, 2013.
In the clean-air area, in anticipation of the April 2015, Mercury and Air Toxics Standards (MATS) compliance deadline, MidAmerican evaluated each of its coal-fueled units for compliance with the MATS limits. Due to the MATS compliance costs, MidAmerican plans to retire four coal-fueled units by March 31, 2015. These units include Walter Scott Jr. Energy Center Units 1 and 2 and George Neal Energy Center Units 1 and 2. A fifth unit, Riverside Generating Station, will be limited to natural gas combustion by March 31, 2015.
The units being retired produced 2.2 million MWh of electricity, or 7% of MidAmerican’s owned generation production, during 2012. These planned retirements are independent of and precede the April 2016 deadline by which these five units had to stop burning solid fuel due to a consent decree MidAmerican previously agreed to with the Sierra Club.