AEP will shut Tanners Creek Unit 4 instead of coal-to-gas switch

American Electric Power’s (NYSE: AEP) Indiana Michigan Power subsidiary announced Sept. 17 that it will retire the 500-MW coal-fueled Tanners Creek Unit 4 in mid-2015, along with the other generating units at the plant.

The decision to retire Tanners Creek Units 1-3 (a total of 495 MW) by mid-2015 was announced in June 2011. A revamped agreement reached in February with the U.S. government provided the option of refueling or retiring Tanners Creek Unit 4. So the unit was dead as a coal facility already. Before that re-worked deal, Tanners Creek 4 would have lived on as a coal facility after installation of a dry sorbent injection system.

New projections for limited electricity demand growth, combined with the amount of generation currently available to serve Indiana Michigan customers, make it financially unfeasible to refuel Tanners Creek Unit 4 with natural gas, AEP said. All four generating units at Tanners Creek will be retired by mid-2015.

“The decision to retire Tanners Creek 4 was made as part of our ongoing analysis of resource needs and environmental compliance costs as part of our disciplined approach to capital investment,” said Nicholas Akins, AEP president and CEO.

The retirement of Tanners Creek Unit 4 does not impact AEP’s 2013 operating earnings guidance range of $3.05 to $3.25 per share, and the company said it still expects to deliver an earnings growth rate of 4% to 6% off of 2013 operating earnings guidance. Indiana Michigan Power currently recovers Tanners Creek costs in its rates and plans to seek appropriate regulatory approvals to recover its costs going forward.

“Tanners Creek Plant has served Indiana Michigan Power customers well for many decades,” said Paul Chodak III, Indiana Michigan Power president and COO. “However, the plant’s age, combined with new environmental regulations, our successful energy efficiency programs and the fact that we currently don’t need additional generation make retirement the best decision for our customers. We are mindful of the impact of this decision on the employees at Tanners Creek and will work with them as they manage their way through this transition.”

AEP previously announced the retirement of 6,676 MW of coal-fueled generation to comply with new environmental regulations. With the addition of the Tanners Creek 4 retirement, AEP will retire 7,176 MW of coal-fired capacity by early 2016.

In another major piece of the revamped air plan, the Indiana Department of Environmental Management on Aug. 27 approved an air permit change that would allow Indiana Michigan Power to install new air emissions controls on the two, 1,300-MW coal units at the Rockport power plant.

The IDEM approval covers construction of new dry sorbent injection (DSI) and related systems for Units 1 and 2. As part of the modification of New Source Review (NSR) Consent Decree, signed by the U.S. District Court for the Southern District of Ohio on May 14, Indiana Michigan Power has accepted federally enforceable limitations on annual SO2 emissions from the Rockport main boilers. The modified NSR deal, among other things, allows AEP to install these cheaper controls on the two Rockport coal units, instead of more costly flue gas desulfurization on one unit.

Tanners Creek is located in Dearborn County, Ind., and consists of four coal units with a total nominal capacity of 995 MW. As a result of the different air emissions standards, as well as differences in the boiler designs, the coal supplies for Tanners Creek 1-3 (TC 1-3) and Tanners Creek 4 (TC 4) vary in order to meet differing quality requirements. Units 1-3 are limited to emissions of 1.2 lbs SO2/MMBtu while Unit 4 is held to a 1.2% sulfur standard on an annual basis. The fuel needs of TC 1-3 are met by bituminous coals from Colorado and eastern sources. TC 4, similar to Rockport, uses a blend of PRB coal from Wyoming and high-sulfur bituminous coal from eastern sources.

U.S. Energy Information Administration data shows Tanners Creek getting coal earlier this year from: Central Appalachia suppliers that included Alpha Coal, RWE Trading Americas, Mercuria Energy Trading and Argus Energy; and from the Cumberland longwall mine in the Pittsburgh seam in Northern Appalachia of Alpha Coal.

AEP is one of the largest electric utilities in the U.S, delivering electricity to more than 5.3 million customers in 11 states. AEP ranks among the nation’s largest generators of electricity, owning nearly 38,000 MW of generating capacity in the U.S.

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.