The Kentucky Public Service Commission on Sept. 12 agreed to let Gallatin Steel intervene in a case, begun in August, where East Kentucky Power Cooperative wants approval to extend the scrubber at one coal-fired unit at its J. Sherman Cooper power plant to another unit at a cost of about $15m.
EKPC is seeking from the commission a Certificate of Public Convenience and Necessity (CPCN) for the rerouting of certain duct work at the Cooper station, and approval of an environmental compliance plan amendment so it can recover the project costs through EKPC’s environmental surcharge. It had announced plans for this project on July 15 and filed the formal application with the PSC on Aug. 21.
EKPC’s 2012 Integrated Resource Plan (IRP) indicated a future need to acquire up to 300 MW of capacity in light of anticipated idling or retirement of existing generation capacity that will result from the implementation and enforcement of new environmental regulations. EKPC conducted a Request For Proposal (RFP) process in 2012 to identify the best resource, or mix of resources, to satisfy anticipated capacity requirements.
“The RFP identified a clear, least-cost option for filling a significant portion of the anticipated capacity need,” said the Aug. 21 application. “That option involves re-routing the existing duct work for EKPC’s Cooper Station Unit #1 (‘Cooper #1’) such that its emissions are able to flow to the Cooper Station Unit #2 Air Quality Control System (‘Cooper #2 AQCS’). For a capital investment of approximately $15 million, EKPC will be able to retain 116 MW of existing capacity, thereby reducing its needs to procure new capacity from other sources. This option, which shall be referred to herein as the “Project,” is significantly cheaper than other capacity options available to EKPC.”
Cooper was constructed in 1962 and consists of two units. Cooper 1 began commercial operations in 1965 and is rated at 116 MW. Cooper 2 began commercial operations in 1969 and is rated at 225 MW.
The project will consist of new ductwork from the Unit 1 ID fan to the Unit 2 ductwork tie-in location, exhaust gas regulating and isolation dampers, integration of the controls systems, and new CEMS equipment. The project scope also includes foundations, support steel, access steel to support the new balance of plant (BOP) equipment, demolition of the existing stack division wall, and sealing of the existing Unit 1 stack breaching. In addition to the new BOP equipment, the circulating dry scrubber (CDS) equipment will incorporate a modified hydrated lime feed system to allow dual hydrator operation, and longer fabric filter bags and cages to support the increased gas flow through the CDS equipment. The combined exhaust gas from the CDS equipment will be routed to the existing stack via the Unit 2 ID fan.
EPA consent decree, new emissions mandates drive the project need
As part of a 2007 Consent Decree with the U.S. Environmental Protection Agency, EKPC agreed to construct a scrubber and other environmental equipment to service Cooper 2, with that new equipment going into operation in 2012. Other relevant EPA mandates affecting the cooperative’s coal-fired capacity include the Mercury and Air Toxics Standards (MATS).
The RFP was issued on June 8, 2012, and requested proposals for conventional projects with a capacity of 50 MW or more, or renewable projects with a capacity of 5 MW or more, and was directed towards utilities, power marketers, project owners and project developers. EKPC retained the Brattle Group to serve as the Independent Procurement Manager (IPM) for the RFP and to provide expertise in evaluating the proposals received. Moreover, because EKPC’s Power Production business unit planned to submit one or more self-build options in the RFP, EKPC said it took appropriate steps to isolate the Power Supply business unit, which would receive and evaluate the bids, from the work of the Power Production business unit.
EKPC received over 100 different proposals from 65 different entities through the RFP. These proposals included proposals for new natural-gas fired power plants (some at existing EKPC sites and some at other locations); the sale of existing gas or coal-fired plants to EKPC; the sale of ownership interests in existing power plants; natural gas tolling agreements; energy-only contracts; capacity-only contracts; power purchase agreements for renewable energy resources or energy resources from coal waste and minemouth methane.
Brattle and EKPC’s evaluation teams concluded that the Cooper duct project clearly provided the most reasonable, least-cost option. The project was developed by EKPC’s Power Production business unit in consultation with the Burns & McDonnell engineering consulting firm.
Entry into PJM opened up the possibilities for EKPC
Attached to the Aug. 21 application was testimony from James Read, a Principal with Brattle Group. He noted that EKPC’s recent entry into the PJM Interconnection opened up possibilities for outside power. “Prior to its integration into PJM, EKPC’s ability to buy power from and sell power to third parties was very limited,” Read said. “As a result, it had to plan to meet the power supply needs of its owner-members largely from its own generation resources. Now, in contrast, PJM is both the supplier to EKPC’s owner-members and the market for the production of EKPC’s generation fleet. Therefore, constructing or acquiring additional generation resources is an option for EKPC, not a requirement.”
Read said the Cooper project was the clear RFP winner and that Brattle/EKPC are negotiating with unnamed parties for further power supply.
Julia Tucker, Director of Power Supply Planning for EKPC, described in attached testimony how MATS caused the cooperative to look at the viability of a number of its coal units.
“EKPC had to consider the impacts of the MATS issued by the EPA in February 2012 on its existing generation fleet,” Tucker wrote. “The Spurlock Plant units are state of the art facilities that can be readily modified to meet all of the new rules. Likewise, the Cooper 2 unit with its recent addition of pollution control equipment can also meet the new rules. At the time of finalizing the IRP, the oldest units in the EKPC fleet, Dale Station and Cooper 1, were expected to require capital intensive retrofits to meet operating requirements under MATS. EKPC needed to find the most economic alternatives to meet its power supply requirements and meet MATS. EKPC needed to mitigate the potential risk of losing approximately 300 MW of existing power supply resources (Dale Station-200 MW; Cooper 1-116 MW) while maintaining an economic and reliable power supply to its member owners.”
Tucker said the remainder of the 300-MW projected capacity gap, basically what is left after subtracting the continued 116 MW from Cooper 1, is being addressed through negotiations with a short list of RFP bidders.
“The Project does leave EKPC with 116 MW more coal-fired capacity than it would have if Cooper 1 was retired, and thus with that much more capacity exposed to coal market price risk and the potential for a carbon tax and/or carbon regulations,” Tucker conceded. “However, given the uncertainty of future regulations, the modest amount of investment needed to continue use of an existing facility until regulations are further vetted is a prudent use of member owner funds.”
The 270-page application includes various supporting documents, including detailed technology and engineering descriptions.
The Cooper plant is fueled primarily by Kentucky coal. U.S. Energy Information Administration data shows that coal suppliers to the plant earlier this year included Jamieson Construction, Mountainside Coal and B&W Resources.