Wisconsin Public Service reports cost increase for Weston ReACT project

Wisconsin Public Service Corp. (WPSC) notified the Public Service Commission of Wisconsin on Sept. 20 that the ReACT emissions control project for the coal-fired Weston Unit 3 will likely exceed the 5% cost increase notification requirement set by the commission in approving this project on April 12.

The approved ReACT project cost, excluding AFUDC, was $275m, making the 5% cost increase notification cap $288.8m. “WPSC remains fully committed to the project and continues to have a high degree of confidence in the feasibility of the ReACT multi-pollutant control technology,” said the heavily-redacted Sept. 20 letter. “By this letter, WPSC also reports pursuant to Order Point 3 that construction of the project commenced on July 30, 2013.”

One factor in the cost increases is that the ReACT system construction bid received by HRC was high and HRC has re-bid the construction component. The re-bidding process is not yet complete. Due to the construction re-bidding, WPSC has rescheduled the outage of Weston Unit 3 for ReACT installation from fourth quarter 2015 to first quarter 2016.

Also, the sulfuric acid plant was originally designed as a “wet” system. During engineering it was determined that the flue gas stream concentration of chlorides and fluorides from such a system would cause excessive corrosion, so a “dry” system was selected. A mercury removal system is also required to prevent potential contamination of the sulfuric acid byproduct. The dry acid plant design incorporates upgraded materials and additional equipment to accommodate the cycling of the Weston 3 unit in response to Midcontinent ISO dispatch directions. Although the capital cost of the dry system is about $10m more than the wet system, the dry system will have lower operating and maintenance costs over the life of the ReACT system, the utility noted.

Also, due in large part to the re-bid of the ReACT system construction work and its effect on the project schedule, the costs of project engineering, construction management, internal staffing, and balance of plant have increased.

WPSC said it has undertaken a line-by-line review of all cost estimates with HRC and URS to identify potential cost reductions and has determined a likely project estimate range. In its contract with HRC, WPSC negotiated risk sharing provisions that provide HRC with financial incentives to control costs.

WPSC said it expects HRC to have firm cost figures for mechanical and electrical material and updated construction costs by the end of November. WPSC is finding with the initial bid packages for other project components that local firms are pricing their products and services “aggressively” relative to the national vendors assumed by HRC.

If this trend continues, WPSC said it could achieve a total project cost toward the lower end of its current range, with a large contribution of local firms and laborers to the project. The new estimated cost range is redacted from the filing.

WPSC is currently in negotiation with HRC for a long-term agreement for makeup activated coke (AC) supply. WPSC has identified three potential domestic sources of AC in addition to the Chinese source discussed in the docket for approval of this project. At this time WPSC expects the cost of makeup AC to be within 5% of the original estimate.

Finally, WPSC said it has received numerous indications of interest from local businesses interested in purchasing byproduct sulfuric acid from the project. These businesses report that the nearest existing supplies of the commodity are located in Chicago and that a local source would avoid transportation costs.

In the base case used in the commission docket, the ReACT project was $124m less costly on a present value revenue requirements basis than installing flue gas desulfurization (FGD)/selective catalytic reduction (SCR) technology on Weston 3, the utility noted. Holding all else equal, the ReACT project’s capital cost would have to increase by $139m relative to the original estimate of $275m before the project’s economics become comparable to the FGD/SCR option, the utility added.

Commission approved this project over the objections of outside parties

Over the objections of some parties, the commission on April 12 approved the application by WPSC to install the ReACT multi-pollutant control system on the coal-fired Weston Unit 3. WPSC had estimated that the cost of ReACT project construction is $275m, excluding allowance for funds used during construction (AFUDC). The AFUDC associated with the project would be $41m.

The Weston plant is located along the Wisconsin River, about seven miles south of the city of Wausau in Marathon County. It includes four coal-fired units, two natural gas/oil-fired combustion turbine generators, and auxiliary systems. Weston 3 is the second largest coal-fired unit, with a capacity of
 320 MW using primarily sub-bituminous Powder River Basin coal. It has been in service since 1981. Existing emissions control facilities include: fabric filters installed in 2000 for better particulate control, low NOx burners installed in 2009, and an activated carbon injection system installed in late 2009 for mercury emissions control.

ReACT is a multi-pollutant control technology that WPSC intends to install downstream from the existing Weston 3 baghouse. It involves three process stages:

  • adsorption of SO2, NOx and mercury onto a moving bed of activated coke pellets as flue gas passes through it;
  • regeneration of the activated coke pellets by thermal desorption of the pollutants; and
  • byproduct recovery, including creation of sulfuric acid from the sulfur-rich gases coming out of the process.

WPSC acknowledged during that case that the installation of ReACT at Weston 3 would be the first large-scale application of this technology in the United States, but maintained that ReACT is a proven technology with air emission control results guaranteed by the vendor.

In response to recommendations by intervenors for the commission’s imposition of a “cost cap” as a condition of project approval, WPSC told the commission it is willing to report to the commission if costs exceed 5% over the approved cost, but argued that a hard cap on construction or operating costs would be arbitrary and premature. WPSC said that some intervenors’ concerns about the risk of actual construction cost and the ongoing reliability of the supply and reasonableness of the cost of activated coke are not well-founded and can be addressed using the commission’s typical prudence review procedures.

The utility is a subsidiary of Integrys Energy Group (NYSE: TEG).

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.