PacifiCorp: Obama CO2 plan too uncertain to model right now

President Barack Obama’s June 25 directive for the writing of CO2 rules for existing power plants is too new, and its impacts too uncertain, to play into PacifiCorp’s ongoing integrated resource plan (IRP) case at the Utah Public Service Commission.

That was the PacifiCorp position taken in Oct. 11 response testimony filed with the PSC, which addressed criticisms from various environmental groups to its April 30 IRP filing. Notable is that around the time it filed the IRP in Utah, it filed this plan with other state commissions where it does business, including in Wyoming.

“PacifiCorp has reviewed the Presidential Memorandum issued June 25, 2013, in which President Obama directed the EPA to complete greenhouse gas (GHG) standards for both new and existing power plants,” the largely coal-fired utility said. “With regard to existing sources, EPA was directed to issue ‘standards, regulations, or guidelines, as appropriate’ that address GHG emissions from modified, reconstructed, and existing power plants.”

The company added: “PacifiCorp notes that the Presidential Memorandum did not explicitly set forth regulations for existing coal plants. The proposed standards, regulations, or guidelines are to be issued by June 1, 2014, finalized by June 1, 2015, with implementing regulations and state implementation plans required by June 30, 2016. Following submission of state implementation plans, EPA review of the state implementation plans would commence. Accordingly, if EPA follows the President’s aggressive schedule, the effective compliance dates for these standards, regulations, or guidelines are likely a number of years into the future. The June 25, 2013 Presidential Memorandum did not include detail with respect to how EPA will approach CO2 regulation or what the resulting standards, regulations, or guidelines will ultimately entail.”

Considering all of that uncertainty, the CO2 assumptions applied in the 2013 IRP remain reasonable, PacifiCorp noted. The IRP assumptions already represent a wide range of policy mechanisms that might be used to regulate CO2 emissions in the power sector at some point in the future. This approach was taken because, as yet, there are a wide range of potential future policy tools that may be employed to regulate CO2 emissions.  Because the June 25 Presidential Memorandum does not direct a particular type of regulatory approach, it does not make one particular approach more or less likely and therefore does not change the IRP assumptions already applied in this regard, PacifiCorp added. Similarly, because there is no detail on which to base an analysis, it does not make a particular CO2 price forecast used in the IRP more or less reasonable.

Given the timeline set forth in the Presidential Memorandum, the company said it will have multiple opportunities to update its CO2 price assumptions prior to and after the issuance of proposed regulations in June 2014. As assumptions are developed for the 2015 version of the IRP, the company will re-evaluate current market conditions and policy developments along with current forecasts from external sources in establishing updates, if any, to CO2 price assumptions.

PacifiCorp defends coal planning within its IRP

PacifiCorp at various points in the Oct. 11 response addressed the status of other air regulation impacting coal-fired capacity, like the EPA’s regional haze rule.

PacifiCorp noted that EPA issued a re-proposed regional haze federal implementation plan (FIP) for Wyoming on May 23, after the 2013 IRP was filed. As it pertains to PacifiCorp assets, EPA’s re-proposed FIP does not alter the requirements or timing for selective catalytic reduction (SCR) on any of the Jim Bridger coal units, and consequently, does not affect the related action item in PacifiCorp’s 2013 IRP Action Plan.

EPA’s re-proposed FIP for Wyoming includes requirements for SCR at the coal-fired Naughton Units 1 and 2 and at Dave Johnston Unit 3 by the end of December 2018.  These controls were not included in the Wyoming state implementation plan (SIP), nor were they required in EPA’s original FIP for Wyoming, which was used to establish inputs for the stringent regional haze assumptions used in the 2013 IRP.

PacifiCorp said that it is not seeking acknowledgement of SCR investments at Naughton Unit 1, Naughton Unit 2, or Dave Johnston Unit 3 in its 2013 IRP. Considering that EPA has not yet made a final action on its re-proposed FIP for Wyoming, which is required by Nov. 21, it remains uncertain whether these specific investments will be required.  PacifiCorp said it will continue to evaluate, pending future actions by EPA, how it will meet its compliance obligations in the best interest of its customers during the 2015 IRP planning cycle and in future IRPs.

PacifiCorp responded to various comments from the Interwest Energy Alliance (IEA). IEA stated that stakeholders requested PacifiCorp model additional potential investments or retirements early in the IRP public process, suggested that portfolios including transitions from fossil fuels to larger penetrations of wind and solar resources were eliminated, and recommends that PacifiCorp be required to review and update its modeling prior to Spring 2014, when there will be additional confirmation of revised EPA rules applicable to coal plants providing electricity to ratepayers in Utah. IEA claims that absent revision, the IRP could potentially drive imprudent investments.

PacifiCorp noted that it developed numerous portfolios where a large portion of its coal fleet retires or is converted to burn natural gas by the end of the 20-year planning horizon. In the 2013 IRP, 94 different core resource portfolios were developed among five different Energy Gateway transmission scenarios. Of these 94 resource portfolios, 25 showed more than 4,000 MW of coal either retiring or converting to burn natural gas by 2032. Ultimately, PacifiCorp did not select these resource portfolios as its preferred portfolio. IEA stated that these portfolios were eliminated but fails to mention that they were not chosen as the preferred portfolio in the 2013 IRP because the modeling showed these portfolios to have higher costs and higher risk as compared to the alternatives, PacifiCorp added.

“IEA’s claim that, absent revision, the IRP will potentially drive imprudent investments is simply not factual,” said the utility. “The IRP is a useful planning tool that provides the foundation for actions the Company will take to meet the needs of its customers into the future. However, when PacifiCorp makes investment decisions, it relies upon the most current information and analysis available at the time the decision is being made.”

IRP covers coal shutdowns and a coal-to-gas conversion

PacifiCorp plans to convert the coal-fired Naughton Unit 3 to a natural gas-fired facility and to install environmental investments required to meet near term compliance obligations at the Hunter Unit 1, Jim Bridger Unit 3, and Jim Bridger Unit 4 coal units.

“Installation of emission control equipment at these facilities will reduce emissions of nitrous oxides (NOX) and sulfur dioxide (SO2) and contribute to improved visibility in the region,” PacifiCorp added in the IRP filed April 30 at the Utah commission. “The Company plans to continue to evaluate environmental investments required to meet known and prospective environmental compliance obligations at existing coal units in future IRPs and future IRP Updates.”

The coal-related action plan includes:

  • Naughton Unit 3 (Wyoming, 330 MW) – Continue permitting and development efforts in support of the Naughton Unit 3 natural gas conversion project. The permit application requesting operation on coal through year-end 2017 was under review by the Wyoming Department of Environmental Quality.
  • Hunter Unit 1 (Utah, 418 MW) – Complete installation of the baghouse conversion and low NOX burner compliance projects at Hunter Unit 1 as required by the end of 2014.
  • Jim Bridger Units 3 and 4 (Wyoming, 702 MW total) – Complete installation of SCR projects at Jim Bridger Unit 3 and Jim Bridger Unit 4 as required by the end of 2015 and 2016, respectively.
  • Cholla Unit 4 (Arizona, 387 MW) – Continue to evaluate alternative compliance strategies that will meet regional haze obligations, related to EPA’s FIP requirements to install SCR equipment at Cholla Unit 4.

PacifiCorp anticipates that retiring the 172-MW Carbon coal plant in Utah in early 2015 will be least-cost alternative to comply with the Mercury and Air Toxics Standards (MATS) and other environmental regulations.

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.