Sierra Club argues against coal retrofit spending in Missouri

The Sierra Club is trying to convince the Missouri Public Service Commission that throwing billions of new dollars into environmental retrofits of old coal plants is a waste of ratepayer money and that other, clean-energy alternatives should be developed.

The Sierra Club on Nov. 8 filed a response to the commission’s September order directing its staff to update an older report regarding the cost of compliance with new federal environmental regulations.

“Utilities’ reliance on coal generation exposes ratepayers to extraordinary risk,” the club told the commission. “The United States continues to strengthen existing environmental regulations as it makes thoughtful progress on greenhouse gas regulation, and there is no doubt that coal plants will bear a disproportionate impact of forthcoming environmental requirements. As Sierra Club pointed out in its previous comments in this docket, it is critical that Missouri utilities and the Commission consider the full suite of forthcoming environmental regulations together, rather than piecemeal, as part of ensuring that Missouri utilities maintain a reliable resource portfolio in conjunction with just and reasonable rates.”

In a May 2012 report, commission staff cited Sierra Club’s tables estimating capital expenditures for environmental upgrades for Missouri’s many aging coal-fired power plants. Synapse Energy Economics has recently updated its database estimating these costs, which is derived from publicly available information, and that work was provided by the club to the commission.

“Notably, costs for controlling coal combustion residuals and compliance with the forthcoming effluent limitation guidelines are now included, though the costs of future greenhouse gas emissions regulations are not,” the club wrote. “While the precise details of future greenhouse gas rules are still uncertain, it is clear that utilities will need to meet new regulatory requirements (and their associated costs) in the near future.”

With respect to the remaining regulations, the club estimates total capital expenditures of about $12.6bn to install the full suite of environmental pollution controls on Missouri coal units. A table in the filing depicts these projected capital expenditures for each Missouri coal unit, including units at Ameren’s Meramec and Rush Island plants, and at Associated Electric Cooperative’s New Madrid plant.

As the cost of generating electricity from coal continues to increase, the cost of alternative resources continues to decline, the club added. For example, a number of recent reports from the U.S. Department of Energy’s Lawrence Berkeley National Laboratory document significantly lower prices for wind power purchase agreements—as low as $31 per MWh. Both capital and O&M costs for wind projects continue to decline year-on-year. The cost of demand-side resources also continues to decline, the club noted.

Club points to hundreds of coal unit shutdowns nationwide

As of Nov. 7, at least 434 coal units totaling over 60,665 MW of capacity had been announced for retirement by 2020 in the U.S., the club argued. “Utilities’ decisions to retire existing coal-fired generating capacity are being made based on economics. A combination of factors is causing the economic value of continued operation to be negative. These factors include the investments required to comply with environmental regulations, the risks of further regulations, aging and degradation of plant equipment, declining market prices for natural gas and wholesale electricity, and an increasingly broad and attractive range of alternative resources including renewable energy and energy efficiency.”

The commission should make clear, under its general supervisory authority over Missouri electric plants and to ensure that Missouri utilities provide electric service that is “safe and adequate and in all respects just and reasonable,” that any additional investments by Missouri utilities in coal unit retrofits will not be recoverable from Missouri customers unless the prudence of making those investments is justified in economic terms in a proper, transparent planning analysis that is subject to ongoing participation and examination by all interested parties, the club said.

Although the Missouri commission does not have statutory authority to pre-approve retrofit investments, the commission does have ample authority to take actions now, prior to any future rate proceedings where the prudence of any such investments will ultimately be decided, to prevent imprudent decisions from being made, the club added.

Another issue that Sierra Club has pointed out with recent utility integrated resource plan (IRP) filings that has yet to be addressed is the role that assumptions about off-system sales of electricity from Missouri coal plants are playing in utility’s future revenue projections. Missouri utilities’ ability to generate additional revenue through off-system sales from their aging coal units has declined markedly in recent years as the plants have become less competitive on the wholesale market, the club said.

This decline in off-system sales has been a major factor in recent rate increases sought by Ameren and Kansas City Power & Light, but those utilities continue to present the commission with future projections that their coal plants will return to profitability after hundreds of millions, if not billions, of dollars of Missouri ratepayer money is spent to retrofit the plants to comply with environmental regulations, the club argued. “If the plants are not able to generate this off-system sales revenue in future years, however, the utilities’ decision to retrofit them is likely not prudent,” it added.

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.