Southern Co. (NYSE: SO) reported various developments with its utility subsidiaries in its Nov. 6 Form 10-Q report, including the ongoing shutdown of mostly coal-fired capacity at its Georgia Power unit.
On April 30, the state of Georgia finalized revisions to the 2007 Multi-Pollutant Rule and a companion rule requiring a 95% reduction in SO2 emissions from certain coal-fired units on a specific emissions control installation schedule. The revisions modify the compliance dates under those two rules for units yet to be controlled to synchronize them with the federal Mercury and Air Toxics Standards (MATS) compliance deadline. The revisions also allow natural gas to be used as a compliance alternative at Plant Yates.
On April 17, the Georgia Public Service Commission (PSC) approved the decertification of Plant Bowen Unit 6 (gas, 32 MW), which was retired on April 25, 2013. On Sept. 30, 2013, Plant Branch Unit 2 (coal, 319 MW) was retired as approved by the Georgia PSC in the 2011 integrated resource plan (IRP) in order to comply with the Georgia Multi-Pollutant Rule.
On July 11, the Georgia PSC approved Georgia Power’s request to decertify and retire Plant Boulevard Units 2 and 3 (gas, 28 MW) effective July 17, 2013.
Plant Branch Units 3 and 4 (coal, 1,016 MW), Plant Yates Units 1-5 (coal, 579 MW), and Plant McManus Units 1 and 2 (oil, 122 MW) will be decertified and retired by April 16, 2015, the compliance date of the MATS rule. The decertification date of Plant Branch Unit 1 (coal) was extended from Dec. 31, 2013, as specified in the final order in the 2011 IRP to coincide with the decertification date of Plant Branch Units 3 and 4 in 2015.
The decertification and retirement of Plant Kraft Units 1-4 (coal at three units, gas/oil at Unit 4, 316 MW total) was also approved and will be effective by April 16, 2016, based on a one-year extension of the MATS rule compliance date that was approved by the Georgia Environmental Protection Division on Sept. 10, 2013, to allow for necessary transmission system reliability improvements.
Additionally, the Georgia PSC approved Georgia Power’s proposed MATS rule compliance plan for emissions controls necessary for the continued operation of Plants Bowen Units 1-4 (coal), Wansley Units 1-2 (coal), Scherer Units 1-3 (coal), and Hammond Units 1-4 (coal). Also the switch to natural gas as the primary fuel at Plants Yates Units 6 and 7 (coal) and Southern Electric Generating Co.’s (SEGCO) Plant Gaston Units 1-4 (coal), plus the fuel switch at Plant McIntosh Unit 1 to operate on Powder River Basin coal instead of eastern coal.
Vogtle and Kemper lead the way for major capital projects
The two largest construction projects currently underway in the Southern Co. system are the nuclear Plant Vogtle Units 3 and 4 (45.7% ownership interest by Georgia Power in two units, each with about 1,100 MW) and the Kemper IGCC (in which Mississippi Power is ultimately expected to hold an 85% ownership interest in the 582-MW facility). The Kemper gasification project will get feedstock lignite from a nearby mine operated under contract by an affiliate of North American Coal.
The Southern Co. system’s construction program is estimated to be $6.6bn for 2013, $6.1bn for 2014, and $5.2bn for 2015. Included in these estimated amounts are expenditures related to construction of the Kemper IGCC of $1.6bn in 2013 and $260m in 2014, which is net of SMEPA’s 15% proposed ownership share of the Kemper IGCC, which reflects costs of about $545m in 2014. The estimated share for the South Mississippi Electric Power Assn. (SMEPA) reflects estimated construction costs relating to SMEPA’s proposed ownership interest (including construction costs for all prior years relating to its proposed ownership interest).
Southern anticipates that its system capital expenditure requirements will continue to decline through the middle of the decade, before rising again to meet additional requirements for environmental compliance and new generation.
Kemper’s excess costs keep ratcheting up
The Kemper IGCC is under construction and will utilize an integrated coal gasification combined cycle technology. In connection with the Kemper IGCC, Mississippi Power also is constructing and plans to operate about 61 miles of CO2 pipeline infrastructure. There is an ongoing dispute with various parties to the Mississippi PSC oversight of this project about cost overruns.
The Kemper IGCC was originally scheduled to be placed in service in May 2014. On Oct. 28, Mississippi Power revised the scheduled in-service date for the Kemper IGCC to the fourth quarter 2014 primarily as the result of lower-than-planned installation levels for piping as well as abnormally wet weather.
Also on Oct. 28, Mississippi Power further revised its cost estimate for the Kemper IGCC to about $4.02bn, net of U.S. Department od Energy grants and certain cost cap exceptions. Mississippi Power recorded a pre-tax charge to income for an estimated probable loss of $462m ($285.3m after tax) in the first quarter 2013 as a result of additional cost pressures. Mississippi Power recorded a pre-tax charge to income for an estimated probable loss of $450m ($277.9m after tax) in the second quarter 2013 as a result of additional cost pressures. And Mississippi Power recorded a pre-tax charge to income for an estimated probable loss of $150m ($92.6m after tax) in the third quarter 2013 primarily as a result of the schedule extension.
Mississippi Power does not intend to seek any joint owner contributions or rate recovery for any costs related to the construction of the Kemper IGCC that exceed a $2.88bn cost cap, excluding the cost cap exceptions and net of the DOE grants, Southern Co. said.
On Oct. 15, the Mississippi PSC issued a revised scheduling order for the prudence review of the Kemper IGCC costs incurred through March 31, 2013. Mississippi Power expects a decision from the Mississippi PSC in the second quarter 2014.
Bowen Unit 2 still down after April fire
On April 4, 2013, an explosion occurred at the coal-fired Plant Bowen Unit 2 that resulted in substantial damage to the Unit 2 generator, Plant Bowen’s Units 1 and 2 control room and surrounding areas, as well as Plant Bowen’s switchyard. Unit 1 (approximately 700 MW) was returned to service on Aug. 4, 2013. Unit 2 (about 700 MW) remains offline pending completion of the repairs.
In April 2012, the Mississippi PSC approved Mississippi Power’s request to construct a flue gas desulfurization system (scrubber) on the coal-fired Plant Daniel Units 1 and 2. These units are jointly owned by Mississippi Power and Gulf Power, with 50% ownership each. The estimated total cost of the project is about $660m. The project is scheduled for completion in December 2015.
Gulf Power has determined it is not economical to add the environmental controls at the small, little-used Plant Scholz necessary to comply with the MATS rule and that coal-fired generation at Plant Scholz will cease by April 2015.