New Hampshire utility defends Merrimack scrubber project

The executive director of the New Hampshire Public Utilities Commission on Aug. 12 issued a schedule covering the next few weeks of activity in a long-running case at the commission covering the prudency of scrubber costs for coal-fired capacity at Public Service Co. of New Hampshire (PSNH).

In an Aug. 7 letter, commission staff recommended that the commission appoint a hearing examiner to conduct a meeting of the parties to review discovery issues, to propose a revised procedural schedule that accommodates motion practice related to therebuttal testimony, and to consider changes to the schedule for prehearing motions and for a hearing on those motions. The commission has now appointed F. Anne Ross to conduct a technical session on Aug. 18. Ross is to preside over an informal discussion concerning any remaining discovery disputes and to take comments on a proposed procedural schedule.

PSNH, for its part, on Aug. 12 filed with the commission its response to the state Office of Consumer Advocate’s (OCA) five motions to strike dated Aug. 6.

“What is the scope of this proceeding?,” PSNH wrote. “That question is central to the five Motions filed by OCA and must be answered before PSNH can determine whether it opposes or supports those Motions.”

Is the scope of this proceeding, the utility asked, limited to a review of the actions PSNH took to comply with a state Scrubber Law to have a scrubber installed and operational at the coal-fired, 439-MW Merrimack Station by July 1, 2013, based on either the existence of a statutory mandate or the reasonable belief of PSNH based upon the information and facts that were known or knowable at the time that such a statutory mandate existed? Or, does the scope of this proceeding presume that there was no such statutory mandate and that a reasonable utility could not have prudently believed that such a statutory mandate existed at the critical times periods based upon the information and facts known or knowable at that time?

If this proceeding moves forward on the basis that the Scrubber Law required PSNH to install the Merrimack scrubber – as the state Supreme Court stated twice in a decision in this matter, the Legislature itself stated, and the commission also found – then much of the protest filed in this case by various parties is a moot point, the utility said.

“The Commission itself emphasized that the Scrubber Law required PSNH to install and have operational the Scrubber by July 2013,” the utility wrote. “The Commission also found that ‘The legislative history supports a conclusion that the Legislature viewed time to be of the essence.’”

The utility added: “PSNH’s rebuttal testimony, including the sections referenced in OCA’s Motions, was necessary to respond to the plethora of issues raised in the Intervenors’ Testimony. The Intervenors’ Testimony is all based on the fundamental premises that the Scrubber Law did not mandate PSNH to install the Scrubber and that a prudent utility should have known that the law did not create such a mandate. Building on those premises, the Intervenors Testimony contended that due to gas prices caused by fracking and other market conditions PSNH could and should have sought variances or retired or divested Merrimack Station. But none of that is relevant if either [the Scrubber Law] mandated PSNH to construct the Scrubber or if a prudent utility reasonably believed that such a mandate existed based upon the information known or knowable at the time.”

Utility says scrubber was mandated, and that Merrimack is valuable

William Smagula, Vice President of Generation at PSNH, said in July 11 rebuttal testimony: “The Scrubber Law clearly created a mandate, enforceable by criminal and civil penalties under RSA 125-O:7, ordering installation and operation of scrubber technology at Merrimack Station by no later than July 1, 2013. PSNH did not believe that there was any other reasonable interpretation of the statute, particularly after the decisions of the PUC in the fall of 2008 and the Supreme Court in 2009. PSNH operates its generating facilities with a clear focus on following all applicable laws, regulations, and permits.”

Smagula said about the retirement argument offered by critics, like environmental groups: “Clearly, the Scrubber Law did not contemplate retirement of the plant in lieu of installation of the scrubber. If PSNH retired Merrimack Station, PSNH would still be the ‘owner’ of that station. The law’s clear, unequivocal mandate found in RSA 125-O:13 provides that ‘The owner shall install and have operational scrubber technology to control mercury emissions at Merrimack Units 1 and 2 no later than July 1, 2013.’ After retirement, PSNH, as the ‘owner,’ would still be subject to the mandate that it ‘shall install and have operational scrubber technology.’ Such an absurd result is evidence that retirement was not a viable option.”

Smagula said that the scrubber project blew through initial price estimates because it came at a time of rapidly escalating prices in the emissions-control industry and the utility was under a mandate to install the scrubber, so it had no option not to. He said that knowing that the scrubber was then estimated to cost $457m, and after hearing from myriad interested parties, the Legislature expressly chose not to change the mandate that a scrubber must be installed and operated at Merrimack. The commission came to the same conclusion also at a time when the inflated $457m figure was known, he added.

Smagula said that the benefit of having a reliable coal plant like Merrimack was underlined with this past winter’s extreme weather conditions in the ISO New England region.

“This past winter, ISO-NE could not rely upon natural gas-fired generation to keep the lights on,” he wrote. “ISO-NE’s Winter Reliability Program, which paid dual fuel oil/gas units to pre-buy oil for the winter season, was running low on fuel well before the winter was over. The region’s coal-fired generating stations, including Merrimack and Schiller Stations, as well as oil and gas fueled Newington Station, were pivotal in avoiding shortages of electricity. These PSNH units ran very reliably during this past winter period and they demonstrated the wisdom of having a diversified portfolio of generating resources, rather than over-relying on natural gas-fired generation. These benefits were well understood when the legislature determined that the installation of the scrubber was in the public interest – it was the Legislature itself that found that the installation of scrubber technology will not only reduce mercury emissions significantly but will do so without jeopardizing electric reliability. ISO-NE has clearly signaled its concern for the upcoming winter period by establishing another Winter Reliability Program, especially in light of the recently-retired generating stations in the region.”

Also, he said, without Merrimack and its coal deliveries, the continued reliable operation of the railroad line serving Nashua, Manchester, and Concord is in doubt. The railroad owner stated to legislators in 2009 that without the coal trains for Merrimack, the economics of this rail line could be jeopardized and there could be insufficient base load traffic required to keep it viable.

“The Scrubber is performing exceptionally well,” Smagula reported. “Its initial startup was trouble-free and its ability to remove both mercury and sulfur from the two Merrimack boiler emission gas streams exceeds the level required by the Scrubber Law and the station’s air permit. In my experience in this industry, I have not previously seen such a successful initial online result for a project as complex as the Scrubber.”

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.