AEP subsidiaries argue for cost accounting on to-be-retired coal plants

Appalachian Power and Wheeling Power witnesses on Jan. 5 offered rebuttal testimony at the West Virginia Public Service Commission that the Clinch River coal plant in Virginia, two units at which are now being converted to fire natural gas, has a life any longer than 2025.

American Electric Power (NYSE: AEP) official Jeffery D. LaFleur noted that a PSC staff witness recommends that the proposed retirement year of 2025 for the Clinch River coal units that are to be converted to natural gas be changed to coincide with the retirement of other steam plants in 2040. This 20140 retirement date more closely coincides with the lives assigned to the Ceredo and Dresden gas-fueled plants, which were never subject to a conversion from coal. Another staff witness has suggested that Clinch River be written off entirely right now, like other coal plants that are being shut outright.

LaFleur said that the one witness mistakenly assumes that 50-year old coal plant units converted from coal-fired to natural gas-fired, such as Clinch River’s Units 1 and 2, will be mechanically or operationally equivalent to the Ceredo and Dresden plants, which are relatively new plants originally designed specifically as gas-fired generation. “The operational lives cannot be equated,” he added.

Also a witness has mistakenly assumed that Clinch River Units 1 and 2 will retire in 2015 prior to the conversion from coal- to gas-fired units. “This will not be the case,” LaFleur wrote. “The Clinch River Plant as a whole is not to be retired in 2015, only Unit 3. Units 1 and 2 will continue to operate as coal-fired units until their scheduled conversion outages. Afterwards, Units 1 and 2 are expected to operate as gas-fired units until 2025.”

LaFleur added about the endangered coal units: “APCo evaluated all applicable generating plants and determined that Clinch River, Glen Lyn, Sporn, and Kanawha River would not be able to meet the emissions requirements of the MATS Rule without significant capital investment in control technology or refueling to an alternative fuel source. APCo determined that two units of the Clinch River Plant were economically and technically suitable for reheling to a natural gas some, preserving 494 MW of generation capacity, which is why APCo applied for and received a certificate of public convenience and necessity from this Commission. No other plants or units were determined to be suitable for this conversion to gas. APCo’s other subcritical coal-fired units will be retired by June 1, 2015.”

He said the retirement plans for these non-Clinch River units are firm. “By June 1, 2015, these plants will cease generating power. At that time, the Companies will begin the process of decommissioning the plants. Each plant will be decommissioned separately in accordance with relevant permit requirements and with activities and schedules established by a decommissioning plan.”

LaFleur said “repowering” of these plants is not an option. “The plants would not be repowered after they have been retired and decommissioned. The process of decommissioning involves removal of equipment and infrastructure. In addition, attempting to repower a plant after retirement would make it subject to the New Source Review provisions of the Clean Air Act. It is not practical to assume that these plants can economically meet such stringent requirements. If the Companies determined there was any possibility that a plant could be a useful generating asset in the future, it would be ‘mothballed’ in place rather than decommissioned.”

It may be possible for the plant sites to be reused or sold. However, even if the plant sites are sold, the AEP companies would incur decommissioning costs prior to transfer, LaFleur pointed out.

AEP’s David G. Hummel said in companion Jan. 5 rebuttal testimony: “Based on the historical record, APCo has demonstrated that it demolishes retired generating plants. Since 1955, APCo has retired five steam generating plants, which include Kingsport, Roanoke, Kenova, Logan and Cabin Creek Plants. All of these plants have been demolished. Currently APCo has no fully retired generating plants that have not been demolished.”

LaFleur is Vice President of Generating Assets for Appalachian Power and Kentucky Power. Hummel is employed by American Electric Power Service Corp. as Senior Staff Accountant-Accounting Policy and Research. This case, covering the depreciation accounting for the affected power plants, was begun in August 2014.

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.