The Wisconsin Power and Light (WPL) and Interstate Power and Light (IPL) subsidiaries of Alliant Energy (NYSE: LNT) plan several coal unit retirements over the next few years, with those gaps in their generation portfolios to mostly be made up with new gas-fired capacity.
Alliant Energy said in its Feb. 25 annual Form 10-K report that key strategic plan developments include the following:
- January 2014 – WPL received an order from the Public Service Commission of Wisconsin (PSCW) approving a request for generation maintenance and performance improvements at the coal-fired Columbia Units 1 and 2. WPL expects to begin construction in the first half of 2015 and place the projects in service by the end of 2017.
- April 2014 – The scrubber and baghouse at WPL’s Columbia Unit 2 were placed in service. In addition, the scrubber and baghouse at WPL’s Columbia Unit 1 were placed in service in July 2014.
- May 2014 – The scrubber and baghouse at IPL’s coal-fired George Neal Unit 3 were placed in service.
- June 2014 – After receiving the final necessary regulatory approvals and permits in the second quarter of 2014, IPL began constructing Marshalltown, an approximate 650 MW natural gas-fired combined-cycle plant. IPL currently expects to place Marshalltown in service in the second quarter of 2017.
- November 2014 – WPL announced plans to file an application with the PSCW in early 2015 for approval to construct an approximate 650 MW natural gas-fired combined-cycle facility in Beloit, Wisconsin, referred to as the Riverside expansion. A decision from the PSCW on WPL’s request is currently expected by mid 2016. Subject to all needed approvals, construction is currently expected to begin in 2016 and be completed by early 2019.
- December 2014 – The scrubber and baghouse at IPL’s coal-fired Ottumwa Unit 1 were placed in service.
- January 2015 – WPL received an order from the PSCW approving an application to install a selective catalytic reduction (SCR) system at Columbia Unit 2 to reduce NOx emissions. WPL currently expects to place the project in service in 2018.
The strategic plan includes investments in generation maintenance and performance improvements at newer, larger and more efficient coal-fired units, including WPL’s Edgewater Unit 5 and Columbia Units 1 and 2. Construction of IPL’s Ottumwa Unit 1 generation maintenance and performance improvements was completed in 2014.
In January 2014, WPL received an order from the PSCW approving a request for generation maintenance and performance improvements at Columbia Units 1 and 2. WPL’s portion of the capital expenditures for the projects, excluding allowance for funds used during construction (AFUDC), is currently estimated to be between $55 million and $65 million. WPL currently expects to begin construction in the first half of 2015 and place the projects in service by the end of 2017.
IPL’s M.L. Kapp Unit 2, which was placed in service in 1967 and has a nameplate capacity of 218 MW, is expected to switch from coal to natural gas in 2015, contingent on approval from the Midcontinent ISO. Alliant Energy, IPL and WPL are working with MISO, state regulatory commissions and other regulatory agencies, as required, to determine the final timing of various unit retirements.
Coming up for WPL on the retirement front are:
- the coal-fired Edgewater Units 3 (69 MW, retire by the end of 2015), and Unit 4 (239 MW, retire by the end of 2018;
- the coal-fired Nelson Dewey Units 1 and 2, 227 MW, retire by the end of 2015;
- the gas-fired Rock River Units 3-6 combustion turbines, 169 MW, retire by end of 2019; and
- the gas-fired Sheepskin Unit 1 combustion turbine, 42 MW, retire by end of 2019.
For IPL, the currently-planned retirements are:
- Dubuque Units 3-4, 66 MW (gas), retire by end of 2016;
- Fox Lake Unit 1, 11 MW (gas), retire by end of 2017;
- Fox Lake Unit 3, 82 MW (gas), retire by end of 2017;
- Sutherland Units 1 and 3, 119 MW (gas), retire by end of 2017;
- Other unnamed units, about 200 MW, retire by end of 2017.
Coal makes up a major chunk of the capacity of both subsidiaries
Coal is a primary fuel source for internally generated electric supply and represented approximately 45%, 43% and 47% of Alliant Energy’s, IPL’s and WPL’s total sources of electric energy in 2014, respectively. Alliant Energy, through Corporate Services as agent for IPL and WPL, has entered into contracts with different suppliers to help ensure that a specified supply of coal is available at known prices for IPL’s and WPL’s coal-fired plants for 2015 through 2018. As of the end of 2014, existing contracts provide for a portfolio of coal supplies that cover approximately 72%, 65%, 31% and 21% of IPL’s and WPL’s estimated aggregate annual coal supply needs for 2015 through 2018, respectively. Remaining coal requirements are expected to be met from either future term contracts or purchases in the spot market.
Alliant Energy, through its subsidiaries Corporate Services, IPL and WPL, also enters into various coal transportation agreements to meet IPL’s and WPL’s coal supply requirements. As of the end of 2014, existing coal transportation agreements cover about 100% and 84% of IPL’s estimated coal transportation needs for 2015 and 2016, respectively, and 100% and 63% of WPL’s estimated coal transportation needs for 2015 and 2016, respectively.
Nearly all of the coal utilized by IPL and WPL is from the Wyoming end of the Powder River Basin. A majority of this coal is transported by rail-car directly from Wyoming, with the remainder transported from Wyoming to the Mississippi River by rail-car and then via barges to the final destination. As protection against interruptions in coal deliveries, IPL and WPL strive to maintain average coal inventory supply targets of 25 to 55 days for plants with year-round deliveries and 30 to 150 days (depending upon the time of year) for plants with seasonal deliveries. As of Dec. 31, 2014, actual inventory days ranged from 23 to 57 days for plants with year-round deliveries and 72 to 80 days for plants with seasonal deliveries.
During 2014, coal deliveries to one of WPL’s plants were delayed due to additional rail-car traffic for non-coal commodities. As a result, WPL shifted some of its rail-car coal traffic to a less congested route to help avoid such delays.
Legacy transportation contracts at each of IPL and WPL expired at the end of 2014, which will result in higher coal transportation costs for IPL and WPL beginning in 2015. Rate adjustment provisions in older transportation contracts are primarily based on changes in the Rail Cost Adjustment Factor as published by the U.S. Surface Transportation Board. Rate adjustment provisions in more recent transportation contracts are based on changes in the All Inclusive Index Less Fuel as published by the Association of American Railroads. These more recent transportation contracts also contain fuel surcharges that are subject to change monthly based on changes in diesel fuel prices.
Several air emissions projects ongoing, or completed
In February 2013, the Iowa Utilities Board (IUB) approved IPL’s emissions plan, which includes an emission controls project for Lansing Unit 4. Alliant Energy and IPL currently expect the IUB to issue its decision by mid-2015 on an updated emissions plan, which also includes the emission controls project for Lansing Unit 4. IPL is constructing a scrubber at Lansing Unit 4 to reduce SO2 emissions.
In June 2013, WPL received an order from the PSCW approving an application to install a scrubber and baghouse at Edgewater Unit 5 to reduce SO2 and mercury emissions. The scrubber and baghouse are expected to support compliance obligations under the federal Mercury and Air Toxics Standards (MATS) and Cross-State Air Pollution Rule (CSAPR), as well as a Consent Decree entered into with the EPA and the Sierra Club in 2013.
Compliance with the MATS is required by April 2015; however, an entity can request an additional year for compliance for units that are needed to assure power reliability, needed while building replacement generation or repowering to gas, or that need additional time to install air emission controls technology. In February 2014, the Wisconsin Department of Natural Resources (DNR) approved an extension to the MATS compliance deadline for WPL’s Edgewater Unit 3 and Nelson Dewey Units 1 and 2 to April 2016. In February 2015, IPL filed with the EPA for approval to extend the MATS compliance deadline to April 2016 for M.L. Kapp Unit 2.
Recent air projects include:
- IPL’s George Neal Unit 3 – Construction of a scrubber and baghouse began in 2011 and was completed in 2014. IPL owns a 28% interest in George Neal Unit 3. As of the end of 2014, the capitalized project costs consisted of capital expenditures of $60 million and AFUDC of $4 million for IPL’s allocated portion of the George Neal Unit 3 scrubber and baghouse.
- IPL’s Ottumwa Unit 1 – Construction of a scrubber and baghouse began in 2012 and was completed in 2014. IPL owns a 48% interest in Ottumwa Unit 1. As of the end of 2014, the capitalized project costs consisted of capitalized expenditures of $154 million and AFUDC of $21 million for IPL’s allocated portion of the Ottumwa Unit 1 scrubber and baghouse.
- WPL’s Columbia Units 1 and 2 – Construction of scrubbers and baghouses began in 2012 and was completed in 2014. WPL owns 46.2% interest in Columbia Units 1 and 2. As of the end of 2014, the capitalized project costs consisted of capital expenditures of $272 million and AFUDC of $15 million for WPL’s allocated portion of the Columbia Units 1 and 2 scrubbers and baghouses.
- WPL’s Edgewater Unit 5 – WPL is currently installing a scrubber and baghouse at Edgewater Unit 5. Construction began in 2014 and is expected to be completed in 2016. As of the end of 2014, Alliant Energy and WPL recorded capitalized expenditures of $90 million and AFUDC of $3 million for the scrubber and baghouse.
In August 2014, the EPA published a final rule related to Section 316(b) of the Federal Clean Water Act to regulate cooling water intake structures and minimize adverse environmental impacts to fish and other aquatic life. This rule applies to existing and new cooling water intake structures at certain steam generating and manufacturing facilities. IPL and WPL have identified nine (Ottumwa 1, Prairie Creek Units 3-4, Fox Lake Units 1 and 3, Lansing Unit 4, Dubuque Units 3-4, M.L. Kapp Unit 2, Burlington Unit 1, George Neal Units 3-4 and Louisa Unit 1) and three (Columbia Units 1-2, Nelson Dewey Units 1-2 and Edgewater Units 3-5) generating facilities, respectively, which may be impacted by this rule. Compliance with this final rule will be incorporated during periodic facility permit renewal cycles, with final compliance anticipated by 2022. Alliant Energy, IPL and WPL have completed a preliminary assessment of the final Section 316(b) rule and expect to begin generating facility studies in 2015.