Westar seeks rate hike to help with La Cygne, Wolf Creek project costs

Westar Energy applied March 2 at the Kansas Corporation Commission for a rate hike that is in part needed to pay help pay for new air emissions controls on the coal-fired La Cygne power plant and for upgrade work at the Wolf Creek nuclear plant.

John T. Bridson, Westar’s Senior Vice President for Generation and Marketing, cited in his testimony three major power plant project areas to be covered by the higher rates:

  • First, with respect to the La Cygne Environmental Project, Westar Energy, representing the joint owners, is on track for successfully completing the project under budget and for less than the amount preapproved by the commission. The project is expected to be reducing pollutants at the intended levels by early April for Unit 2 and by May 31 for Unit 1.
  • Second, Westar has been making capital investments at Wolf Creek to prepare the plant for its 20 years of extended life to 2045 and to comply with U.S. Nuclear Regulatory Commission (NRC) regulations enacted after an earthquake and subsequent tidal wave damaged the Fukushima nuclear plant in Japan.
  • Third, Westar is continually looking for ways to improve the efficiency of its generation fleet and to implement innovative solutions to reduce costs. A recent upgrade to the turbine on Unit 1 at the Jeffrey Energy Center (JEC) resulted in fuel cost savings for customers of approximately $6 million each year. Westar has also found innovative solutions to several environmental compliance requirements that have saved customers hundreds of millions of dollars.

La Cygne retrofits being wrapped up

La Cygne has two coal-fired units: Unit 1, rated at 812 MW (gross), which was placed in commercial operation in 1973; and Unit 2, rated at 717 MW gross, placed in service in 1977.

The La Cygne Environmental Project includes the installation of wet scrubbers to reduce SO2 emissions, bag houses to reduce emissions of particulates, activated carbon injection to remove mercury, and a common duel-flue chimney for both Units 1 and 2. It also involves installation of a selective catalytic reduction (SCR) system, low-NOx burners, and an over-fire air (OFA) system for Unit 2 to reduce NOx emissions. The project remains on schedule for an expected completion by May 31, 2015.

As a co-owner of La Cygne, Westar shares interest with Kansas City Power & Light (KCP&L) – the operator of the plant – in the project being completed safely, effectively, on time and on, or under, budget, Bridson noted.

The upgrades to Unit 2 were completed and placed in operation in February of this year. The tie-in to place the Unit 1 upgrades in-service is in process and is expected to be complete by the end of May. The current total cost for the project is estimated to be $30 million below its preapproved cost of $1.23 billion. Westar’s 50% share of the total cost of the project is $600 million, a portion of which has already been reflected in rates. It is the remainder it is now seeking to include in rates in the March 2 application.

Completion by June 1, 2015, is required for the plant to be in compliance with applicable environmental regulations and a consent decree between KCP&L and the U.S. Environmental Protection Agency (EPA). Without the project upgrades, the owners would have to shut down La Cygne at the end of May 2015 until the upgrades are complete.

Wolf Creek going through various upgrades

Wolf Creek is a nuclear plant completed and placed in service in 1985. It can generate about 1,200 MW. The ownership of the plant is divided between Westar (47%), KCP&L (47%) and Kansas Electric Power Cooperative (6%). Wolf Creek Nuclear Operating Corp. (WCNOC) operates the power plant for the owners. It is owned in the same proportions. Early in the last decade the commission changed the depreciable life of Wolf Creek to reflect a 60-year life. In 2008, the owners were successful in gaining the NRC’s approval to actually extend the license for that longer 60 year life; through 2045.

“All power plants require ongoing investment in plant and equipment to assure continued safe, reliable operations,” Bridson wrote. “In Wolf Creek’s case, it is entering a stage of plant life where original plant systems are in need of upgrades to maintain safe and efficient operation for the now much longer expected operating life. Additionally, the original capacity factor assumed for Wolf Creek was far lower than what we have been able to achieve. This stage of plant life, the significant additional production stresses, combinedwith additional external regulatory requirements, such as new requirements related to Fukushima, have caused an increase in capital expenditures for Wolf Creek.”

There are three major modifications either in process or recently completed. All three pertain to safety systems to replace and enhance aging, original plant systems. The Essential Service Water system pumps lake water into the plant and would ultimately cool the plant, the spent fuel pool, and the reactor in the event of an accident. Its operation would be critical to prevent a Fukishima type of event. Because the Essential Service Water system handles lake water, it is subject to corrosion over long periods of use. The owners replaced the original exterior, below-ground piping of the Essential Service Water system in the 2014 mid-cycle outage. Major modifications being completed during this outage are:

  • In-plant Essential Service Water Piping Inspection and Replacement
  • Containment Cooler Upgrade
  • Essential Service Water System Pressure Surge Mitigation

Since Westar’s last general rate case, Westar’s share of the new capital investment at Wolf Creek has been approximately $286 million. This includes capital projects already completed at the plant, the cost of the new projects and a few other smaller projects that are being completed during the Spring 2015 outage.

Other projects being used to increase efficiency, reduce emissions

In other spending:

  • Westar in 2012 installed new bag houses on two of the three units at its coal-fired Lawrence Energy Center (LEC) to meet environmental requirements related to emission of particulates. The bags are replaced on a three-year cycle, with the first such replacement to be completed by May 25, 2015. The bags that will be installed during the May outage will be an upgraded technology and with them Westar hopes to extend the replacement interval to six years.
  • Westar recently upgraded the turbine on Unit 1 at the Jeffrey coal plant. Preliminary results indicate it gained 15 additional MWs of capacity from the unit while burning about 5.6% less fuel.
  • Westar currently has scrubbers on all three units at Jeffrey. In the process of removing SO2 from the flue gas, Westar’s wet flue gas desulfurization process creates a liquid waste. Westar evaluated several options to get rid of this waste, including: discharge to the Kansas River – which was not feasible from an environmental perspective; deep well injection; evaporation/crystallization; and construction of a wetlands that would treat the wastewater naturally. Ultimately, Westar decided to pursue the more innovative option to construct the wetlands and allow nature to treat the wastewater naturally. A pilot project was successful and in 2014, Westar constructed a full-scale constructed wetland.
  • Under a Consent Decree with the U.S. EPA and Kansas regulators, Westar negotiated an option that would require it to either install selective catalytic reduction (SCR) on two units at Jeffrey or to achieve an equivalent level of emissions reductions in another fashion. At the time it could not conceive of any other way of meeting these levels without SCR. Installation of two SCRs would have a capital cost of about $500 million. Ultimately, Westar was able to install less costly low-NOx burner systems and selective non-catalytic reduction systems (SNCRs) on Jeffrey Units 2 and 3 and only one SCR on Unit 1. This one approach alone saved customers approximately $180 million from the more obvious solution, Bridson noted. Westar completed construction of the SCR on Unit 1 for 6% below budgeted costs. Also, after the success with installing the SNCR and burner system on Unit 3, its team discovered further improvements it could make to Unit 2. It modified the installation on Unit 2 to perform even better. With these improvements, it will use less ammonia to achieve the required emissions reductions, resulting in operating savings of about $1 million annually, and reduce the amount of liquid waste to clean up.

Mark A. Ruelle, Westar Energy’s President and Chief Executive Officer, said in his own March 2 testimony: “The costs reflected in Westar’s rate application in this case reflect costs prudently incurred for Westar to continue providing reliable, efficient service at a reasonable cost to our customers, all in accordance with our public service obligations. The largest portion of our request relates to the costs of completing environmental upgrades at La Cygne Station (La Cygne), a project that was previously subject to predetermination scrutiny by the Commission, and that was successfully managed and timely completed – significantly under the preapproved budget.” 

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.