AEP works on new air controls on two Welsh units, and retirement of the third

American Electric Power (NYSE: AEP) said in its July 23 quarterly Form 10-Q statement that its Southwestern Electric Power Co. (SWEPCo) subsidiary is making progress on new air emissions controls on the coal-fired Welsh Units 1 and 3 in Texas.

SWEPCo is currently constructing environmental control projects to meet the federal Mercury and Air Toxics Standards for Welsh Units 1 and 3 at a cost of approximately $410 million, excluding allowance for funds used during construction (AFUDC). AEP management currently estimates that the total environmental projects to be completed through 2020 for Welsh Units 1 and 3 will cost approximately $600 million, excluding AFUDC.

As of June 30, SWEPCo has incurred costs of $256 million, including AFUDC, and has remaining contractual construction obligations of $89 million related to these projects. SWEPCo will seek recovery of these costs from customers through filings at the applicable state commissions and the Federal Energy Regulatory Commission. As of June 30, the net book value of Welsh Units 1 and 3 was $484 million, before cost of removal, including materials and supplies inventory and construction work in progress (CWIP). If any of these costs are not recoverable, it could reduce future net income and cash flows and impact financial condition, AEP noted.

AEP said in the Form 10-Q that it plans in 2016, also for clean-air reasons, to retire the 528-MW Welsh Unit 2.

Said the SWEPCo website: “To comply with stringent new U.S. Environmental Protection Agency regulations, AEP SWEPCO is investing $411 million to install additional environmental controls at Units 1 and 3 of the coal-fueled Welsh Power Plant at Cason, Texas. The generating capacity of each unit is 528 megawatts (MW). Unit 2 (also 528 MW) is scheduled for retirement by April 2016. The project will allow the plant to continue to provide reliable 24/7 base load electric power to SWEPCO customers in three states beyond the April 2015 EPA deadline (extended to April 2016 for the project under construction).”

The new air controls at this plant, which is fired with low-sulfur Powder River Basin coal, are activated carbon injection to reduce mercury emissions and Pulse Jet Fabric Filter (commonly called baghouse) installations to capture carbon and mercury. The project includes a new 531-foot-tall stack.

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.