In September 2014, Oklahoma Gas and Electric (OG&E) executed a contract for the design, engineering and fabrication of two circulating dry scrubber systems to be installed on the coal-fired Sooner Units 1 and 2, and it entered into an agreement on Feb. 9 of this year to install the scrubber systems.
“The scrubbers are part of OG&E’s Environmental Compliance Plan and scheduled to be completed by 2019,” said parent OGE Energy in its Aug. 6 quarterly Form 10-Q report filed with SEC.
In August 2014, OG&E filed an application with the Oklahoma Corporation (OCC) for approval of its plan to comply with the EPA’s Mercury and Air Toxics Standards (MATS) and Regional Haze Federal Implementation Plan (FIP) while serving the best long-term interests of customers in light of future environmental uncertainties. The application seeks approval of the environmental compliance plan and for a recovery mechanism for the associated costs.
The compliance plan includes installing the dry scrubbers at Sooner Units 1 and 2 and the conversion of the coal-fired Muskogee Units 4 and 5 to natural gas. The application also asks the OCC to predetermine the prudence of replacing OG&E’s soon-to-be retired Mustang steam turbines in late 2017 (approximately 460 MW) with 400 MW of new, efficient combustion turbines at the Mustang site in 2018 and 2019 and approval for a recovery mechanism for the associated costs.
OG&E estimates the total capital cost associated with its environmental compliance and Mustang Modernization Plan included in this application to be approximately $1.1 billion. The OCC hearing on OG&E’s application before an administrative law judge (ALJ) began on March 3 and concluded on April 8. Multiple parties advocating a variety of positions intervened in the proceeding.
On June 8, the ALJ issued his report on OG&E’s application. While the ALJ in his report agrees that the installation of dry scrubbers at Sooner Units 1 and 2 and the conversion of Muskogee Units 4 and 5 to natural gas is the best approach, the ALJ makes various recommendations including, among others, that:
- the OCC should not raise rates at this time;
- with respect to OG&E’s environmental compliance plan, the OCC should grant pre-approval of the estimated costs for new equipment as set by contract, including installation costs covered by a contract, but pre-approval of other equipment and installation costs that were still being negotiated at the end of the evidentiary hearing on April 8 should be deferred and may be considered in the next general rate case;
- the foregoing pre-approval is subject to the condition that the OCC should direct OG&E to issue requests for information for at least 200 MW of wind power within thirty days of a final order;
- the OCC should postpone consideration of all other cost recovery issues until the next general rate case;
- the OCC should direct the head of the Public Utility Division at the commission to commence a general rate case; and
- the OCC should deny the Mustang Modernization Plan.
OG&E filed exceptions to the ALJ’s report, including the ALJ’s refusal to recommend a recovery rider for OG&E environmental compliance plan and the ALJ’s recommendation that the OCC should deny the Mustang Modernization Plan. The OCC heard oral arguments on June 25 and took the case under advisement.
On July 21, Commissioner Bob Anthony (one of the three commissioners on the OCC) issued his deliberation statement that was consistent with many parts of the ALJ’s report, including the ALJ’s support of OG&E’s environmental compliance plan, the ALJ’s recommendation, as described above, to pre-approve certain estimated costs of the environmental recovery plan, and the ALJ’s recommendation to defer all other costs recovery issues until the next general rate case. “OG&E cannot predict the outcome of this proceeding,” said the Aug. 6 Form 10-Q.
OG&E’s coal-fired units are:
Muskogee Unit 4, on-line since 1977, 492 MW;
Muskogee Unit 5, on-line since 1978, 506 MW;
Muskogee Unit 6, on-line since 1984, 500 MW;
Sooner Unit 1, on-line since 1979, 520 MW; and
Sooner Unit 2, on-line since 1980, 522 MW.