There are, of course, threats to the coal-fired capacity of Entergy Arkansas Inc. over the long term from the U.S. Environmental Protection Agency’s newly-final Clean Power Plan, but a more immediate threat to at least some of that capacity is a federal implementation plan for regional haze that has been proposed by EPA.
Entergy Arkansas on Oct. 30 filed with the Arkansas Public Service Commission its 2015 Integrated Resource Plan (IRP). The last IRP it had filed with the commission was back in 2012, when the CO2-reducing Clean Power Plan was a glimmer in EPA’s eyes. Notable is that Entergy Arkansas earlier this year tried and failed to get the commission to let it push back this IRP filing into next year, in large part so it had more time to figure out Clean Power Plan issues. The commission ruled on May 29, basically, that there is always a lot of uncertainty involved in these resource plans, so there was no reason for a delay.
EPA proposed a federal implementation plan (FIP) on April 8, to address the requirements of the Regional Haze Rule and visibility transport requirements for Arkansas that EPA had previously disapproved. EAI owns and operates three facilities in Arkansas that the EPA proposes to regulate under the FIP through emission limitations that would require emissions controls for SO2 (scrubbers) at the White Bluff and Independence coal plants and NOx controls (Low NOX Burner/Separated Over-Fire Air) at White Bluff and Independence and lesser NOX controls at one natural gas- and oil-fired plant, Lake Catherine Unit 4. In addition, the EPA is taking comment on requiring only SO2 scrubbers at Independence.
The proposed FIP would require the installation of NOx controls within three years from the effective date of a final FIP and SO2 scrubbers within five years. The final FIP is anticipated to be effective in mid-to-late 2016.
On Aug. 7, Entergy Arkansas submitted comments in response to the proposed FIP. EAI’s comments submitted in response to the proposed FIP do not reflect a decision to shut down White Bluff, the utility said. Rather, EAI has proposed in its comments alternative options than that proposed in the FIP for complying with Regional Haze requirements and EAI expects to seek a public interest finding from the commission as to the appropriate course of action to take in connection with Regional Haze compliance for White Bluff and Independence.
In its comments in response to the FIP, EAI proposed the following:
- to accept lower SO2 emission rate limitations at both White Bluff and Independence;
- to install NOx controls on White Bluff and Independence within three years of the final FIP’s effective date; and
- to commit to the permanent cessation of coal-fired operations at White Bluff in 2027/2028.
EAI said it is awaiting EPA response to its proposal. In the 2015 IRP, a Future 3 case assumes a scenario consistent with EAI’s comments submitted in response to the proposed FIP; however, the other two future cases assume SO2 scrubbers are installed at both the White Bluff and Independence plants and that both plants operate through a 60-year useful life assumption.
Entergy says Arkansas should comply with Clean Power Plan process – for now
On the Clean Power Plan, EAI’s Point of View (POV), which is based on parent Entergy Corp.‘s (NYSE: ETR) corporate POV, is that national carbon regulation for the power generation sector will occur; however, the timing, design, and outcome of any carbon control program are highly uncertain.
Currently EPA has issued final regulations using section 111 of the federal Clean Air Act as the vehicle. EPA’s CPP targets emissions from electric generators, utilizing three building blocks (coal plant heat rate improvements, an increase in dispatch of natural gas combined cycle plants up to 70% capacity factor, and an increase in zero and low emitting generation) to establish state-by-state emissions rate limits, expressed as lbs CO2/MWh.
The CPP was published on Oct. 23 in the Federal Register, triggering a wave of lawsuits against it by multiple state governments, coal producers and coal-fired power plant operators. The future of those lawsuits adds an extra layer of uncertainty to the resource planning process.
The CO2 POV utilized in the 2015 IRP recognizes this uncertainty by presenting a range of potential CO2 cost outcomes. The range of outcomes extends from a zero direct cost per ton (low or “business as usual” case) up to a high case reflecting a national mass cap program that mimics the goals of the old Waxman-Markey legislative bill (and, to a certain extent, the impact of a 111(d) regulatory approach). The high case starts at $25.10/ton (real $2012) in 2020 and escalates to $38.40/ton in 2030.
The “reference case” price stream is based on a probability-weighted forecast average of (i) the business as usual case, (ii) a 111(d) equivalent mass cap case translating the proposed rule into a national mass cap but reflecting the goals of the proposed rule, and (iii) the high case. In the 2015 IRP, the cost of CO2 emissions were added to an emitting unit’s variable cost based on its modeled generation.
EAI said it will participate in the Arkansas CPP stakeholder process sponsored by the Arkansas PSC and the Arkansas Department of Environmental Quality. EAI also continues to analyze the long and complex EPA final rule in order to assess various compliance options open to the state if the rule survives litigation. EAI currently believes the state should engage in the CPP state implementation plan process in the interim at least to the extent of filing the basic initial document required in September 2016 and, at that time, seeking a two-year final plan extension allowed under the rule. EAI assumes that Arkansas will continue its litigation against the rule and sees the planning process as an addition to, and not in conflict with, the state’s litigation position.
EAI utilizes 1,031 MW from coal-fired generation at the White Bluff and Independence plants. EAI shares ownership of White Bluff with the Arkansas Electric Cooperative and several municipal electric utilities and shares ownership of Independence with Entergy Mississippi, Arkansas Electric Cooperative, Entergy Power and several municipal utilities.