Louisiana PSC signs off on prudency of Cleco’s MATS-compliance controls

The Louisiana Public Service Commission in a Feb. 5 order found that it was a prudent decision by Cleco Power LLC to install new air emissions controls on three solid-fuel units to comply with the federal Mercury and Air Toxics Standards (MATS), but decided to defer any decision on the prudency of the actual costs of those controls.

The MATS rule had an April 16, 2015, initial compliance deadline and requires a reduction in emissions of certain heavy metals and acid gases from new and existing coal- and oil-fired electric steam generating units. The MATS rule applies to three solid-fuel generating units owned, in whole or in part, by Cleco: Dolet Hills Power Station, Rodemacher Power Station Unit 2 at the Brame Energy Center, and Madison Unit 3 at the Brame Energy Center. These units total 1,095 MW, and constitute 100% of Cleco’s solid-fuel generation and 45% of its generation fleet. The estimated cost to install the MATS compliance equipment at all three units was $107.6 million.

Commission staff concluded that Cleco adequately supported a finding that its MATS compliance strategies were reasonable and prudent, based on what was reasonably known and measurable. Intervenor Sierra Club did not contest the installation of the emissions control equipment at Madison. Sierra Club, however, with regard to Dolet and Rodemacher, contended that Cleco conducted a flawed least-cost planning analysis to bolster the proposed projects and missed or ignored numerous warning signs indicating that any capital expenditures at the coal-fired power plants would not be cost effective.

In August 2012, Cleco filed the application with the commission requesting authorization to install this emissions control equipment. Cleco also requested authorization to recover the costs associated with the emissions control equipment through pre-existing commission rate-making mechanisms.

According to Cleco, only a prudency determination is being sought, as there is no requirement for the commission to “authorize” the installation of the MATS controls, since such authorization is not required under a commission 1983 General Order.

Cleco argued that it engaged in a thorough, comprehensive, and reasoned analysis in determining its MATS compliance plan. To comply with MATS, Cleco evaluated 15 different control strategies for Dolet and Rodemacher. Cleco utilized both internal and independent third party engineering analysis and testing. According to Cleco, the analysis resulted in the selection of control strategies that provide between $41 million to $515 million net present value savings to Cleco’s customers in comparison to retiring the units and replacing them with a new natural gas combined cycle unit. Cleco pointed out that the savings range depends upon the cost of natural gas, and that the higher the cost of natural gas, the greater the savings to Cleco’s customers. Cleco acknowledges that the range does not take into account the cost of potential future environmental regulations. However, according to Cleco, even considering potential future environmental costs, which Cleco included in its analysis in rebuttal testimony, the selected MATS compliance strategies have the lowest reasonable rate consequences for Cleco’s customers, maintain Cleco’s base load generation reliability, and preserve Cleco’s invaluable generation fuel diversity.

Cleco owns 100% of Madison, 30% of Rodemacher and 50% of Dolet. The current estimates of the installed capital costs for the emissions controls, based on Cleco’s ownership share and the expected installation dates of the controls for the three units, are:

  • Dolet Hills – $60.3 million; 2nd Quarter 2014;
  • Rodemacher – $41.3 million; 4th Quarter 2014; and
  • Madison 3 – $6.0 million; 1st Quarter 2015.

At Madison, Cleco selected as the appropriate MATS control strategy the installation of an activated carbon injection system for the capture of mercury. At Dolet Hills, Cleco selected the addition of stand-alone fabric filters, the installation of a dry sorbent injection system to control HCl, and the installation of an activated carbon injection system to control mercury. At Rodemacher, Cleco selected the addition of stand-alone fabric filters, the installation of a dry sorbent injection system for the control of HCl, and the installation of an activated carbon injection system for the capture of mercury.

Rodemacher is a 480-MW unit, of which Cleco owns 30% (148MW). Dolet is a 636-MW unit, of which Cleco owns 50% (319 MW). In its analysis Cleco compared: the cessation of Rodemacher (148 MW) with replacement from a 250 MW combined cycle gas turbine (CCGT); cessation of Dolet (319 MW) with replacement from a 480 MW CCGT; and cessation of both Rodemacher and Dolet (467 MW) with replacement from a 480 MW CCGT.

Based on the testimony and evidence presented, the commission concluded on Feb. 5 that:

  • its 1983 General Order and 2008 General Order do not require a certicate of public convenience and necessity for the installation of emissions control equipment;
  • that Cleco was prudent in its decision to install the MATS equipment at Dolet Hills Power Station, Rodemacher Power Station Unit 2, and Madison Unit 3;
  • that a determination of the prudency of the actual costs expended in the installation of this emissions control equipment is premature. Determination of the prudency and recovery of Cleco’s actual costs will take place in Cleco’s Formula Rate Plan dockets and annual reviews; and
  • that the expenses of reagents used in those controls should be eligible for recovery in Cleco’s Environmental Adjustment Clause, subject to audit, and that incremental fuel/energy expenses should be eligible for recovery in Cleco’s Fuel Adjustment Clause, subject to audit.

Madison Unit 3, 100% owned by Cleco Power, is the company’s largest generating unit and was completed in 2010. It can use multiple solid fuels including biomass, coal and petroleum coke, a byproduct of the oil refining industry. The plant uses circulating fluidized-bed combustion technology.

Rodemacher Unit 2, completed in 1982, is jointly owned by Cleco Power, Louisiana Energy and Power Authority and Lafayette Utilities System. Unit 2 is fueled predominantly by coal from Wyoming.

The Dolet Hills Power Station sits on a 30,000-acre site and went into operation in 1986. It burns lignite coal, which is mined nearby. 

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.