Louisville Gas and Electric applied on Jan. 29 with the Kentucky Public Service Commission for cost recovery related to new environmental projects at the coal-fired Mill Creek and Trimble County power plants.
Supplying supporting testimony was Robert M. Conroy, at that point the Director of Rates for both Kentucky Utilities and Louisville Gas and Electric, and an employee of LG&E and KU Services. All of these are subsidiaries of PPL Corp. (NYSE: PPL). Conroy noted that as of Feb. 1, he would assume the position of Vice President of State Regulation and Rates for the companies.
The projects covered by the application for environmental cost passthrough in rates will serve the Mill Creek and Trimble County stations. The plan contains three new capital projects.
- In one area, LG&E is seeking environmental cost recovery of the associated operating and maintenance (O&M) expenses for only one project. More specifically, the plan contains projects to install low-cost and economical supplemental control technologies to reduce mercury re-emissions that will keep the Mill Creek coal-fired units and Trimble County Unit 1 in compliance, and provide operational flexibility in maintaining compliance, with the federal Mercury and Air Toxics Standards for mercury.
- The other two projects have to do with combustion residual (CCR) rule compliance construction at Mill Creek and Trimble County, with the construction of process water systems at those generating stations to enable ongoing coal-fired unit operations at those facilities.
In addition to the baghouses (pulse-jet fabric filters) with powdered activated carbon (PAC) injection added to the Mill Creek units and Trimble County Unit 1 as part of LG&E’s 2011 compliance plan, some additional investment is necessary to ensure these coal-fired units can continually meet the mercury-emission limits of MATS. In particular, a phenomenon called mercury re-emission that occurs in the wet flue-gas desulfurization systems (WFGDs) serving these units could result in excessive mercury emissions.
The purpose of this project is to install equipment to apply additives to the coal for Mill Creek Units 1 and 2 to improve mercury oxidation, which in turn improves mercury capture in WFGDs because oxidized mercury is water soluble (elemental mercury is not). This project further includes equipment for injecting an organo-sulfide chemical additive into the WFGD reaction tanks for the Mill Creek units and Trimble County Unit 1 to reduce mercury re-emission.
This project is related to the mercury-sorbent tests the companies conducted on certain generating units from 2013 through 2015. Based on the results of those tests, LG&E proposes to add the supplemental mercury control systems to give LG&E the ability to inject these new additives either as a total substitute for PAC or in combination with PAC injection, depending on the price and effectiveness of each.
The total projected capital cost for all of these facilities at Mill Creek and Trimble County is $4.9 million, all of which LG&E seeks to recover through the enviromental cost recovery mechanism.
On the other hand, the total projected capital cost of the proposed CCR Rule compliance construction and construction of new process water systems is $196.9 million for Mill Creek (of which LG&E seeks to recover $193.7 million through the environmental cost mechanism) and $114.1 million for Trimble County (of which LG&E seeks to recover $110.4 million through the environmental cost mechanism). As engineering proceeds and matures for each proposed closure and the assessments of the CCR Rule’s criteria for each surface impoundment’s circumstances becomes clearer, the closure approach and costs for a given surface impoundment could change, perhaps significantly, especially if larger quantities of virgin fill materials become necessary for closure, Conroy noted.
LG&E is seeking two certificates of public convenience and necessity (CPCNs) for CCR Rule compliance construction regarding surface impoundments and process water construction projects at Mill Creek and Trimble County (one CPCN per generating station).
Also supplying Jan. 29 testimony was John N. Voyles, Jr., the Vice President of Transmission and Generation Services for Louisville Gas and Electric and an employee of LG&E and KU Services.
Voyles noted that for the projects LG&E has proposed that support ongoing operations, such as at Mill Creek, the company’s present value revenue requirement analyses evaluate whether the project is economical for the station’s continued operation from 2019 through 2021. If the companies determine that complying with the U.S. EPA’s CO2-reducing Clean Power Plan (CPP) and Effluent Limitations Guidelines (ELG) is more costly than retiring coal units and replacing the capacity, they can likely operate the units through 2021 without incurring any CPP and ELG compliance costs. These analyses show that these projects are the lowest reasonable cost alternatives, even if the units cease to operate past 2021.
At Trimble County, in addition to the investments required for these new projects, the companies are already proceeding with spending $277 million from 2016 through 2021 for Phase I of the landfill and CCR treatment and transport facility (CCRT). While the relative benefits from these significant long-term investments will greatly exceed their cost, the point at which their benefits exceed their cost will occur after 2021, Voyles wrote. As a result, the companies evaluated the Trimble County projects over the companies’ standard 30-year analysis period with high-level estimates for CPP and ELG compliance costs.
The EPA’s CCR Rule requires that surface impoundments containing CCR close if the surface impoundment does not comply with applicable structural and location requirements. In addition, any surface impoundment must close if it is determined to cause a statistical increase in CCR constituents in the groundwater above applicable groundwater protection standards. Therefore, in order to assure compliance with the CCR Rule’s restrictions regarding surface impoundments while supporting continued operation of the generating units at the stations, LG&E is proposing to close five surface impoundments at Mill Creek and two surface impoundments at Trimble County by 2023.
Kentucky Utilities seeking a separate approval for similar projects
Kentucky Utilities on Jan. 29 filed a similar application at the Kentucky commission. The projects in KU’s 2016 environmental plan will serve the E.W. Brown, Ghent, Trimble County, Green River, Pineville, and Tyrone stations. Although Green River, Pineville, and Tyrone no longer have active coal-fired operations, the projects contained in this plan relate to environmental compliance at those facilities resulting from past coal-fired generation.
KU’s plan contains seven new capital projects. KU is seeking environmental cost recovery of the associated operating and maintenance (O&M) expenses for only one of the projects. The plan contains projects to:
- build the second phase of the existing Brown landfill;
- improve the SO2 removal efficiency of the WFGD serving Ghent Unit 2;
- install low-cost and economical supplemental control technologies to reduce mercury re-emissions that will keep the Ghent units in compliance, and provide operational flexibility in maintaining compliance, with MATS for mercury;
- close the surface impoundments at Green River, Pineville, and Tyrone; and
- conduct CCR Rule compliance construction at Ghent, Trimble County, and Brown, with the construction of process water systems at those generating stations to enable ongoing coal-fired unit operations at those facilities.
KU is converting its Main Ash Pond (a surface impoundment) at Brown to a dry storage landfill, Phase I of which will be in service this year. When the Kentucky Division of Waste Management issued the permit for the Special Waste Landfill at Brown, it set forth a 10 foot height limit for each successive phase of lateral expansion such that the volume of CCR disposed in each phase be no more than 10 feet higher than adjoining phase(s). Because of this permit condition, the initial capacity of Phase I is limited to a height of 10 feet. Based on the historical production at Brown, Phase I’s initial 10 feet of capacity may be exhausted by as early as the second quarter of 2018. Forecasted production volumes suggest there may be usable capacity until 2019.
To ensure KU’s uninterrupted ability to dispatch the Brown coal-fired units with adequate time for construction and possible delays, KU is seeking approval to construct Phase II at this time, but will not begin construction before 2017. The total expected capital cost of Phase II is $11.9 million (of which KU seeks to recover $5.3 million through the environmental cost mechanism). KU is seeking a CPCN for Phase II of the Brown landfill even though the capital cost of the project does not meet the financial materiality criterion in state regulations.
Conroy said investing in Phase II of the Brown landfill is economical even if the Brown coal-fired units operate only through the end of 2021 (although KU is not committing or predicting that the units will retire in 2022 or later).