Georgia Power agrees to limit spending on Hammond/McIntosh coal units

Georgia Power said in a June 29 brief filed at the Georgia Public Service Commission that it and the commission’s Public Interest Advocacy (PIA) staff have agreed within a stipulated agreement in the utility’s latest Integrated Resource Plan (IRP) case to put off for a while any decisions on five coal units at the Plant McIntosh and Plant Hammond facilities.

Said the June 29 brief: “The Company and Staff both concur that it is in the best interest of customers to retain Plant McIntosh Unit 1 and Plant Hammond Units 1-4. However, pursuant to the Stipulation, the Company and Staff have agreed that it is appropriate to limit annual capital expenditures at Plant McIntosh Unit 1 and Plant Hammond Units 1-4 to $1 million and $5 million, respectively, through July 31, 2019. The Company agrees to make a filing with the Commission prior to incurring expenditures that exceed the annual limit. Although one intervenor filed testimony recommending the retirement of Plant McIntosh Unit 1 and Plant Hammond Units 1-4, such units should be retained as specified in the Stipulation in light of the Company’s agreement to limit capital spending over the next three years until the units are reevaluated in the Company’s next IRP.”

Staff at the commission had made the case that Georgia Power should look at retiring the coal-fired Hammond Units 1-4 earlier than expected, and that the Southern Co. (NYSE: SO) subsidiary should minimize any capital investments in those units in the meantime. Tom J. Newsome, the Director of Utility Finance with the Georgia PSC, and Philip M. Hayet, a utility rate and planning consultant at J. Kennedy and Associates Inc., provided joint May 6 testimony to the PSC in the IRP case. Within that IRP is a Unit Retirement Study (URS).

Based on its analysis, Georgia Power, in its IRP application, is seeking decertification of 377 MW of generating capacity. Staff investigated whether the company’s analysis of resources identified for retirement was reasonable, and whether alternative or additional unit retirements should be considered. Staff’s review included analysis of the Georgia Power URS methodology, and staff’s own independent URS evaluation conducted using alternative modeling tools and assumptions.

  • Staff agreed with the company’s recommendation to retire the Mitchell Units 3, 4A and 4B, Kraft Unit 1 combustion turbine (CT) and Intercession City CT units.
  • Staff’s results are consistent with the company’s analysis regarding continued operation of the Bowen 1-4, Scherer 1-3, Wansley 1-2, and Gaston 1-4 units. These units are coal-fired, except that Gaston has lately been converted to burning natural gas instead of coal.
  • Staff’s results support retirement of McIntosh Unit 1, Hammond Units 1-4, and Yates Units 6-7. However, since the coal-to-gas-converted Yates Units 6-7 currently run little, mostly for peaking use, PSC staff saw no urgency that they be retired in the near term.

Staff’s modeling analysis results indicated it was not economic to continue operating McIntosh Unit 1 or Hammond Units 1-4 over the long term. However, staff does not believe it is necessary for the company to shut down these units right away and any decision to retire these units should be postponed until the 2019 IRP or an interim IRP is filed. However, staff’s recommendation was contingent on the company agreeing to minimize all capital investment in these units until the 2019 IRP or interim IRP is concluded. That is something the utility has now agreed to do, pending commission approval of the stipulation.

Even the newest Hammond unit didn’t pass staff scrutiny

The PSC staff report said: “The Company conducted its evaluation of the Hammond Units by assuming that all four units would either continue to operate or would all retire at the same time. Staff was concerned that the Company’s benefits associated with the Hammond plant might largely be driven by the benefit attributed to Hammond 4 alone, the newest and largest of the four units. Thus, Staff requested the Company perform separate evaluations for Hammond 1-3 and Hammond 4, which the Company provided in response to STF 1-31.

“The Company evaluation of the retirement of all four units together showed that the expected value benefit of continuing to operate all four units was $[redacted] million. When the units were evaluated separately, the benefit of Hammond Units 1-3 was $[redacted] million, and the benefit of continuing to operate Hammond 4 alone was $[redacted] million. This demonstrates that most of the benefit of operating the Hammond plant is indeed provided by operating Hammond 4 alone.

“When it provided the separate analyses for Hammond 1-3 and Hammond 4, the Company also took the opportunity to supply another case examining Hammond 1-4 together, but using a revised and lower cost projection of coal transportation costs from the Illinois Basin. Staff compared this case with all four units retired together to the original Hammond 1-4 case that the Company filed at the start of the IRP. The Company’s results show that when the new transportation rates are considered, the benefits of continuing to operate the Hammond 1-4 units more than double, increasing from $[redacted] million to $[redacted] million.”

In the 2013 IRP, Georgia Power’s retirement study concluded that it was economic to continue operating McIntosh 1. Staff’s analysis in that IRP showed that there was a small but positive benefit under its analysis. In this 2016 IRP, McIntosh 1 is no longer economic in either the company or staff’s analysis due to changed economic circumstances.

Key stats for these units are:

  • McIntosh Unit 1, installed in 1979, 139 MW summer capacity;
  • Hammond Unit 1, installed 1954, 110 MW summer capacity;
  • Hammond Unit 2, installed 1954, 110 MW summer capacity;
  • Hammond Unit 3, installed 1955, 110 MW summer capacity; and
  • Hammond Unit 4, installed 1970, 510 MW summer capacity.
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.