Indianapolis Power lays out new round of environmental spending

The costs for NPDES Clean Water Act compliance at the coal-fired Petersburg station for 2016 to 2018 are expected to be $97 million, said Indianapolis Power & Light (IPL) parent IPALCO Enterprises in its Aug. 5 quarterly Form 10-Q report.

IPL plans to spend a total of $224 million for this Petersburg project (of which $180 million has been expended through June 30, 2016). Also, as a result of environmental regulations, IPL completed the refueling of Unit 7 at its Harding Street station in the second quarter of 2016, converting from coal-fired to natural gas-fired. The 2016 to 2018 cost of the projects necessary to complete this conversion, including costs for NPDES, MATS compliance and dry ash handling, are expected to be $57 million (IPL plans to spend a total of $101 million on this project, including amounts already expended through June 30, 2016).

IPL has also included in the 2016 to 2018 forecast $149 million related to environmental compliance for coal combustion residuals (CCR) and National Ambient Air Quality Standards (NAAQS) regulations and studies related to cooling water intake requirements in sections 316(a) and 316(b) of the Clean Water Act.

IPL also plans on spending $17 million over the 2016-2018 period for an energy storage facility at its Harding Street station (the majority of the $17 million is expected to be spent in 2016). The total cost of this project is expected to be $26 million (of which $24 million has been expended through June 30, 2016).

The EPA’s final CCR rule became effective in October 2015. Generally, the rule regulates CCR as non-hazardous solid waste and establishes national minimum criteria for existing and new CCR landfills and existing and new CCR surface impoundments (ash ponds), including location restrictions, design and operating criteria, groundwater-monitoring and corrective action, and closure requirements and post closure care.

IPL does not reasonably anticipate that the existing ash ponds at Petersburg will be able to successfully demonstrate compliance with certain structural stability requirements set forth in the CCR rule by the Oct. 17, 2016, deadline. As such, IPL would be required to cease use of the ash ponds by April 17, 2017. However, the Indiana Department of Environmental Management (IDEM) has granted IPL a variance extending that deadline to April 11, 2018. In order to handle the bottom ash material that would otherwise be sluiced to the ash ponds, IPL plans to install a dry bottom ash handling system at an estimated cost of approximately $47 million.

On May 31, 2016, IPL filed its CCR compliance plans with the Indiana Utility Regulatory Commission. IPL is seeking approval to install the bottom ash dewatering system at its Petersburg station. It expects to recover through an environmental rate adjustment mechanism any operating or capital expenditures related to the installation of this system. Recovery of these costs is sought through an Indiana statute that allows for 80% recovery of qualifying costs through a rate adjustment mechanism with the remainder recorded as a regulatory asset to be considered for recovery in the next base rate case proceeding. 

In August 2010, a new one-hour SO2 primary NAAQS became effective. In August 2013, EPA published in the Federal Register its final designations, which include portions of Marion, Morgan, and Pike counties, Indiana, as nonattainment with respect to the one-hour SO2 standard. In September 2015, IDEM published its final rule establishing reduced SO2 limits for IPL facilities in accordance with the new one-hour standard, for the areas in which IPL’s Harding Street, Petersburg, and Eagle Valley generating stations operate, with compliance required by Jan. 1, 2017.

The NAAQS rule will not impact IPL’s Eagle Valley or Harding Street generating stations as these facilities have ceased coal combustion in advance of the compliance date. However, improvements to the existing FGD systems at Petersburg station will be required by the rule. IPL estimates costs for compliance at Petersburg station at approximately $48 million for measures that enhance the performance and integrity of the FGD systems.

On May 31, 2016, IPL filed its SO2 NAAQS compliance plans with the Indiana URC. IPL expects to recover through an environmental rate adjustment mechanism any operating or capital expenditures related to compliance with the rule. Recovery of these costs is sought through the Indiana statute that allows for 80% recovery of qualifying costs through a rate adjustment mechanism with the remainder recorded as a regulatory asset to be considered for recovery in the next base rate case proceeding. 

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.