NIPSCO evaluates retirement of four coal units over next seven years

Northern Indiana Public Service Co. (NIPSCO) announced Aug. 23 that it is considering long-term supply options, which may lead to the retirement of four of the company’s coal-fired generation units at two different power plants over the next seven years.

While not yet final, NIPSCO outlined its electric generation strategy at a public meeting with consumer representatives, environmental organizations, customers and other stakeholders taking part in Indiana’s Integrated Resource Planning (IRP) process. During the session, NIPSCO leaders said the company has been and will continue working with stakeholders and regulators to solicit input on a generation strategy that meets customer needs in a cost-effective manner, with the goal to provide ongoing work opportunities for any affected employees.

“The landscape for electric generation is shifting dramatically, not just for NIPSCO but for our nation as a whole,” said Violet Sistovaris, NIPSCO executive vice president. “In particular, companies with aging coal-fired units are facing intense economic and environmental regulatory pressures that are driving important decisions today about how to meet the customer needs of tomorrow. Given these factors, we believe it may be in our customers’ best interests to retire some of NIPSCO’s coal-fired generation units, and we will continue working closely with stakeholders via the IRP process to seek input and further evaluate these assumptions while considering the interests of customers, employees and local communities.”

The IRP process is conducted every two years by Indiana energy providers to outline plans for meeting the anticipated energy needs of customers over the next 20 years.. NIPSCO will review various long-term supply options with interested stakeholders and further solicit information for consideration in the development of its final IRP, which the company will submit to the Indiana Utility Regulatory Commission by Nov. 1, 2016.

Although the IRP process is still ongoing, the company believes that the most viable option for customers, the company and employees involves the retirement of four of the company’s seven coal-fired units over the next seven years. Under this option, NIPSCO would retire its Bailly Generating Station coal-fired units as soon as mid-2018 and two of its R.M. Schahfer Generating Station coal-fired units by the end of 2023. The company will outline strategies through the IRP process for securing alternative electric supply as necessary to continue to provide cost-effective and reliable service to customers.

“Our goal is to transition to the best cost, cleanest electric supply mix available while keeping options open for the future as technologies and markets change,” added Sistovaris.

The Generation Hub database shows Bailly with two coal units: Unit 7 (160 MW summer rating) and Unit 8 (320 MW summer). Schahfer has four coal units: Unit 14 (431 MW summer), Unit 15 (472 MW summer), Unit 17 (361 MW summer) and Unit 18 (361 MW summer).

Should NIPSCO decide to proceed with retirement of Bailly, the company would have to seek approval from the Midcontinent Independent System Operator (MISO), which is responsible for coordinating, controlling and monitoring the use of the electric transmission system by utilities, generators and marketers across parts of 15 U.S. states and the Canadian province of Manitoba. MISO will evaluate NIPSCO’s proposed plan with other capacity changes across the MISO footprint.

Due to environmental, regulatory and economic factors, including low natural gas prices, NIPSCO’s electric supply portfolio has already been shifting to include less coal-fired generation. In 2010, NIPSCO’s supply mix included about 90% coal-fired generation, while that portfolio today is 72% coal-fired. NIPSCO also has invested more than $800 million in new technologies for certain coal-fired units – including those units which are expected to continue operating according to the analysis – to improve air quality in compliance with federal regulations.

However, newly enacted Coal Combustion Residuals (CCR) rules and Effluent Limit Guidelines (ELG) will require additional investments at each of NIPSCO’s coal-fired plants, with compliance dates of 2018 and 2023 respectively. Due to these requirements and other maintenance needs, NIPSCO expects to incur approximately $1 billion in additional costs over the next seven years if the company continues to operate its entire fleet of coal units. Under the IRP option outlined by the company, some of these incremental costs would be avoided – providing long-term benefits to customers.

In total, NIPSCO’s current generation portfolio includes three coal-fired stations, one natural gas–fired station, two hydroelectric facilities and purchased wind power. NIPSCO’s supply strategy also includes electricity provided by customers through the company’s voluntary industrial interruptible program, feed-in tariff and net metering programs as well as savings derived from energy efficiency programs.

NIPSCO, with headquarters in Merrillville, Ind., has served the energy needs of northern Indiana for more than 100 years. As Indiana’s largest natural gas distribution company, and the second largest electric distribution company, NIPSCO serves approximately 810,000 natural gas and 460,000 electric customers across 32 counties. NIPSCO is part of NiSource’s (NYSE: NI) seven regulated utility companies.

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.