The Southwestern Electric Power Co. (SWEPCO) unit of American Electric Power (NYSE: AEP) filed Sept. 27 with the Arkansas Public Service Commission an interim rate schedule pursuant to Act 310, under which it wants to recover from ratepayers certain compliance costs for coal-fired capacity.
Act 310 authorizes public utilities to recover in rates, through an interim surcharge, costs and expenses reasonably incurred as a result of legislative or regulatory requirements relating to the protection of the public health, safety and the environment. Eligible costs are recoverable through the interim surcharge until such time as they can be included in base rates established in the company’s next general rate case.
In this filing, SWEPCO seeks to recover through an interim surcharge the remaining costs it has incurred since its last filing to install environmental controls at the Welsh Unit 1, Welsh Unit 3 and Flint Creek generating facilities. The Welsh Plant is located in Cason, Texas, and the Flint Creek Plant is located in Benton County, Arkansas. The surcharge will also recover expenditures by the company for work being performed on the fly ash landfill at the Flint Creek Plant.
The environmental controls were installed at the Flint Creek and Welsh units to comply with rules adopted by the U.S. Environmental Protection Agency under the federal Clean Air Act. Both the Flint Creek and Welsh units must comply with the EPA’s Mercury and Air Toxics Standards (MATS). The MATS Rule became effective on April 16, 2012, with compliance required within three years, or by April 16, 2015. EPA granted SWEPCO a one-year extension, with compliance required to be achieved by April 16, 2016.
In addition to the MATS Rule, the Regional Haze Rule (RHR) affects the Flint Creek Plant. SWEPCO is also performing work on the Flint Creek fly ash landfill in order to comply with the Arkansas Department of Environmental Quality’s solid waste regulations. These regulations establish requirements for design, construction and operation of landfills in the state of Arkansas. The regulations are intended to ensure the quality of groundwater through proper solid waste management.
In order for the Welsh plant to continue operating in compliance with MATS, SWEPCO has installed an activated carbon injection (ACI) system and fabric filter on both Welsh Unit 1 and Unit 3. The installation also includes a silo for the storage and delivery of activated carbon, ancillary equipment necessary for the collection and disposal of the fabric filter byproduct; an induced draft fan; a chimney flue; digital instrumentation controls upgrades; and boiler reinforcement. Improvements and equipment additions that will have common use between the two units include the concrete exhaust chimney shell, the 13.8-kV power feed to the chimney switchyard, and the compressors and dryers for the fabric filter.
For Welsh Unit 3, construction of the newly-installed environmental controls was completed, and the unit placed in service, on March 22, 2016. Construction of the ACI system and fabric filter on Welsh Unit 1 was completed and the unit placed in service on April 28, 2016.
For the Flint Creek plant, SWEPCO has installed an ACI system and a dry Flue Gas Desulfurization (DFGD) system, including an integrated fabric filter. The Arkansas PSC approved the installation of these environmental controls. The ACI system will reduce mercury for MATS compliance and particulate emissions. The DFGD will reduce SO2 emissions for MATS, as a surrogate for HCl, and for RHR compliance. The landfill modifications at the Flint Creek Plant will be completed and placed in-service by the end of 2016. The DFGD and ACI systems were completed and placed in-service on June 12, 2016.
Paul W. Franklin, the Vice President Generating Assets for SWEPCO, said in accompanying testimony that the Welsh plant is located near Cason, Texas, in Titus County and consists of two generating units (Unit 2 at the three-unit facility was retired in April 2016). Units 1 and 3 each have a net generating capacity of 528 MW. Welsh is the largest plant on SWEPCO’s system and has a total net capability of 1,056 MW. Unit 1 was placed into commercial operation in 1977 and was the ccmpany’s first coal-fired unit. Unit 3 was placed in service in 1982. The units at Welsh burn Powder River Basin (PRB) coal that is transported to the plant by rail. The Welsh units are equipped with a hot-side electrostatic precipitator (ESP) to mitigate emissions of particulate matter.
The Flint Creek plant is located in Benton County, Arkansas. SWEPCO and Arkansas Electric Cooperative Corp. co-own the plant on a 50/50 net output and cost basis. Flint Creek is a single-unit pulverized coal-fired plant with a net capacity of 528 MW, and was placed in service in 1978. SWEPCO operates the plant. The single-unit Flint Creek Plant is fueled with PRB coal that is transported by rail. The unit is equipped with a hot-side ESP for particulate control.
Welsh Units 1 and 3, and Flint Creek, represent approximately 23% of SWEPCO’s generating capacity, and accounted for nearly 30% of SWEPCO’s energy generated in 2015.
For the Welsh projects, actual capital costs total approximately $144.6 million for Unit 1, $114.0 million for Unit 3, and $124.7 million for the improvements common to both units.
At Flint Creek, In accordance with permit conditions and ADEQ requirements, SWEPCO is installing an intermediate liner and leachate collection system (collectively referred to as a “liner system”) over the existing landfill, and a bioreactor for treatment of leachate. The liner system will allow for collection of leachate in the landfill. The bioreactor will use microorganisms to treat the leachate, reducing selenium and hexavalent chromium levels prior to permitted discharge into the bottom ash pond. Placing the liner system over the existing waste in the landfill avoids the cost of excavating that waste, while preventing constituents from the existing and newly-placed waste from leaching into groundwater. The landfill modifications are planned to be complete and placed in-service by the end of 2016.
These actual capital costs for Flint Creek total approximately $213.4 million for MATS and RHR investments, and $10.5 million for groundwater protection improvements to the fly ash landfill, Franklin noted.