Clearing the air about clearing the air

(Story written by Rachel Hammer) 

On June 9, AEP released its base plan scenario outlining what the company anticipates it would need to do to comply with all regulations currently proposed by the U.S. Environmental Protection Agency (U.S. EPA). Recognizing that this base plan will change as rules are finalized, AEP estimates that it will need to spend $6 billion to $8 billion to:

All units at Kammer Plant, above, would be among the nearly 6,000 megawatts of generation retired under AEP's base plan scenario, to comply with the U.S. EPA's proposed regulatory changes.

• Retire nearly 6,000 megawatts (MW) of existing coal fired generation by Dec. 31, 2014;
• Refuel, retrofit with new or upgrade existing environmental controls on another 11,000 MW;
• Temporarily (1 to 4 years) idle/curtail 1,500 MW to 5,200 MW; and
• Build approximately 1,700 MW of new generation.

AEP’s plan certainly has generated a lot of discussion. Some of that discussion – including an editorial in the Wall Street Journal and an article in the Chicago Tribune — has supported AEP’s position. While other media – such as The New York Times and yes, Rolling Stone – have had harsh words. Many governors and members of Congress have commented with varying points of view. Environmental organizations, and U.S. EPA itself, have questioned AEP’s information.

Several questions and/or comments have been raised repeatedly. When reading or hearing these inaccurate statements or allegations, AEP employees need to have the correct information. Some of these statements are addressed here.

What you may have heard: “AEP has known these regulations were coming for years and hasn’t prepared like it should have.”

Facts: Since 1990, AEP has invested more than $7 billion in environmental controls and has reduced sulfur dioxide emissions by about 73 percent and nitrogen oxide emissions by approximately 80 percent.

All of the major environmental retrofits (flue gas desulfurization/selective catalytic reduction) on our eastern units also reduce mercury as a co-benefit. When the Clean Air Interstate Rule (CAIR) was remanded and the Clean Air Mercury Rule was vacated, AEP continued with the installation of controls as required under current rules.

Until U.S. EPA came out with its proposed rule for Hazardous Air Pollutants (HAPs) in March, no one in the industry knew what level of controls would be needed. AEP’s base plan outlines the additional steps that will be required to comply with the proposed rules just announced.

What you may have heard: “Most of the units AEP says it will close already were scheduled for retirement.”

Facts: Many, but not all of the units, were candidates for retirement between now and 2021. Only Conesville 3 and Sporn 5, 615 MW combined, have scheduled retirement dates before the end of 2014 based on the New Source Review Consent Decree. In addition to these two units, the Consent Decree requires a decision to retrofit, repower or retire Muskingum River units 1-4 by the end of 2015, and another 600 MW of capacity in our eastern area by 2018. U.S. EPA’s proposed rules have less flexibility and will force retirement of these units and more, much earlier than otherwise required.

To put some numbers around this, of the nearly 6,000 MW of coal capacity facing retirement, only about 2,000 MW is subject to the Consent Decree and, of this, all but 615 MW would face accelerated retirements under EPA’s proposed rules.

What you may have heard: “The average age of the coal units that could be retired is 55 years.”

Fact: This is factually true. But that doesn’t mean they’re too old to operate. U.S. EPA’s own modeling suggests that, without additional regulation, one-third of the coal fleet will have been operating more than 50 years by 2020, 15 percent will have been operating more than 60 years and many units will still be economic and operationally sound to run well past 70 years.

What you may have heard: “AEP hasn’t been running these units anyway.”

Fact: There is a significant difference between a unit not running and it not being available to run. Some of the units have not run much in recent years due to the economic downturn. In 2010, AEP placed 10 units at six plants on “extended startup” status which means they are available to run during seasons when demand is highest. Other units provide essential ancillary services that support reliability of our transmission system. During the hot weather that we have experienced already this summer, all available units have been called into operation.

What you may have heard: “Other companies say the compliance time frames are not a concern. Why is this a problem for AEP?”

Fact: Compliance with these time frames is not a concern for companies with significantly less coal-fired generation. Many of the companies making these claims have large fleets of nuclear and/or natural gas generation and stand to benefit financially if U.S. EPA regulations raise market prices for power. AEP has built nine scrubbers since 2004, and we know from this experience that it takes an average of 58 months – close to five years – to bring such a system on line, including all regulatory approvals, design, permitting, contracting, construction and startup. U.S. EPA is allowing only three years.

What you may have heard: “Emissions from coal-burning power plants are causing significant negative health conditions.”

Fact: Emissions from coal-fired power plants have decreased substantially and will continue to decrease – even without the stringent requirements and unreasonable schedules included in U.S. EPA’s proposed rules. Air quality modeling submitted to EPA demonstrates that continued compliance with current rules will achieve the same air quality benefits in the near term. AEP simply is seeking more time and greater flexibility to determine how and when the additional reductions occur in an effort to minimize impacts on jobs, electricity reliability and customer rates.

U.S. EPA acknowledges in its mercury MACT proposal that U.S. power plants emit only a small percentage of the mercury that is in our environment. According to the EPA’s own data, the largest source of man-made mercury is Asia. U.S. power company customers are being asked to pay the significant cost to make reductions that will have negligible impacts on overall mercury exposure levels.

U.S. EPA should consider the most recent data available before imposing costly new compliance programs. New modeling performed by the Midwest Ozone Group shows that, with the exception of a few specific sites, the states subject to CAIR will be in compliance with particulate air quality standards by 2014.

What you may have heard: “AEP is using scare tactics.”

Fact: We agree that the potential impact of these rules may be frightening, particularly in communities where jobs will be lost. Presenting data about financial impacts to local communities and to customers, and raising concerns about reliability is simply telling the whole story about what these rules will mean if they move forward in their current forms. We want to make sure that decision-makers have complete data and that those who may be negatively affected by these rules have adequate time to prepare.

We arrived at our base case for compliance after months of study, analysis and emissions testing. We believe it to be the scenario that, given what we know today, is the best route to compliance while considering the impacts on customers, communities and reliability. The scenario AEP has presented is realistically what would be required for compliance if all proposals become final in their current forms.