A plan for $250 million in capital improvements to install air quality controls at the Nearman power plant will go to a vote of the Unified Government Commission on Dec. 19.
The UG will have a public hearing at the 6 p.m. Dec. 19 meeting, followed by a vote on the issue.
Because of the Environmental Protection Agency’s Mercury and Air Toxics Standards (MATS), the Board of Public Utilities will no longer be able to burn coal at the power plants after April 2015, according to Don Gray, BPU general manager. Adding air quality controls would allow coal to continue to be used.
The BPU on Dec. 12 presented its case to the UG for $250 million in capital improvements to install air quality controls, presenting testimony from BPU officials, as well as presentations by Ed Chicanowicz, an outside engineering consultant, and David MacGillivray, the chairman of Springsted International, a financial and management advisory firm.
Gray made the case for the utility’s choice of installing air quality controls on the coal-burning Nearman plant as the best option.
Three best options were outlined, and one was recommended.
BPU board President David Alvey said installing air quality controls on the Nearman power plant was the best option. The other two leading options, either purchasing the power from other utilities, or converting the Nearman plant to natural gas, had significant disadvantages, including greater costs to customers, predictability, and reliability of generation, he said.
He said Kansas City, Kan., would have difficulty purchasing all of its power, importing all of the energy all of the time, because of transmission constraints. The residents, industries and businesses could face interrupted power about 11 percent of the year if this option was chosen, according to Gray.
The option of converting Nearman to all natural gas would mean that the utility would be subject to volatile prices of natural gas, Gray said. The supply of natural gas could be more easily interrupted.
In contrast, there have been very stable coal prices over the past two years and Gray anticipates stable coal prices over the next few decades.
Industry officials have told the BPU they want the lowest cost, reliable energy, and the key is reliable, Gray said. Interrupting power to their operations is a huge cost, he said.
“When you operate on gas, you cannot guarantee stable prices,” Gray said.
He outlined the costs of the three main options.
Annual power generation costs at Nearman currently are $63 million, he said.
Just purchasing energy from other utilities would cost about $120 million a year, he said. Those costs would be expected to increase. Average residential bills would probably go up $25 a month.
The switch to natural gas would cost about $127 million, or a $30 a month increase on residential bills, he said.
The option to add air quality controls to the coal-powered Nearman plant would cost a total $96 million a year, amounting to a $12 a month increase on residential bills, phased in over a three-year period, he said. Gray said BPU customers would not see the entire $12 a month increase in one year.
“This is our best solution, moving forward, in our view,” Gray said.
He said the Sierra Club had approved this plan in the consent decree.
The BPU would still have some natural gas available through some of its plants, and it has a 17 percent share of the Dogwood natural gas plant. It also buys small amounts of wind power, hydroelectric power and other renewable sources.
The state allowed the BPU an extension of one year, until April 2016, because it is planning to put air quality controls on the Nearman plant and it will be under construction, Gray said. However, the utility may need until 2017 to finish installing these controls, so it is asking for another extension. Gray said the Sierra Club has supported this extension.
Some UG commissioners expressed their feelings that although this wasn’t something they wanted to do, they may have to do it because it is the utility’s best option concerning impending government regulations on air quality.
Commissioner Brian McKiernan said although it makes him sick that the local government is being forced (by federal government regulations) to invest in that plan, the BPU has created a plan that he could support.
“We find ourselves in a very difficult situation, very complex situation, it came at us very rapidly,” Alvey said. “Because we did follow due diligence, I believe we did come up with the best recommendation.”
The Unified Government is planning to post more information from this meeting on its website, www.wycokck.org, on Friday.