Environmental Compliance and Impacts. June 2011

Transcription

1 Environmental Compliance and Impacts June

2 AEP s environmental stewardship AEP is an environmentally responsible company. It supports regulations that achieve long-term environmental benefits while considering the impacts on customers, the economy and system reliability. Environmental regulation must be approached in a coordinated, realistic and cost-effective manner. AEP does, and will continue to, comply with all environmental regulations. 2

3 Ongoing air quality improvements AEP has improved its environmental performance. Since 1990, AEP has reduced its NOx emissions by 80% and its SO 2 emissions by 73%. AEP has invested more than $7.2 billion since 1990 to reduce emissions from its coal-fueled generation fleet. AEP will continue to improve the environmental performance of its power plants. TOTAL SYSTEM - AVERAGE ANNUAL SO 2 EMISSIONS (in thousand US tons) TOTAL SYSTEM - AVERAGE ANNUAL NOx EMISSIONS (in thousand US tons) 1,535 1, ,

4 Anticipated environmental regulations and compliance deadlines Will set statespecific SO 2 and NOx limits Assumed Rule Finalization Mid 2011 Clean Air Transport Rule (CATR) Assumed Rule Finalization Nov 2011 Assumed Rule Finalization Nov 2011 *Hazardous Air Pollutants (HAPS) Assumed Rule Finalization Mid 2012 Regional Haze Coal Combustion Residual (CCR) Establishes SO 2 and NOx limits for Oklahoma and Arkansas Sets: HCl limit at lb/mmbtu PM limit at lb/mmbtu Hg limit at 1.2 lb/tbtu Requires lined wet ash ponds and/or conversion to dry ash handling Impingement requirements (2020) Entrainment requirements (varies) Water (316b) Assumed Rule Finalization Mid 2012 Jan-2011 Jan-2012 Jan-2013 Jan-2014 Jan-2015 Jan-2016 Jan-2017 Jan-2018 Jan-2019 Jan-2020 * Units that will be retrofit are eligible for a one year compliance extension from the EPA 4

5 Compliance with time frames is not feasible Typical FGD system construction timeline. (10 12 mo) Certificate of Convenience & Necessity (9 mo) Front End Engineering & Design CATR Compliance (12/31/2013) HAPs Compliance without 1-year Compliance Extension (12/31/2014) HAPs Compliance with 1-year Compliance Extension (12/31/2015) (12 18 mo) Major Permitting (9 mo) Regulatory Approval (18 mo) Detailed Engineering & Design (28 mo) Construction Execution (6 mo) Start Up & Commissioning

6 Reliability concerns Capacity reductions caused by retirements, idled units and curtailments will create grid reliability concerns. Generating units provide ancillary services that support grid reliability. These ancillary services -- voltage and reactive load support, frequency response, load following ability, system restoration and black start will be lost with unit retirements and curtailments. It is not clear how and when these services will be replaced. We are meeting with regional reliability organizations to make sure these concerns are being addressed. With longer time frames, AEP and the industry can address these concerns. 6

7 A base plan scenario The following slides outline what AEP currently expects it will need to do to comply if all proposed environmental regulations are enacted without change. The scenario is AEP s best estimate at this point in time. This scenario will change. 7

8 Overall impacts for AEP To meet compliance deadlines for new environmental regulations, AEP expects it will need to invest $6 billion to $8 billion to: Retire more than 6,000 MW of existing coal-fired generation by. Refuel, retrofit with new or upgrade existing environmental controls on another 11,000 MW. Temporarily (1 3 years) idle approximately 1,000 MW. Build approximately 1,220 MW of new generation. This will create: Abrupt rate increases ranging from 10% to 35%. Significant reliability concerns, particularly in the time frame. The need to install additional equipment to address impacts on the transmission system due to the reduction in generating capacity. Other locally significant economic impacts. 8

9 Overall impacts to employees and communities Nearly 750 employees could be displaced through premature unit retirements, while an estimated 170 permanent new jobs could be created by retrofit technologies. Net impact could be approximately 600 fewer jobs with annual lost wages of approximately $40 million. There will be indirect job losses affecting local vendors, contractors and service providers, as every MW of coal-fueled generation supports an average of three additional indirect jobs. In 2015 Payroll taxes could decline more than $20 million. Property tax payments could decline approximately $12 million. 9

10 Environmental control technologies FGD flue gas desulfurization system (scrubber) reduces sulfur dioxide emissions SCR selective catalytic reduction system reduces nitrogen oxide emissions ACI activated carbon injection reduces mercury emissions DSI dry sorbent injection neutralizes acid gases Baghouse also fabric filter physically traps and filters particulate matter 10

11 AEP Ohio Retirements Retrofit-Refuel-Upgrade^ Unit(s) MW Jobs Date Units Type Notes Conesville 3 Kammer 1 3* Dec. 31, 2012 Conesville 5, 6 Gavin 1, 2 SCR, DSI FGD upgrade Curtailment Muskingum River Muskingum River 5 Refuel to natural gas Capacity reduced Picway Zimmer FGD upgrade Sporn 2, 4* Sporn 5* Total , Requested ^Assumes regulatory cost recovery for environmental investments including refuel are non-bypassable surcharge as proposed *Units are located in West Virginia Customer rates Lost taxes Payroll (2010) Property (2009 actual) Other Impacts 10% - 15% $9.1 million in Ohio $4.7 million $4.3 million Lost wages $10.4 million 11

12 Appalachian Power Retirements Retrofit-Refuel-Upgrade Unit(s) MW Jobs Date Unit(s) Type Notes Clinch River 3 Glen Lyn 5, 6 Kanawha River 1, 2 Sporn 1, 3 Total , Premature retirement of AEP Ohio-owned units at Sporn and Kammer plants will have economic impacts in West Virginia. Clinch River 1, 2 Customer rates Virginia West Virginia Lost taxes Virginia West Virginia Lost wages Virginia West Virginia Refuel with natural gas Other Impacts 10% - 15% 10% - 15% Capacity reduced $15.75 million $ 2.9 million $12.89 million $23.0 million $ 6.1 million $16.9 million 12

13 Indiana Michigan Unit(s) Tanners Creek 1-3 Retirements MW Jobs Date Unit(s) Rockport 1 Rockport 2 Tanners Creek 4 Retrofit-Refuel-Upgrade Type FGD, SCR FGD, SCR DSI and ACI Jobs Other Impacts Customer rates Indiana Michigan Taxes (Indiana) Payroll (2010) Property (2009) Wages (Indiana) 25% - 30% 25% - 30% ($1.0 million) $129,000 ($1.2 million) +$1.0 million 13

14 Kentucky Power Unit(s) Big Sandy 2 Big Sandy 1 Total MW Retirements ,078 Jobs 86 Date *A portion of KPC rate impact is from the company s allocation from Rockport. Unit(s) Big Sandy 1 Customer rates Lost taxes Property (2009) Payroll (2010) Lost wages New Generation MW Repower as 640 MW natural gas Other Impacts 30% - 35%* $3.7 million $461,000 $3.2 million $6.0 million Date Dec. 31,

15 Public Service Oklahoma Retrofit-Refuel-Upgrade Other Impacts Unit(s) Type Notes Jobs Customer rates 10% - 15% Northeastern 3, 4 FGD, ACI, Baghouse Units will be idled 1/1/16 until retrofits are complete +60 Oklaunion FGD upgrade, ACI 15

16 SWEPCO Retirements Retrofit-Refuel-Upgrade Unit MW Jobs Date Unit(s) Type Jobs Welsh Dolet Hills* ACI, Baghouse Other Impacts Flint Creek FGD, ACI, Baghouse +30 Customer rates Arkansas Louisiana Texas 19% - 23% 16% - 20% 18% - 22% Pirkey Welsh 1, 3 ACI, Baghouse ACI, DSI, Baghouse Lost taxes Payroll (2010) Property (2009) Lost wages $1.5 million/year $89,000 $1.4 million $980,000 16

17 A better option AEP supports appropriate environmental regulation or legislation that establish a more coordinated, realistic and cost-effective compliance program. Regulations must provide appropriate flexibility to achieve the desired emission reductions while managing customer costs. A thoughtful phased-in approach will achieve similar environmental benefits with significantly less economic and reliability impact. 17

18 Benefits of a phased-in approach Will provide the time utilities need to install environmental retrofits without idling or curtailing generating units. Will allow unit retirements to occur over a more reasonable timeframe needed to address grid reliability issues. Will support construction jobs over a longer period of time. Will provide long-term environmental benefits. Will give local communities time to plan for economic losses. 18

19 A phased-in approach will arrive at the same destination 2,500,000 AEP Plant NOx and SO2 Emissions 2,000,000 1,500,000 Tons 1,000, % reduction in total NOx & SO2 emissions at a cost of approximately $7 billion 500,000 0 Approximately 15.5% further reduction in emissions at a cost of $6-8 billion HAPs Rule Total System NOx+SO2 Rational Approach 19