Oklahoma Gas and Electric Co. has big plans for its aging Mustang natural gas plant and wants to install scrubbers at its Sooner coal plant in Red Rock to comply with environmental regulations, the utility said in a planning update submitted to Oklahoma regulators.
While it’s too early to determine exact costs, OG&E representatives said the changes could increase customer bills by 15 to 20 percent when it’s fully implemented by 2019.
OG&E said its plan meets federal mandates in a way that preserves reliability and minimizes the effect on customers.
“Unfortunately, all alternatives available to the company increase customer costs,” the utility said in a draft Integrated Resource Plan submitted to the Oklahoma Corporation Commission.
In the update, OG&E said it wants to convert two of the three coal units at its Muskogee plant to use natural gas. The utility also wants to replace natural gas-powered steam units from the 1950s at its Mustang plant with modern, quick-fired combustion turbine natural gas units.
“With this plan, we’re moving a lot further into the (natural) gas area, but we are preserving some coal for fuel diversity, which is a very important part of our planning,” said OG&E attorney Kimber Shoop. “We really feel strongly that fuel diversity is important for our customers because of the insurance against the increase in costs of one particular fuel.”
The utility’s planning document forecasts that natural gas will be twice as expensive as coal.
Whitney Pearson, with the Sierra Club’s Beyond Coal campaign in Oklahoma, said the utility has taken a “half step in the right direction through its decision to reduce coal use at its largest and dirtiest power plant.”
Pearson said the Sierra Club was disappointed OG&E isn’t taking more advantage of low-cost wind resources available in Oklahoma and will continue to buy coal from Wyoming. The Sierra Club wants OG&E to phase out all its coal plants, a decision already taken by the state’s other large electric utility, Public Service Co. of Oklahoma.
“Throughout the planning process, the Sierra Club will advocate for the Oklahoma-first solutions that will strengthen our economy and protect public health,” Pearson said.
OG&E, which has added 670 megawatts of wind capacity in the last decade, said it wasn’t interested in adding more wind until planned transmission lines are finished. The utility also said it looked at large-scale solar generation but the options weren’t yet cost-effective for customers.
The company plans to file an environmental compliance plan in August for its response to regional haze, mercury and air toxics and other federal emissions mandates. That filing will detail some of the costs the utility needs to recover from customers.
OG&E representatives said they are still studying a 645-page proposed rule on carbon dioxide emissions from existing power plants released Monday by the Environmental Protection Agency. EPA set a goal of reducing greenhouse gas emissions from power plants 30 percent by 2030. For Oklahoma, the plan would mean a reduction of 35 percent in carbon dioxide emissions by 2030.
Apart from the proposed carbon rules, OG&E faces deadlines in April 2016 for mercury and air toxics rules and in January 2019 for compliance with regional haze rules. OG&E, the Oklahoma attorney general’s office and a group of industrial consumers unsuccessfully fought a federal plan in court for part of the regional haze implementation.
Shoop said appealing a federal plan for regional haze bought the utility time to study other options and benefited customers, who didn’t immediately have to pay for compliance costs mandated by the EPA. The regional haze rules are meant to restore visibility at national parks and wilderness areas by 2064.
The utility’s regulatory analysts came up with 25 different options for compliance with regional haze rules, including scrubbing four coal units, converting coal units to use natural gas or replacing coal units with new natural gas units.
OG&E said the best scenario was a hybrid option that involves putting dry scrubbers on its two Sooner coal units and converting two Muskogee coal units to use natural gas. Another Muskogee coal unit would still operate, but it began operations in 1984 and isn’t covered by the regional haze rules.
Installing dry scrubbers at the Sooner plant could cost about $500 million, or $250 million each, said Don Rowlett, managing director of regulatory affairs for OGE Energy Corp., the utility’s parent company. Those estimates don’t include additional costs needed for ongoing operations.
To comply with the mercury and air toxics rules, OG&E plans to use activated carbon injection technology to remove mercury at all five of its coal units. That project will be complete by April 2016.
Meanwhile, OG&E plans to replace its four natural gas units at the Mustang power plant with 10, 40-megawatt combustion turbine units powered by natural gas. The current Mustang natural gas units were installed in the 1950s. OG&E said it is getting harder to find replacement parts.
“We’ve got some older, legacy gas units that are at the end of their useful lives,” Shoop said. “We’re going to propose that we retire them at the end of 2017 and replace them with modern combustion turbines that are designed to be quick-start and quick-ramping units.”
Shoop said the new gas units at Mustang will allow OG&E to be more responsive to market signals from the Southwest Power Pool, which runs the regional grid that covers Oklahoma and parts of eight other states. The new units also will enhance wind generation integration by allowing grid operators to bring them up and down quickly in concert with wind conditions.
Rowlett said Mustang is a good location for the replacement natural gas units because it is close to customer demand in Oklahoma City, has existing of transmission infrastructure and plenty of water for cooling.
Rowlett said OG&E has been pleased with the response to its SmartHours program, which offers residential customer free programmable thermostats to better manage use during peak summer times. More than 80,000 customers signed up in the second year of the program, and OG&E wants to have 120,000 customers in the program by the end of this year.