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Oklahoma utilities have big decisions to make on long-term coal usage

Coal will continue to be used for electricity generation in Oklahoma for the next several decades, but its long-term outlook faces uncertainty from increasingly strict emissions regulations and competition from natural gas and wind.
by Paul Monies Modified: August 4, 2013 at 4:00 pm •  Published: August 3, 2013

Coal is far from dead in Oklahoma, but its long-term prospects as a fuel for electricity generation are dwindling due to environmental constraints, competition from natural gas and wind and an aging coal-generation fleet.

The state's two largest electric utilities are charting different paths with their coal plants. Public Service Co. of Oklahoma wants to retire the last of its two coal units at Northeastern Station near Oologah by 2026.

Oklahoma Gas and Electric Co. wants to keep its two coal plants going, but the next power plant it builds likely will be fueled by natural gas. OG&E plans to put off building a new fossil-fueled plant until at least 2020, largely through energy efficiency and projects to reduce demand.

Oklahoma has six coal plants producing electricity, with five of the six dating to the 1970s and 1980s. The average useful life of a coal plant is about 48 years, according to a recent market report for the Southwest Power Pool, a regional transmission organization that covers Oklahoma and eight other states.

Coal to continue

Jay Albert, Oklahoma's interim secretary of energy, said coal will remain an important fuel for electricity customers, even at diminished levels.

“We'll continue to see coal as part of the resource mix for the foreseeable future,” Albert said. “The mix will begin to shuffle. Fuel diversity is an important part of keeping electricity rates low for customers.”

Albert said a new integrated marketplace run by the Southwest Power Pool will start in 2014. It means customers will benefit from lower prices from other generating sources throughout the nine-state SPP region, not just those in and near Oklahoma.

About 37 percent of Oklahoma's electricity capacity came from coal-fired generators in 2000, according to the Energy Information Administration. That fell to 25 percent by 2010, as independent power producers went on a building spree for natural gas plants in Oklahoma. Natural gas capacity grew to 62 percent by 2010, up from 54 percent a decade earlier.

Wind also made significant gains during that time, although it can't be relied on for baseload generation, the type of electricity generation that is available all the time.

When it comes to actual generation, though, coal remains a strong — and cheap — choice for utilities, cooperatives and other power generators. As well as coal plants owned by OG&E and PSO, the Grand River Dam Authority (GRDA) in Chouteau and Western Farmers Electric Cooperative in Hugo generate electricity from coal. Independent producer AES Shady Point has two coal units in Le Flore County and sells power to OG&E under a long-term contract.

Faced with upcoming environmental regulations at its coal plant in Chouteau, GRDA is exploring options to install emissions-control technology on one coal unit. It also is looking at either converting the older coal unit to natural gas or shutting it down and buying power from another generator. The total costs could be up to $380 million, which would come from revenue bonds paid back by GRDA customers. The bonds for such projects would count against the state's indebtedness at a time when many in the Legislature are leery of adding new state debt.

GRDA's board delayed action on the coal projects in July after criticism from Gov. Mary Fallin's representatives that more study was needed. Fallin then separately announced she would appoint a 15-member task force to study the future of GRDA, including splitting its utility and lake management functions or privatizing it.

Regional haze

How to deal with Environmental Protection Agency rules for regional haze has been a contentious issue for utilities, environmental groups and politicians in Oklahoma.

Regional haze rules to improve visibility at national parks and wilderness areas were updated in 2005 and included new limits on sulfur dioxide emissions from power plants. States had until 2007 to present plans to deal with regional haze, but Oklahoma and 36 other states missed the deadline.

In 2009, the EPA began to formulate a federal plan to deal with regional haze in Oklahoma. Before EPA could finalize its federal plan, Oklahoma submitted its own plan, which let PSO and OG&E continue to burn low-sulfur coal and install some basic pollution controls. The EPA approved parts of it, but still wanted PSO and OG&E to install expensive emissions-control technology called scrubbers on their coal plants.

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by Paul Monies
Energy Reporter
Paul Monies is an energy reporter for The Oklahoman. He has worked at newspapers in Texas and Missouri and most recently was a data journalist for USA Today in the Washington D.C. area. Monies also spent nine years as a business reporter and...
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