Public Service Co. of Oklahoma will get rid of the last two coal-fired units at its Oklahoma power plants in a proposed settlement over air quality announced Tuesday with the state, the Environmental Protection Agency and the Sierra Club.
The agreement would resolve a conflict over the pace of EPA rules meant to curb emissions that affect visibility. Under the tentative agreement, PSO would meet specified emissions rates at its two coal-fired units at Northeastern station in Oologah. One coal unit would be retired by 2016, while the utility would install emissions-control equipment and retire the other unit by 2025 or 2026.
As part of the proposal, the utility will withdraw a pending lawsuit against the EPA over its regional haze rule. In March 2011, the EPA rejected Oklahoma's plan to address regional haze, which covers emissions from several coal-fired power plants that affect visibility on federal lands and parks.
“This landmark agreement outlines a clear and cost-effective path for compliance by PSO's Oklahoma coal-fired generating units with the EPA's new rules,” said Stuart Solomon, PSO's president and chief operating officer, in a statement. “It allows PSO to implement a compliance plan that resolves the company's most significant environmental issues, provides a manageable transition for our generation fleet and assures continued reliability for our customers.”
Oklahoma Attorney General Scott Pruitt and Oklahoma Gas and Electric Co. continue to fight the EPA's regional haze plan for Oklahoma in a federal appeals court in Denver.
PSO, a unit of Ohio-based American Electric Power, has more than 520,000 electric customers in eastern and southwestern Oklahoma. The Northeastern power plant, which can generate up to 1,780 megawatts of electricity, has two coal-fired units and two natural-gas-fired units. The coal units came online in 1979 and 1980.
Utility will recover costs
Bud Ground, PSO's manager of governmental and environmental affairs, said the company hasn't decided how it will make up for the lost generation from the planned coal unit retirements.
“There's a good chance we would just buy the energy on the market or we build a new plant,” Ground said. “Our customer base does grow, so we have to look for growth in the future, but it's not something we have to do immediately.”
The utility also will try to recover its costs for the retirement of coal units which are still within their useful lives. Those amounts, called stranded costs in regulatory language, likely would come from higher customer bills. PSO will apply to the Oklahoma Corporation Commission for reimbursement of those costs.
Ground said PSO expects to spend an estimated $175 million to install emissions control equipment on the coal unit at Northeastern that will be retired by 2026. Before the proposed settlement, the utility estimated it would have to spend hundreds of millions to come into compliance with the EPA's rules on regional haze and mercury and other air toxics.
“What we really wanted to do was to operate out through their remaining useful life without spending the amount of money you'd have to spend to put on scrubbers, which would have extended their lives another 20 to 30 years,” Ground said. “We were looking for that balance.”
American Electric Power, PSO's parent company, last month announced the retirement of more than 20 other coal-fired units at power plants in several other states. That plan would retire more than 4,600 megawatts of coal-fired generation, or almost 12 percent of AEP's generating capacity.
Settlement gets good reaction
Gov. Mary Fallin said the PSO agreement is in Oklahoma's best interest.
“This agreement provides much-needed certainty for PSO and its utility customers, ensures manage
The Oklahoma chapter of the Sierra Club said it hoped the proposed PSO settlement would spur action from other state utilities and cooperatives to move away from coal as a generating fuel.
“Oklahoma must move beyond coal, and AEP-PSO is taking a strong first step here,” said Whitney Pearson with the Sierra Club. “Today's announcement paves the way for resolving the long-standing public health concerns about PSO's Northeastern coal plant and shines a bright spotlight on the other two coal plants owned by OG&E.”
OG&E spokesman Brian Alford said the utility was studying the PSO agreement but doesn't plan to withdraw its appeal over the EPA's regional haze rule for Oklahoma.
“We have more questions than answers, but that information will come with time,” Alford said. “It does not change our position and our direction. Fuel diversity is important, and our goal is to make the most informed choice for our customers. Rest assured, we will be in compliance, but we want to be sure our customers are considered in that equation.”
PSO, the state and EPA will work out final details on the agreement over the coal units at Northeastern in the next 30 to 60 days. The settlement will be filed at the Oklahoma Corporation Commission for a period of public review and comment.