Public Service Co. of Oklahoma plans to spend up to $350 million to put in place the terms of a settlement for environmental regulations that will remove coal from its Oklahoma generating fleet by 2026, the electric utility said Wednesday.
PSO, a unit of Ohio-based American Electric Power that has more than 530,000 customers in eastern and southwestern Oklahoma, filed an environmental compliance plan with the Oklahoma Corporation Commission. The plan deals with federal regulations on emissions of sulfur dioxide, nitrogen oxides, mercury and other air toxins.
If implemented, the plan could raise customer rates by 11 percent starting in 2016, PSO representatives said.
The plan came out of a pending settlement PSO has with the Environmental Protection Agency, the Sierra Club, the Oklahoma Department of Environmental Quality and Oklahoma Environment Secretary Gary Sherrer. The settlement dealing with the utility's implementation of EPA's regional haze rules was announced in April.
PSO plans to retire one of its coal units at its Northeastern station power plan near Oologah by 2016. It will install emissions-control equipment on another Northeastern coal unit and continue operating it until 2026.
To make up for the retirement of a coal-fired unit in 2016, PSO said it plans to buy natural gas generation from Calpine Corp. under a 15-year power purchase agreement. PSO will buy 260 megawatts of electricity from Calpine's Oneta Energy Center near Coweta from 2016 to 2031, the companies said Wednesday.
PSO's environmental compliance plan mirrors much of what the utility presented to the Corporation Commission in its long-term, integrated resource plan during a public meeting Wednesday. The integrated resource plan, which is not binding, has to be filed every three years with the commission.
PSO looked at several different options to deal with environmental regulations affecting utilities. It could have retired both Northeastern coal units at the same time or installed a combination of emissions controls to keep the coal units in service for a longer period.
“They are all reasonable options,” said John Torpey, AEP's director of integrated resources planning. “They're reasonable to the extent that we know we have to spend money. We know we have to do something. There's no do-nothing option that's available to us. Anything we're looking at to bring these units into compliance will involve spending additional funds.”
The integrated resource plan also includes energy-efficiency initiatives and programs to help customers reduce electricity demand.
A group of manufacturing companies, the Oklahoma Industrial Energy Consumers, took issue with PSO's integrated resource plan. They said coal remains a cheaper option for customers and PSO didn't take into account a changing legal and regulatory environment.
A federal appeals court stopped implementation of the EPA's regional haze rules in June so it could study a case brought by Oklahoma Attorney General Scott Pruitt, Oklahoma Gas and Electric Co. and OIEC.
PSO's plan criticized
Tom Schroedter, an attorney for OIEC, said PSO's plan would be harmful to businesses and industry.
“The results of our assessment indicate that the settlement agreement will cripple the state of Oklahoma's manufacturing sector, which we believe is the backbone of the Oklahoma economy,” Schroedter said.
PSO representatives said the utility fully analyzed its options and determined coal-fired generation will continue to be subject to environmental rules from the Clean Air Act and the Clean Water Act.
“We've been studying this for over two years in detail,” said Steve Fate, PSO's director of business operations support. “We've looked at it every which way. At this point, we've got to move to start executing on the plan because all of the options have very long lead times to implement them. … Our main focus is making sure the lights stay on, that we have a reliable supply, that we have a plan we can implement over a reasonable period of time so we can maintain reliability.”
Whitney Pearson, with the Sierra Club's Beyond Coal campaign, said criticism of PSO's integrated resource plan was shortsighted. The plan is good for public health, the environment and Oklahomans' pocket books, she said.
“This plan not only resolves the company's most significant environmental issues, it creates a manageable transition and continued reliability for the customers,” Pearson said. “PSO understood that in order to comply with environmental safeguards, rates would increase under any scenario. As shown in PSO's draft (plan), the company chose the least-cost scenario.”
PSO's environmental compliance plan needs final approval from the three-member Corporation Commission. Its separate, integrated resource plan should be finalized by Oct. 1.