The Appalachian Power Co. (APCo) unit of American Electric Power (NYSE:AEP) told the West Virginia Public Service Commission on June 24 that it never did it a complete study on the costs of converting several recently-shut coal units to natural gas, but such conversions are generally too expensive and that this capacity isn't needed anyway.
APCo in the June 24 filing was responding to a request by commission staff to have the PSC do a full review of the coal plant shutdowns, which came on June 1 and were largely needed to comply with the federal Mercury and Air Toxics Standards (MATS). May 8, 2015, the staff of filed a petition requesting that the commission initiate a new proceeding and direct APCo to file information sufficient for the commission to evaluate the factors that APCo regarded as justifying a planned deactivation or retirement of certain generating units, which are referred to as the “Disposition Units."
The Disposition Units consist of Units 5 and 6 of the Glen Lyn Plant, Units 1 and 2 of the Kanawha River Plant, Units 1 and 3 of the Sporn Plant, and Unit 3 of the Clinch River Plant. Clinch River is located in Virginia, serves West Virginia load, and Units 1 and 2 are to be converted to natural gas instead of being shut. Some of the June 24 testimony from APCo centers on why the Clinch River 1 and 2 conversions were considered to be economic, but the conversion of the Disposition Units wasn't.
"The Company has not undertaken a detailed study of the full cost to convert each of the Disposition Units to consume natural gas," APCo wrote. "At the time the Company was considering the conversion to gas of the Disposition Units, the Company determined that the work needed to upgrade plant infrastructure (excluding equipment upgrade and refurbishment discussed below) at each site would be relatively comparable when viewed against the largely variable cost of constructing a natural gas pipeline to each site. Once the Company established that Clinch River Units 1 and 2 would be the least expensive for gas pipeline construction, and that the generating capacity of Units 1 and 2 would meet APCo’s planning needs at that time, the Company did not further pursue analysis of conversion of the Disposition Units.
"While the Company did not undertake gas conversion studies specific to each of the Disposition Units, the Company estimates that such costs are very likely to be proportionally higher than those for the conversion of Clinch River Units 1 and 2 due to the age and condition of the Disposition Units. Since the decision to retire the Disposition Units was made in 2012, those units have been maintained and invested in for the purpose of ensuring their safe operation until their expected date of retirement. The equipment and systems of the Disposition Units may require significant refurbishment and possible upgrades if these units are to be relied upon for future generating capacity and/or energy."
The major project components that were included in the gas conversion project for Clinch River Units 1 and 2 were: changes to the existing boilers and unit control systems to accommodate the combustion of natural gas instead of coal; the addition of a new natural gas pipeline lateral; the installation of new natural gas handling facilities, and changes to the associated balance of plant systems.
"For each of the Disposition Units, similar changes would be required to the power plant to convert to natural gas," APCo said. "In addition, varying levels of refurbishment would be required due to the age and current state of wear for various components in order to be operable for additional years. While the conversion and refurbishment costs for the Disposition Units would be expected to be higher than for Clinch River, specifics of the work and its costs cannot be known without detailed study. In addition, the site of each Disposition Unit would need a new natural gas pipeline lateral and natural gas handling facilities. The feasibility and projected cost of such work has not been evaluated more recently or in greater detail than in the 2012 study of the Disposition Units that demonstrated Clinch River Units 1 and 2 as the most viable option for conversion."
The pipeline construction portion of the Clinch River conversion project is nearing completion, APCo said. The pipeline has been fully placed underground and the remaining items (installation of interconnect facilities, testing, clean up, etc.) are expected to be completed by the end of August. The cost estimate for the pipeline and related facilities is now approximately $53 million.
For the plant-related (non-pipeline) portion of the Clinch River conversion project, engineering is 92% complete. The overall project is 17% complete. The construction of foundation work is 99% complete, and the Structural & Mechanical Construction contractor is unloading materials and preparing to start installation of the gas line and fabrication of ductwork. This work is being performed in preparation for the conversion work on the Unit 1 boiler that is scheduled to start in early September. The company currently plans for Unit 1 to enter service as a gas-fired unit on Jan. 1, 2016, with June 1, 2016, being the planned in-service date for Unit 2’s gas-fired operation. The current estimated loaded cost for the Clinch River conversion project is $93.7 million.
APCo said it does not have a currently planned time line for the demolition of any of the Disposition Units, including the Kanawha River Plant. The company is currently performing, and will continue to perform, decommissioning work such as removing hazardous materials from the sites. This work will continue separately from any future demolition at the sites.
The utility added: "APCo is subject to various legal and regulatory requirements with which it must comply and which necessitated the retirement of the Disposition Units and now require the performance of post-retirement activities at the Disposition Units. Having provided the foregoing responses to the Commission’s questions, APCo respectfully requests that the Commission issue an Order determining that the issues in this case have been resolved and closing this case. With respect to the most pressing matter identified in its June 10, 2015 Response to the Commission’s previous questions, APCo respectfully asks the Commission to advise it by no later than June 30, 2015 whether the Commission wishes the Company to maintain certain operating permits."