AEP-PSO's deal with EPA criticized
BY ROD WALTON World Staff Writer
Tuesday, October 30, 2012
10/30/12 at 4:19 AM
An industrial-size opponent of AEP-PSO's settlement with federal regulators over regional haze rules contends that the utility's deal was premature and will unnecessarily cost ratepayers billions of dollars over the long haul.
Tom Schroedter and Scott Norwood, representing the Oklahoma Industrial Energy Consumers group, said Monday that American Electric Power-Public Service Company of Oklahoma ditched a reasonable plan worked out in-state with fellow utility OG&E and state environmental officials. Instead, they said, AEP-PSO erred in favor of a costly agreement with the U.S. Environmental Protection Agency to shut down two coal-fired generation plans by 2026.
"We're urging them to delay this," Norwood said in exclusive interview with the Tulsa World.
The state's second largest utility filed testimony last month with the Oklahoma Corporation Commission asking for cost recovery methods to fund the environmental compliance plan. Both sides hope to start hearings by Feb. 26.
AEP-PSO officials estimated that the deal to cut sulfur dioxide and nitrogen oxide emissions could cost about $350 million and increase base rates by 11 percent in four years.
AEP-PSO decided on a plan to shut one of its Oologah coal-fired plants by 2016. The second Oologah coal unit would be installed with emissions control equipment and retired by 2026.
Steven Fate, director of business operations support for AEP-PSO, said the utility's compliance plan tried to cover a lot of bases at once.
"What we're trying to do with the environmental compliance plan is come up with a comprehensive plan that dealt with both regional haze and mercury and air toxins," he said. "We thought it made sense to come up with a comprehensive plan."
The OIEC disagrees that the plan is a cost-effective solution. OIEC officials pointed out that OG&E, the state's largest utility, teamed with Oklahoma Attorney General Scott Pruitt on a lawsuit against the EPA and that the 10th U.S. Circuit Court of Appeals has issued a stay of the regional haze rules.
Utilities also won another reprieve in August when a federal appeals court in Washington, D.C., struck down the EPA's Cross-State Air Pollution rule. Both OG&E and AEP-PSO had battled that federal rule concerning emissions that cross state lines.
Given that a presidential race is pending, the OIEC leaders wondered why AEP-PSO was so eager to settle up with the EPA on regional haze.
"We think the settlement was premature in light of the stay entered by the 10th Circuit," Schroedter said.
The OIEC's assessment also challenges the utility's cost analysis. Norwood said AEP-PSO customers could be hit with rate increases from 14 percent to 25 percent and cost $2 billion altogether in a tighter time frame.
The group also questions the utility's increasing reliance on natural gas in light of the coal-fired unit shutdowns. OIEC estimated the compliance plan's rate impact of gas prices at $300 million by 2026, compared to less than $100 million if AEP-PSO had stuck with its state implementation agreement forged along with OG&E and the state Department of Environmental Quality.
"Fuel diversity is critical," Schroedter said. "That's all going out the window with this plan."
PSO's Fate, testifying before the Corporation Commission, estimated that the relative capital cost of using flue gas desulferization equipment and other emissions controls on the coal-fired units at about $900 million. The compliance plan only costs about $256 million in relative capital, he said.
The cost of putting sulfur dioxide controls on the temporarily surviving coal-fired unit and nitrogen oxide controls of other gas-fired units is about $350 million by 2016. Other costs will grow through the 2026 deadline to shutter the final coal-fired plant but will be meted out over a long period.
"We do our planning over a 40-year period," Fate said. "The $2 billion is a pretty shocking number, but when you look at it as a percent of the total cost it's a fairly small number over 40 years."
OIEC represents companies that employ about 16,189 workers statewide, according to OIEC statistics. Schroedter estimated that AEP-PSO's largest industrial class uses about 20 percent to 25 percent of the power sold by the utility.
Original Print Headline: Industry group chides PSO over EPA plan
Rod Walton 918-581-8457