Transcript Slide 1
Impact of New Environmental Regulations on Big Rivers CATR / CCR / HAPs MACT / CO2 / 316a & 316 b Big Rivers Electric Corporation Service Area Member Cooperatives’ Customers Jackson Purchase 29,000 Kenergy 55,000 Meade County RECC 28,000 Total Customers 2 112,000 EPA is Proposing an Unprecedented Number of New Regulations • Clean Air Transport Rule (CATR) • Hazardous Air Pollutants (HAPs MACT) • Carbon Dioxide (CO2) • Coal Combustion Residuals (CCR) • Water Quality (316a & 316b) 3 Environmental Compliance Timeline 2010 Clean Air Transport Rule (CATR) S02 NOx Coal Combustion Residuals (CCR) 2011 Effluent Guidelines 316(a & b) 4 2013 2014 2015 2016 2017 Comment Period Possible Final Rule Phase I Proposed Start Date Phase II Design Construction Build Comment Period Final Rule Possible Start of Compliance Design Construction Build Hazardous Air Pollutants (HAP) Hg or Mercury Carbon (CO2) Regulation 2012 Proposed Rule Final Rule Compliance Time Compliance Design Construction Build US EPA Collection of Data Regulation Possible Rule Proposal Possible Compliance Data Collection Proposed Rule Proposed Rule Final Rule Final Rule CATR Impact* on Big Rivers •Generation 2012 reduction – 2.2 million MWh (18%) over planned generation •1,000,000 tons of coal not burned (100% KY) •Estimated rate increase of 8.5% •Generation 2013 reduction – 4.2 million MWh (32%) over planned generation •1,850,000 tons of coal not burned (100% KY) •Estimated rate increase of 5.6% •Generation 2014 reduction – Continued 4.2 million MWh (37%) reduction over planned generation •1,850,000 tons of coal not burned (100% KY) •Estimated rate increase of -.6% •Control 2015 equipment cost ~$108,000,000 •Conversion to Natural Gas cost ~$30,000,000 •Estimated rate increase of 15.7% •Capital Total 5 (additional 2M from 2012) expense ~$138,000,000 •Estimated rate increase of 29.2% *When estimating the potential impact of Big Rivers’ generation reduction, forward electricity pricing information does not reflect the likely effect of proposed environmental regulations. Hazardous Air Pollutants (HAPs MACT Rule) • Mercury control is expected to be the main issue. • Individual unit emission limits are likely. • Maximum Achievable Control Technology (MACT) determination could require new controls on each BREC coal-fired unit. ▫ Most likely solution to MACT will be activated carbon with a bag house collection system. 6 Hazardous Air Pollutants (HAPs MACT Rule) • Proposed rule expected in Spring 2011, final rule effective in 2012, compliance expected in 2015. Final rule timeframe mandated by Consent Decree • Compliance by 2015 or shut-down units. Expected 4 yr timeframe to design, engineer, permit, procure, construct • Estimated Cost to Comply $338 Million to $846 Million (~$200- $500 per kw) 7 Coal Combustion Residuals Rule (CCR) • Regulation of the disposal of bottom ash, fly ash, and flue gas desulphurization materials. • Ash spill at the TVA Kingston plant was the driving force for the regulations. • Proposed rule published June 21, 2010. • Final Rule expected in 2012. 8 Proposed CCR Rule Options • Subtitle C (Hazardous Waste) Ash classified as hazardous waste EPA oversees program Ponds will require liners or close Landfills will require liners No ash reuse • Subtitle D (Non-Hazardous Waste) Same as Subtitle C, except no hazardous waste classification • Subtitle D prime 9 State run program Standards similar to existing program CCR Cost Estimate for Subtitles C & D • Dry Bottom Ash conversion $11 million per boiler 5 boilers to be converted $55,000,000 • Dry Fly Ash conversion $10 million per boiler 3 Coleman units to be converted $30,000,000 • Landfill Development 200 acres $76 million per station Coleman & Sebree $152,000,000 ~$237,000,000 10 Water Quality (316a & 316b) • Potential federal EPA water regulations would impose more stringent requirements on water withdrawal and discharges. • Potential addition of cooling towers at our Coleman Station. $55M estimated cost 11 Challenges and Risks related to Proposed Regulations • Short time horizon – some air regulations would require compliance as early as 2012 with the most costly regulations beginning in 2014 and 2015. This allows insufficient time to design facilities, obtain necessary federal and state regulatory approvals, contract with vendors and install equipment. • Potential impacts on system reliability and transmission system – one consequence of the proposed regulations will be the retirement of significant amounts of coal-fired generation across the region. 12 Challenges and Risks related to Proposed Regulations • Rapid cost escalation – industry rush to achieve compliance will drive up labor and material costs (repeat of 2008) and make it difficult to obtain labor and equipment at any price. • CO2 policy could change – uncertainty associated with future CO2 legislation could result in less than optimal long-term investment decisions. • Absence of a comprehensive and coordinated federal strategy compels implementation on a more costly piecemeal basis. 13 Environmental Compliance Impacts - 2012-2015 • Estimated generation reduction 2012 - 2014 Up to 4.2 million MWh • Estimated incremental rate increase 2012 – 8.5% 2013 – 5.6% 2014 – 3.0% 2015 – 21.8% Cumulative thru 2015 - 38.8%* • Estimated cost of constructing control equipment ~$785,000,000 + 316a & 316b + CO2 Big Rivers Net Plant ~$1,083,000,000 as of 6/30/2010 • Unknowns 14 Impact to Smelters Impact to Western Kentucky Economy BREC employment *Includes CATR, CCR and HAPs MACT estimated impact