Proposed Environmental Protection Agency (EPA) regulations would cost AEP $6 billion to $8 billion by the end of the decade and raise electricity prices for its business customers by 10 to 35 percent or more, the utility said today.
AEP said that cumulative costs of EPA regulations have been "vastly underestimated", and a constrained timeframe for compliance could drive actual costs even higher.
The utility outlined its plans for complying with EPA regulations including the Hazardous Air Pollutants Rule, Clean Air Transport Rule, Regional Haze Program Implementation Plans, Coal Combustion Residuals Rule and proposed Clean Water Act standards.
Based on the regulations as proposed, AEP's compliance plan includes upgrading or installing new advanced emissions reduction equipment on 10,100 MW of coal plants, refuelling 1,070 MW of coal generation as 932 MW of natural gas capacity, and building 1,220 MW of natural gas-fuelled generation. But the plan could change significantly depending on the final form of the EPA regulations and state regulatory approvals, the utility said.
AEP said that some jobs would be created from the installation of emissions reduction equipment, but it expects a net direct loss of about 600 power plant jobs with wages totalling about $40 million a year. And the economic impact of the plant closures will extend far further, the utility said.
"Thousands of ancillary jobs are supported by every coal-fueled generating unit. Businesses that have benefited from reasonably priced coal-fueled power will face the impact of electricity price increases ranging from 10 percent to more than 35 percent just for compliance with these environmental rules at a time when they are still trying to recover from the economic downturn," AEP chairman and chief executive officer Michael G. Morris said.
He added that the changes will significantly degrade transmission system reliability, particularly in the Midwest.
“The proposed timelines for compliance aren't adequate for construction of significant retrofits or replacement generation, so many coal-fueled plants would be prematurely retired or idled in just a few years,” Morris said. “AEP's compliance plan alone would abruptly cut generation capacity in the Midwest by more than 5,400 MW. Depending on the year, another 1,500 MW to 5,200 MW of AEP generation would be idled or curtailed for extended periods as pollution control equipment is installed.”
Under the plan, AEP would completely retire five coal-fueled power plants in Virginia, West Virginia and Ohio. It would retire some of the generating units at six other plants in Virginia, Ohio, Kentucky, Indiana and Texas. And it would install or upgrade emissions reduction equipment at seven other plants in Arkansas, Indiana, Louisiana, Ohio and Texas.
The retirements and retrofits in the plan are in addition to more than $7.2 billion that AEP says it has invested since 1990 to reduce emissions from its coal-fueled generation fleet. Annual emissions of nitrogen oxides from AEP plants are 80 percent lower today than in 1990, the utility said, and sulfur dioxide emissions are 73 percent lower.
The company owns nearly 25,000 MW of coal-fueled generation, about 65 percent of its total generating capacity. Under the plan, coal would fuel about 57 percent of AEP's capacity by the end of the decade.
AEP said it will continue its discussions with lawmakers about a “legislative approach” that would achieve the same environmental aims with less impact on the economy.
For more details on AEP’s compliance plans, including which coal plans are to be retired, click here.
