State Environmental Policy Innovations: North Carolina's Clean Smokestacks Act

By Andrews, Richard N. L. | Environmental Law, Fall 2013 | Go to article overview

State Environmental Policy Innovations: North Carolina's Clean Smokestacks Act


Andrews, Richard N. L., Environmental Law


B. Plant Retirements and Replacements

Between 2002 and 2007, both utilities concentrated on constructing their highest priority N[O.sub.x] control technologies and beginning their major investments in S[O.sub.2] scrubbers to meet the 2007 cap and amortization deadlines. (178) As early as 2005, Duke expressed concern about the cost of SNCR technology and the narrowness of its compliance margin to meet the initial 2007 N[O.sub.x] cap, and suggested that it might therefore consider using SCR rather than SNCR or even perhaps retire some plants to assure compliance. (179) It also accelerated construction of scrubbers on its Allen units to assure compliance with the new federal CAIR promulgated by EPA in 2005 and the anticipated federal mercury rule. (180) Progress reported in 2004 that it was able to attain higher rates of S[O.sub.2] removal from its scrubbed units, thereby enabling it to cancel a scrubber it had proposed for one of its smaller units (Lee 3). (181)

In 2005, Duke took a major step further, requesting permission from the Utilities Commission to build two new 800-megawatt pulverized-coal units at its Cliffside site, both equipped with state of the art control technology, and at the same time to retire rather than retrofit the four oldest Cliffside units (Cliffside 1-4) by 2013. The Utilities Commission approved one of these two new units (Cliffside 6) coupled with requirements for the retirements of Cliffside 1-4 and for additional programs promoting energy efficiency. (182)

Beginning in 2005, both utilities began to report somewhat higher costs than initially anticipated: 18-31% higher in various years for Duke, 10% higher for Progress in 2005 but increasing to as much as 67% higher in 2006 and 90% higher in 2008, before ultimately finalizing in 2011 at 23% higher for Duke and 30% higher for Progress than their original estimates. (183) Both utilities therefore began documenting their possible intent to request additional cost amortization in 2008 and 2009. Progress also declared that it did not intend to request amortization of more than its initial $813 million cost estimate: any costs above that amount it proposed to request adding to its rate base and charging to its customers instead. (184)

In 2007, both utilities met their first N[O.sub.x] caps and achieved significant reductions in S[O.sub.2] emissions: Duke had reduced its N[O.sub.x] emissions to 33,000 tons (versus a cap of 35,000, a 60% reduction since 2002), and its S[O.sub.2] emissions by 15%, while Progress had reduced its N[O.sub.x] emissions to 24,383 tons (versus a cap of 25,000, a 59% reduction since 2002) and its S[O.sub.2] emissions by 25%. (185) Both also met their financial mandates for amortization of 70% of compliance costs by 2007, and Progress sought authorization to amortize an additional $243.9 million (the balance of its initially estimated $813 million) in 2008 and 2009. (186) Duke, however, negotiated a new stipulation that it would not seek any further accelerated amortization--leaving $225.2 million of its originally estimated compliance costs unamortized--but would seek instead to have them added to its rate base. (187) Progress subsequently also requested that all compliance costs beyond its initial $813 million be included in its rate base, and in 2008 followed Duke's lead in asking to terminate its accelerated amortization program and add all additional costs to its rate base instead. (188)

In 2008, Progress also began reconsidering the costs of additional control technology at several of its smaller plants (for instance, Cape Fear 5 and 6), to determine which technology would ultimately be most cost effective. (189) Then in 2009, it went a major step further and announced its intention to retire all three units of its Lee facility (397 megawatts total), and instead to build a 950-megawatt, state of the art combined cycle natural gas plant at that site. (190) This major natural gas substitution would dramatically reduce its S[O. …

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State Environmental Policy Innovations: North Carolina's Clean Smokestacks Act
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