Dominion to Shut Down Mass., Ind. Coal Plants on EPA Rule Uncertainties
Dominion plans to shutter two of the four units at Salem Harbor Power Station by the end of this year, and it will close the entire plant in Salem, Mass., by June 2014 because “pending environmental regulations and market conditions are making the power station uneconomical to operate,” the company announced today. The news comes on the heels of the announced closure of Dominion’s State Line Power Plant in Hammond, Ind.
Dominion said it told ISO-New England, the independent system operator for the region’s electric grid, that it would not seek to negotiate an agreement that could keep the station operating beyond existing commitments.
"This was a decision we had to make given the significant costs required to keep the station in compliance with pending environmental regulations and the falling margins for coal stations selling electricity in New England," said David A. Christian, chief executive officer of Dominion Generation. "Salem Harbor employees are dedicated professionals who will continue to operate the station safely as we move toward retirement in 2014."
Dominion has operated Salem Harbor since 2005, when it bought the plant. Last year, the company said it would not invest the required funds to comply with new environmental regulations that would go into effect in 2014 and beyond. “The company would have been required to spend millions of dollars on new controls at the power station to comply with new regulations from the U.S. Environmental Protection Agency,” Dominion said in a statement.
Dominion last fall submitted a permanent delist bid for all four Salem Harbor units in the ISO-New England’s Forward Capacity Auction 5, covering June 1, 2014 to May 31, 2015. ISO-New England rejected that bid and offered a mitigated price that did not guarantee full cost recovery of the environmental controls. In response, the company submitted a non-price retirement bid for all four units in February. On May 10, the ISO informed Dominion that it had accepted those bids for Units 1 and 2, but rejected the non-price retirement bids for Units 3 and 4 because they were needed for system reliability during the FCA5 commitment period.
"We would have been faced with spending millions to comply with new environmental regulations without assurance of full cost recovery before committing to support the ISO’s reliability needs," said Christian. "We could not take that risk."
Today’s news closely follows the announced closure of the 515-MW State Line Power Station in Hammond, Ind., by 2014. Dominion Chief Financial Officer Mark McGettrick told investors on April 28 that the recent Toxic Air rules proposed by the Environmental Protection Agency (EPA) had prompted the company not to bid the capacity at State Line into the upcoming PJM capacity auction for the 2014 to 2015 planning period.
“Last year we wrote down the value of this asset after the one-hour [sulfur dioxide] rules were finalized by the EPA, shortening its expected life to the end of 2017 because we would not be installing control equipment at the site,” he reminded investors on the earnings call.
The decision not to bid capacity as a result of the Toxic Air rule “triggered an impairment test for State Line and, as a result, we have written-off the remaining book value of the plant. Under current market conditions, we will be retiring the plant no later than the middle of 2014.”
A Dominion spokesperson told POWERnews that because State Line is a merchant power station, selling its energy into the marketplace operated by PJM Interconnection, the company does not have retail customers and is not responsible for ensuring adequate supplies.
Sources: POWERnews, Dominion