Study: Emission Regulations Could Cost 600-MW Ark. Coal Plant $2.8 Billion

If the Obama administration regulates carbon dioxide, future costs to contain or abate emissions at the 600-MW John W. Turk Jr. Power Plant proposed for southwest Arkansas by the Southwestern Electric Power Co. (SWEPCO) could exceed $163 million a year—or more than $2.8 billion for the 40-year life of the plant—says an economic study prepared for two environmental groups.

The study, “Up in Smoke” (PDF), was prepared on behalf of the Sierra Club and Audubon Arkansas—opponents of the Turk plant—by HISTECON Associates. It was released on Thursday, just as SWEPCO announced it had submitted to the Arkansas Public Service Commission (APSC) a request to increase the company’s non-fuel base rates by $53.9 million for the state. This included recovery of financing costs during construction of the baseload Turk plant and the 500-MW J. Lamar Stall Unit, an intermediate gas plant proposed for northwest Louisiana.

“Since 1985, when our last major construction program was completed, SWEPCO has absorbed or offset the higher costs of serving customers through belt-tightening and significant changes in the way we do business,” Paul Chodak, SWEPCO president and chief operating officer, said in a press release Thursday. “But as we have been saying, we are out of belt notches to tighten, and we need to raise our rates to cover our increased costs so that we can continue to provide our customers with affordable, reliable electricity in the years ahead.”

The Turk plant—which will be one of the first U.S. coal plants to use ultrasupercritical technology—has so far received all required approvals from the APSC, the Louisiana Public Service Commission, and the Public Utility Commission of Texas.

The APSC’s decision to grant the AEP subsidiary a certificate of environmental compatibility and pubic need is currently under appeal to the Arkansas Court of Appeals, but a state body has allowed SWEPCO to proceed with the plant’s construction while the appeal is heard. This January, the APSC also approved SWEPCO’s plans to build three transmission lines and a new substation connecting the plant to the grid. Completion of the plant is slated for 2012.

Counting the costs of upgrading power lines and substations, SWEPCO puts the cost of building the Turk plant at about $2 billion. “Recovery of financing costs while the plants are under construction, instead of at the end of construction, will help prevent compounding interest on these major investments, which will save customers money in the long run,” Chodak said.

But according to the HISTECON report, SWEPCO and AEP had not factored future costs of controlling carbon emissions into initial cost projections. These costs are uncertain (PDF), the report said, and could range from about $5 per ton of carbon dioxide at the low end to almost $100 per ton, as projected by an Environmental Protection Agency analysis of Senate Bill 2191 (the Lieberman-Warner Climate Security Act of 2007).

The report also points to a trend of increased construction costs for all generating plants, and to increased coal prices, which it said, could be 50% more than the prices SWEPCO allegedly used in its testimony before the PSC.

“Arkansas customers will feel the hit in their pocketbooks through an increase in electricity rates,” said Ken Smith, executive director of Audubon Arkansas, in a release Thursday. “Instead of the company’s estimated cost of $0.09 per kilowatt hour (kWh) from this plant, rates would jump to a range of $0.127 and $0.145 per kWh.”

The report also said that the new plant could create 151 fewer temporary jobs and 80 fewer full-time jobs than SWEPCO had established. The company had earlier said that the plant’s construction, expected to take about 48 months, would create about 1,400 jobs at the height of the project. “The construction will generate about $38 million in sales and property tax revenues, and upon completion, will bring 110 permanent jobs with an annual payroll of around $9 million to the southwest corner of Arkansas near Hope,” it said.

But this is misleading, the report said: “First, the multiplier used was too large for this type of facility, and second, not all of the construction and operations positions can be filled by local Arkansans, and their communities will not benefit fully from the economic growth.

Alternatively, the report said that renewable energy and energy efficiency strategies could create a wide swath of jobs in factories and construction statewide, supporting such projects as energy conservation, housing rehabilitation, and wind farms.

Sources: SWEPCO, Audubon Arkansas, POWERnews

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