Mar 232012

By Teri Walker —

Ever increasing environmental restrictions have Arizona Public Service Co. (APS) weighing whether it will continue operating the Cholla Power Plant near Joseph City.

Mark Schiavoni, APS senior vice president of fossil generation, says APS is closely watching wrangling within the state over EPA (Environmental Protection Agency) rulings that greatly influence Cholla’s future. While a number of new EPA rulings have been issued lately, Schiavoni said it’s those associated with mer-cury emissions and BART (Best Available Retrofit Technologies) that most affect the Cholla plant.

Coal-powered plants have until 2015 to comply with the Mercury and Air Toxics Standards, finalized by EPA in December 2011, which calls for power plants to reduce mercury emissions. Schiavoni said Cholla would have no problem meeting the mercury standards for its units 1, 3 and 4, but unit 2 would require im-proved emissions controls to meet the standards.

APS had plans to begin retrofitting unit 2 this year with an engineered fabric filter or “bag house,” to filter mercury from emissions, but is holding off on doing so until it learns the outcome of a dispute over another EPA ruling that has a more significant implication for Cholla.

Under the BART ruling, APS has until 2017 to address new standards related to regional haze initiatives. In Arizona, Schiavoni explains, it is allowable for coal-fired plants to use “low-NOx burner” and “over fire air” technologies to control emissions. The state is wrangling with the EPA, which wants Arizona to use dif-ferent emission control methods that Schiavoni says would cost eight to 10 times as much to implement.

“We have to weigh the cost of the investment to comply with the new rulings against the return, based on the life expectancy of the plant,” said Schiavoni.

Schiavoni said the dilemma APS is facing at Cholla is being faced across the country: tightening regula-tions and fines aimed at the coal fuel industry are shuttering plants nationwide.

In February, U.S. power generator GenOn Energy Inc. said it would close seven of its coal fired power plants between June 2012 and May 2015 because the return on investments needed to meet environmental regulations wouldn’t be sufficient. The GenOn plants scheduled to close are in Pennsylvania, Ohio and New Jersey. The same day of GenOn’s announcement, Midwest Generation, part of the California-based Edison International family, announced it had agreed to close two of its coal plants in Chicago.

The toppling of smoke stacks across the nation is in keeping with a pronouncement President Barack Obama made in 2008 during an interview with the San Francisco Chronicle. Speaking of the cap and trade credits that he would like to see required for “every unit” of carbon or greenhouse gas emissions, Obama said, “If somebody wants to build a coal powered plant, they can. It’s just that it will bankrupt them because they’re gonna be charged a huge sum for all that greenhouse gas that’s being emitted.”

APS already decided to shut down three units at the Four Corners Generating Station near Farmington, N.M., because of the cost of retrofitting those units. In that instance, the company purchased the remaining two units at the plant from Southern California Edison and is making the required retrofits to keep those units up and running.

Schiavoni said APS is required to consider the long-term impacts to shareholders and customers when deciding how much and whether to invest in retrofitting a plant to meet changing standards. He said at this time, however, he’s intent on continuing to operate the plant as usual and evaluating the situation with the EPA as it unfolds.

Cholla has 269 employees and Schiavoni said the company is keeping them apprised of developments as they occur, so they are fully aware of the questions on the table.

“I’m very sensitive to our employees and their concerns, and those of the community. As things move forward, we’ll spend time continuing to educate employees and the community on the process,” said Schia-voni.

Schiavoni said the situation surrounding the coal industry today is a unique one and isn’t one Cholla has faced in the past. The increasing regulatory requirements, the move away from coal as an energy source and the terrific energy non-governmental organizations are exerting to shut down coal plants has created what he terms, “a sort of perfect storm.”

“I can’t tell you what’s going to happen. We’re going to continue to evaluate the situation over the next year and I fully expect we’ll make a decision about long-term investments over the next year,” said Schia-voni. “No one’s far enough along to make a judgment of viability. We’re going to continue to invest in the plant as we normally do to keep it in the best material condition, and do things we’d normally be doing.

“We’re going to continue as if we’re going to continue operating.”