* Dominion to shut plant due expected environmental rules
* Dominion also to shut State Line plant in Indiana
* If EPA ozone rules change, plants may not shut
NEW YORK, Nov 18 Dominion (D.N) expects to shut the Salem Harbor coal/oil-fired power plant in Massachusetts within seven years as the high cost of keeping up with ever more stringent pollution rules could make it uneconomic to keep operating the plant, a company executive said.
With the federal government looking to impose a cost on carbon emissions to combat global warming and environmental regulations becoming increasingly stringent year over year, several power companies, including Exelon Corp (EXC.N), Progress Energy Inc (PGN.N) and American Electric Power Co Inc (AEP.N) already have announced plans to retire some older, less efficient coal plants.
Dominion CFO Mark McGettrick told investors this month at the Edison Electric Institute conference in Palm Desert, California, the company expects to close two merchant coal-fired generating stations within the next seven years, if changes to environmental regulations occur as expected.
The two plants are the 738-megawatt Salem Harbor and the 515 MW State Line plant in Indiana. The first of the coal units still operating at both plants entered service more than half a century ago.
The environmental regulations McGettrick referred to was the U.S. Environmental Protection Agency's planned one-hour ozone rule for 2015-2017.
"If that rule goes into effect, we do not plan to install expensive environmental controls at either of those two stations," Dominion spokesman Dan Genest told Reuters Thursday.
Jon Wellinghoff, chairman of the U.S. Federal Energy Regulatory Commission, has said the retirement of about 60 gigawatts (60,000 MW) of coal-fired capacity was "very likely within five years" as the EPA moves forward with more stringent emissions standards.
That is about 20 percent of the 300 gigawatts of coal-fired capacity, which mostly run all the time as baseload plants, generating about 45 percent of the nation's power. But that is down from about 50 percent a couple of years ago as cheap natural gas prices have boosted its share of the generating mix from about 20 percent to about 24 percent now.
Genest said: "The key word in McGettrick's statement is 'expect.' Our future decision is dependent on what happens. Environmental regulations get delayed ... courts change rules ... We don't know if the EPA rules will go in effect in 2015-2017.
"We have made no definite plans on a time or date to shut the plant at this point," Genest said.
PLANT NEEDED FOR RELIABILITY
ISO New England, which operates the regional power grid, could again decide Salem Harbor is needed for reliability -- as the ISO has over the past couple of years -- Genest said.
Dominion recently asked the ISO to withdraw the plant from the grid's June 2011 forward capacity auction for 2014-15. The ISO is not expected to decide on the request until next year.
Genest said Dominion wants to withdraw from the auction not because the company wants to shut the plant but because the capacity price has been coming down over the past few years.
The capacity auction pays power suppliers (and demand response customers who agree to reduce usage) to remain available to maintain the long-term reliability of the grid.
"We do not anticipate (capacity prices will go) up, but if they do, and it is profitable to keep running the plant, we may keep it going," Genest said.
The shutdown of Salem Harbor would hit the city of Salem hard. Last year, the plant, which employs about 145 people, paid about $4.5 million in taxes, making it the biggest taxpayer in the city, according to local news reports. ----------------------------------------------------------- PLANT BACKGROUND/TIMELINE STATE: Massachusetts COUNTY: Essex TOWN: Salem about 20 miles (32 km) northeast of Boston OPERATOR: Dominion OWNER(S): Dominion CAPACITY: 738 MW UNIT(S): - 1 - 79 MW coal/oil-fired steam turbine
- 2 - 77 MW coal/oil-fired steam turbine
- 3 - 145 MW coal/oil-fired steam turbine
- 4 - 437 MW oil-fired steam turbine FUEL: Coal/Oil DISPATCH: Intermediate/Peaking TIMELINE: 1952 - Units 1 and 2 enter service 1958 - Unit 3 enters service 1972 - Unit 4 enters service 1998 - PG&E buys Salem Harbor and other generating
facilities from New England Electric Systems (now
part of National Grid) 2000 - PG&E says to invest over $400 million to upgrade
emissions at Salem Harbor 2001-3 - PG&E considers shutting Salem Harbor due in part
to high cost of cutting emissions. Ultimately,
PG&E agrees to upgrade emissions but not before
the PG&E National Energy Group subsidiary
operating the plant goes bankrupt 2005 - Dominion bought the station from US Gen New
England Inc, a unit of PG&E's former bankrupt
subsidiary 2010 - Dominion says expects to shut Salem Harbor within
seven years depending on U.S. EPA ozone
regulations expected to go in effect in 2015-2017 2012 - Dominion to install equipment to control mercury
emissions 2015-2017 - Dominion could shut Salem
Harbor depending on a number of factors, including
the EPA's ozone emission rules and the value of
ISO New England's forward capacity market (Reporting by Scott DiSavino in New York and Eileen O'Grady in Houston; Editing by Walter Bagley)