UPDATE 2-AEP to stop burning coal at 3 U.S. Midwest power units

Mon Feb 25, 2013 12:48pm EST

By Scott DiSavino

Feb 25 (Reuters) - U.S. power company American Electric Power Co Inc will stop burning coal at three Midwest power plants by 2015 to reduce air pollution as part of a settlement with federal regulators, states and environmental groups.

In a statement on Monday, the environmental groups said the Ohio-based company, long known as the biggest coal generator in the country, would retire a total of 2,011 megawatts (MW) of coal-fired capacity at plants in Indiana, Ohio and Kentucky.

The groups, including the Sierra Club and Natural Resources Defense Council, said AEP would stop burning coal at the 580-MW Tanners Creek 4 unit in Indiana, the 615-MW Muskingum River 5 unit in Ohio and the 816-MW Big Sandy 2 unit in Kentucky.

Ohio-based AEP said in a statement that it also agreed to install pollution control equipment on the two 1,300-MW coal-fired units at Rockport, another power plant in Indiana, as well as refueling or retiring the Tanners Creek 4 unit.

In the past, AEP said it was thinking about retiring Big Sandy 2 by 2015, refueling or retiring Muskingum River 5 with natural gas by 2017 and refueling or retiring Tanners Creek 4 at some point.

Since President Barack Obama took office in 2009, power companies, including AEP, have announced plans to shut more than 40,000 MW of coal capacity over the next several years as weak gas prices pushed power prices to decade lows.

Those weak power prices have made it uneconomic for the generators to invest in emission control equipment needed to keep their older coal plants compliant with the administration's stricter federal environmental rules.

AEP said prior to this agreement, its Indiana and Michigan unit had requested approval from Indiana regulators for the installation of a dry scrubber on one of the two 1,300-MW Rockport units to satisfy environmental requirements.

The company said estimates for the single dry scrubber were $1.4 billion. Given this high cost, AEP said it continued to investigate alternatives and ultimately selected the lower cost dry sorbent injection technology.

AEP NEGOTIATES

AEP said it entered into negotiations with the U.S. Environmental Protection Agency (EPA), several northeastern states, and various environmental groups to help keep the cost of installing environmental controls for Rockport low for its customers.

AEP said the cost of installing the dry sorbent injection equipment on both Rockport units will be less than a fifth of the cost of installing a dry scrubber on just one unit and will still meet all environmental regulations.

AEP also said as part of the agreement, it will install an additional 200 MW of wind power, among other things.

AEP said further emission reductions will be required at Rockport in the next decade.

The Sierra Club said AEP will have to retire the two Rockport units in 2025 and 2028 or install additional controls to reduce sulfur emissions further.

The agreement settles a lawsuit originally filed in federal court in Ohio in 1999, and is a modification to a prior 2007 settlement, according to the Sierra Club.

The agreement is subject to review and approval by federal court, which AEP said is expected to occur within the next few months.

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