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HOUSTON, Nov 11 (Reuters) - Alliant Energy Corp (LNT.N) said state regulators on Tuesday rejected its Wisconsin utility unit's plan to build a $1.26 billion coal/biomass unit at an existing power station in Wisconsin.
The Public Service Commission of Wisconsin denied Wisconsin Power and Light's application for a certificate of need for the 300-megawatt Nelson Dewey Unit 3 near Cassville, Wisconsin, in a 3-0 oral decision.
Regulators said the expansion project was too costly when weighed against other alternatives such as natural gas generation or purchased power from existing sources.
Concerns over construction costs and uncertainty over the costs of complying with future carbon dioxide regulation were contributing factors to the denial, the commission said in a release.
WPL president Barbara Swan said the utility was "extremely disappointed" with the decision and "the opportunities lost with it."
The proposed Nelson Dewey 3 unit was designed to burn not only coal, but also switch grass, corn stalks and waste wood, the Madison-based utility said.
The company had agreed to offset greenhouse gas emissions from the new unit by retiring an old coal plant, adding wind power and boosting the amount of biomass to be burned at the new unit.
Regulators applauded WPL's decision to burn up to 20 percent renewable biomass, but found that total risk tied to the project was "unacceptable to ratepayers."
"We are at a unique juncture in this country, and in Wisconsin, and decisions regarding new sources of electric generation need to account for the likely future costs of complying with constraints on carbon emissions," said Eric Callisto, commission chairman.
Cost estimates for Nelson Dewey 3 had risen from $850 million to $950 million to more than $1.2 billion. WPL had hoped to bring the unit online in 2013.
The utility may add more wind power, but the coal-plant retirement and other greenhouse-gas cuts were contingent on approval of the new unit, said utility spokesman Rob Crain.
Crain said the regulatory process showed that WPL, which serves 450,000 electricity customers in Wisconsin, needs additional baseload generation to meet growing demand.
"What wasn't agreed on was how to serve that load," he said.
Increased opposition to coal-fired plants and the higher levels of carbon dioxide they emit forced U.S. utilities to cancel or delay more than 30,000 MW of coal generation between 2002 and 2007, according to a government report. More than 3,500 MW were canceled or deferred in the first half of 2008.
Even so, more than a dozen new coal-fired plants, totaling 8,700 MW, are under construction while permits for dozens more are being considered. (Reporting by Eileen O'Grady; Editing by Marguerita Choy)