July 25 Southern Co, one of the largest
utility consumers of coal, cut the amount it plans to spend to
keep its coal generating fleet in compliance with stricter
federal environmental rules to about $2.3 billion, officials
said Wednesday, down from estimates exceeding $4 billion.
Last week, the U.S. Environmental Protection Agency said it
would review its final rule on mercury emissions from power
plants, known as the Mercury and Air Toxics Standards, or MATS,
to add more flexibility.
The changes will reduce the number of baghouses, or particle
filtration units, that Southern's utilities will need to
install, said Art Beattie, Southern's chief financial officer.
That may pare the cost of MATS compliance to $1.8 billion, down
$900 million from Southern's previous estimate.
Southern, which operates utilities in Georgia, Alabama,
Mississippi and Florida serving 4.4 million customers, has
already shut 500 MW of coal-fired generation in Georgia and
plans to shut another 600 MW next year.
"Our strategy now calls for approximately 13,000 of
coal-fired generation to be preserved for the long term," said
Between 3,000 and 4,000 MW of Southern's remaining 7,000 MW
of coal generation may be retired and the rest will be repowered
or replaced to burn other fuel, primarily natural gas, Beattie
Southern also lowered its environmental compliance budget to
reflect additional time allowed to deal with new coal waste and
Environmental spending over the next three years will
account for 14 percent of Southern's total capital spending of
$16.3 billion over the 2012-2014 period, officials told analysts
on a conference call.
While the EPA changes "have resulted in a lower expected
cost for MATS compliance, this is still a very expensive rule
that will be difficult to comply with on a continuing basis,"
Southern Chief Executive Tom Fanning told analysts.
Fanning called the latest EPA regulations part of a set of
"well-intentioned but overreaching rules ... that will eliminate
a significant portion of America's current coal generation
fleet, and effectively prohibit new coal plants from being
Fanning said the EPA, an agency not accountable to voters,
is now setting U.S. energy policy.
Southern's four utility units have reduced their reliance on
coal so far this year to 38 percent of the generation mix, from
54 percent in the first half of 2011. Use of cheaper natural gas
has risen to 45 percent, from 29 percent in the first half of
Southern's unregulated generating unit, Southern Power,
recently completed a 100-MW biomass plant in East Texas for
about $500 million, but Fanning told Reuters that other EPA
regulations have "chilled" development of biomass in the U.S.
Southeast for now.