Air Permit Denial Threatens to Cost Consumers

Like the old Chinese curse, " may you live in interesting times", recent events could be on track for a perfect storm for electric utility generation, with electricity consumers caught in the middle and footing the bill as usual.

The convergence of recent US Supreme Court decisions, pending State and Federal government climate change legislation and citizen discussions about global warming put consumers at risk for a deluge of electric rate increases. Add a cold winter, or higher transportation and maintenance costs and the writing is on the wall. For those consumers that believe that current electricity rates are too low and do not reflect the external costs of air pollution created during electricity generation, the recent decision to deny power plant air quality permits in Kansas is a good decision. For those consumers struggling on fixed incomes or tight budgets, the decision may mean electric rates will continue to climb. That could be bad for everyone.

The Background
Tri-State G&T proposed the joint construction of the largest coal-fired power plant in the United States, to be built at the cost of $3.6 billion. The power plant with its two 700-megawatt generators was to be built and financed by several utilities including, Tri-State Generation and Transmission Association, Sunflower Electric Association, Golden Spread Electric Cooperative, Inc, and Midwest Energy.All four companies are member owned, non-profit cooperative corporations. The first three companies are wholesale power suppliers. Sunflower, organized in 1957, serves six rural electric distribution cooperatives in 34 western Kansas counties. Tri-State, started in 1952, is owned by and serves 44 electric cooperatives across portions of Colorado, Nebraska, New Mexico and Wyoming. Golden Spread Electric Cooperative was founded in 1984 and serves 16 distribution cooperatives in Oklahoma and Texas. Midwest Energy serves customers in central and western Kansas.

The new power plants are planned as an expansion to existing power generation facilities owned by Sunflower on their 10,000-acre, 360-megawatt Holcomb Station site. This is located approximately four miles south of Holcomb, Kansas.

The original plan was for Golden Spread, Sunflower, Tri-State and other investors to jointly own the first new 700-megawatt unit. Construction of the first unit was planned to begin in 2007 and be operational in 2012. Golden Spread planed to own 400 megawatts of the unit’s output for supply to its member systems. Sunflower expected to provide up to 150 megawatts to its member systems, and Midwest Energy was in for 75 megawatts. Tri-State planned to own the second 700-megawatt unit, to supply power to its member systems. This unit was projected to be online in 2013, but recent proposals before the denial show Tri-State postponing construction and tying the construction schedule to future load growth.

The Denial
According to an October 18, 2007 Kansas Department of Health and Environment (KDHE), press release concern over carbon dioxide production was the key factor in permit denial. Bolstered by the recent US Supreme Court decision (Massachusetts v. EPA), KHDE Secretary Roderick L. Bremby, stated, "I believe it would be irresponsible to ignore emerging information about the contribution of carbon dioxide and other greenhouse gases to climate change and the potential harm to our environment and health if we do nothing".

Massachusetts v. EPA defined carbon dioxide ( CO2) as an air quality pollutant that should be regulated by the EPA. The 66 page Supreme Court Opinion refers to specific scientific studies and reports documenting the existing and predicted negative impacts from global climate change and ties these changes directly to human activity; specifically the accelerated production of green house gases. Carbon dioxide heads the list of these green house gas emissions.

The EPA defines coal fired electricity generation as the single largest source of CO2 emissions in the USA. Coal fired electricity generation exceeds CO2 emissions from the entire transportation sector.

This permit denial is the first such denial in the nation."We are disappointed with the Secretary's arbitrary and capricious action," said Earl Watkins, Sunflower's president and chief executive officer. Those disappointed with the denial point out the neither the EPA or the State of Kansas include CO2 as a regulated air pollutant. Project partners felt that they had met all environmental and regulatory requirements with their proposal.

This action also changes Sunflower's plans to invest in and advance algae technology that would use carbon dioxide from the power plants. Attempting to address carbon emissions, the project partners completed initial testing for an innovative algae reactor that would use a portion of the carbon dioxide emissions from Holcomb Station to produce biofuels, including ethanol and biodiesel. Funds that would have been earned from the power plant expansion project were expected to be used to finance Sunflower's investment in the commercial algae reactor.

The Next Step
Tri-State's general counsel Ken Reif reported to the G&T's employees, "Naturally we are all disappointed in this action and we are in the process of evaluating our options with Sunflower and our board."
Sunflower’s President and CEO Watkins said, "Politics aside, the 1.5 million cooperative customers still need reliable, low- cost power. We will endeavor to fulfill that mission in the appropriate way, but those customers will be harmed and the economy damaged by the Secretary's decision. Sunflower expects to pursue legal and legislative remedies to this denial."

Talk about Denial
Wholesale power utilities still do not get it. They continue to promote misleading statements regarding global warming or climate change and insist that decisions are being made based on emotion and "politics" rather than science. If it wasn’t for "politics", utilities and consumers would have been paying higher generation rates for decades to account for externalities - pollution etc., caused by fossil fuel electricity generation. Some argue that as soon as electricity becomes expensive enough to be worth saving, energy conservation will finally kick in and become a serious part of demand side management, instead of the token savings that it is inmost homes today.

In any case the Kansas Department of Health and Environment took one of the first steps toward new thinking and new energy solutions. In these interesting times it will be very interesting to see the impact that this permit decision has on other coal fired power plant construction plans across the nation. It will be even be more interesting to see how utilities meet the growing national demand for electricity with limited generation resources and a growing demand for climate change action.
© 2007Mark Daily