As Alabama Power nears the $1 billion mark in expenditures related to complying with recent federal environmental regulations, more environmental rules loom that could more than double the cost figure.
Newly approved federal regulations could force the company to dramatically change the way it handles and stores coal ash and how it processes water used at its power plants. Combined, the two rules are likely to require the company to eventually close all its ash ponds and to install expensive water treatment facilities at some of its coal-fired generating plants. The price tag, over time, for the two rules is expected to easily top $1 billion.
The company is closely examining the two rules now, and the corresponding deadlines for compliance, to determine the most cost-effective path forward.
“There is no question – these new rules are going to be costly for our customers,” said Nick Sellers, vice president for Regulatory and Corporate Affairs. He noted that in addition to the actual ash pond closure costs, the company will be required to monitor the closed ponds for decades to come, while having to resort to higher-cost options for handling coal ash at plants that use coal as a fuel source.
In a public meeting in Montgomery on Dec. 8 about Alabama Power’s environmental compliance plans, the company was asked whether it planned to stagger the closure of ash ponds to help spread out the cost impact on customers. The company has ash facilities at six power plants across the state, and preliminary estimates put the closure costs alone at $670 million.
Mike Godfrey, Alabama Power’s general manager for Environmental Affairs, responded that the company would do all it could to spread the costs, but will be bound by deadlines set forth in the new rules.
While the company expects to ultimately close, drain and cap existing ash ponds, its experts are still examining the best options for handling ash going forward. One option would be to build new, lined landfills at plant sites, although stricter guidelines could limit potential locations. Another option: trucking ash to approved landfills located off-site.
For now, the company estimates its environmental-related capital costs alone will total $895 million from 2016 through 2020. Add to that an estimated $263 million the company expects to spend, just within that five-year period, specifically connected to ash pond closures. Some additional costs are also expected related to the new water rules. The cost projections don’t include any potential expenses for meeting proposed rules for limiting carbon emission from electric generating plants.
“We are talking about layers of new regulations that are requiring more and more changes to how we generate electricity. These rules also restrict the fuels we can use,” said Jim Heilbron, Alabama Power’s senior vice president and senior production officer.
Alabama Power is reducing its use of coal in response to the growing, mandated environmental costs. The company ceased using coal as a fuel source this year at Plant Gadsden, and retired two coal units at Plant Gorgas and one coal unit at Plant Barry. The company expects to cease using coal at four units at Plant Gaston next year, following completion of a project to add natural gas capability at the plant. The company also plans to end the use of coal at Plant Greene County next year, when two units at that plant are equipped to utilize natural gas.
Matt Bowden, the company’s vice president of Environmental Affairs, said that with new federal environmental rules kicking in, and more on the horizon, the company will continue to look for the most economical ways to meet the environmental regulations while meeting customer demands for reliable, affordable energy.
Still, Bowden said, the expenses for complying with the regulations are significant and will be for years to come. “Unfortunately, these rules are going to have a compounding effect on our costs.”