Another State Urges Utility to Think Twice About New Power Plant Plans

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Faced with rising construction costs and a rapidly changing regulatory environment, Louisiana officials yesterday ordered Entergy to reconsider its plan to build two new coal and petroleum-coke burning units at a power plant near New Orleans.

In the year and half since the Louisiana Public Service Commission approved the Little Gypsy Repowering Project, Entergy’s cost estimate for the 538-megawatt retrofit has shot from $910 million to $1.76 billion. Future federal greenhouse gas regulations already in the works in Washington are certain to push that price even higher.

If this scenario sounds familiar, it should.

Utilities across the country have cancelled close to 100 coal projects in recent years, according to the Sierra Club. In each case, state officials and utility executives looked at the increasing costs of materials and the growing uncertainty about how environmental regulations would change under the new administration, and they held back.

Still, a few utilities remained determined to avoid any review that might stop their coal-fired projects. The poster child for this behavior is New Hampshire’s PSNH.

In Concord on Friday, a New Hampshire Senate committee will hold a hearing on legislation that would require a review of PSNH’s increasingly expensive plan to keep its Merrimack Station coal-fired power plant burning. To keep up with current environmental regulations, PSNH must install mercury controls at the aging power plant.

Like Little Gypsy, the Merrimack project’s cost estimates have almost doubled, from $250 million when the legislature ordered the scrubber installation two years ago to $457 million now.

PSNH customers began calling for a state review of the Merrimack plan after the new cost estimate was discovered in an SEC filing last August. The New Hampshire Public Utilities Commission abdicated responsibility for the project to the legislature, which has been slow to consider the ratepayers’ concerns.

For the full saga of New Hampshire’s battle of Merrimack Station and the players’ motivations, read Survival Strategy for an Aging Coal Plant.

In both the PSNH and Entergy cases, the utilities own their power-generating facilities. Both have the authority to recover their expenses from their customers, with a healthy premium. In PSNH’s cases, the utility gets a 9.67 percent rate of return on its investments, which adds up to an extra $20 million to $25 million a year for equipment that likely won’t keep the plant in compliance with clean air regulations for very long.

Environmental groups opposing the projects have noted how quickly the Obama administration is moving to end environmentally damaging Bush-era practices and put in place new science-based rules that are conscious of both human health and the environment.

In Louisiana in particular, the opponents argue the Entergy failed to take into consideration the future cost of carbon emissions, which President Obama even factored into his federal budget.

“For economic, environmental and health reasons the plan to convert Little Gypsy is the worst possible option at the worst possible time,” said Karen Wimpelberg, director of regulatory affairs for the Alliance for Affordable Energy, which is suing over over the Little Gypsy project.

The utilities’ ratepaying customers, including Wal-Mart in Louisiana and Stonyfield Farms in New Hampshire, have also been calling for feasibility reviews for the projects.

New Hampshire’s legislators have the chance to start the ball rolling tomorrow. 

Louisiana finally broke through yesterday. Louisiana’s Public Service Commission, led by Chairman Lambert Boissiere, unanimously called for Entergy to temporarily suspend its work on the Little Gypsy project, conduct a new review based on  current data, and report back to the commission on April 8.

The LPSC motion directs Entergy to determine if it might be appropriate to formally delay the Little Gypsy project.

    “There have been significant changes that have occurred relating to the Little Gypsy Repowering Project during the past few months,” Boissiere said. “Little Gypsy may not have the same positive impact for Louisiana ratepayers today as it did when presented to the LPSC in November 2007.”