Allegheny Power 2010 Annual Report Download - page 63

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In June 2008, the EPA issued a Notice and Finding of Violation to Mission Energy Westside, Inc. alleging that
“modifications” at the Homer City Power Station occurred since 1988 to the present without preconstruction NSR
permitting in violation of the CAA’s PSD program. In May 2010, the EPA issued a second NOV to Mission Energy
Westside, Inc., Penelec, NYSEG and others that have had an ownership interest in the Homer City Power Station
containing in all material respects identical allegations as the June 2008 NOV. On July 20, 2010, the states of New York
and Pennsylvania provided Mission Energy Westside, Inc., Penelec, NYSEG and others that have had an ownership
interest in the Homer City Power Station a notification that was required 60 days prior to filing a citizen suit under the
CAA. In January, 2011, the DOJ filed a complaint against Penelec in the U.S. District Court for the Western District of
Pennsylvania seeking damages based on alleged “modifications” at the Homer City Power Station between 1991 to 1994
without preconstruction NSR permitting in violation of the CAA’s PSD and Title V permitting programs. The complaint
was also filed against the former co-owner, NYSEG, and various current owners of the Homer City Station, including
EME Homer City Generation L.P. and affiliated companies, including Edison International. In addition, the
Commonwealth of Pennsylvania and the State of New York intervened and have filed a separate complaint regarding the
Homer City Station. Mission Energy Westside, Inc. is seeking indemnification from Penelec, the co-owner and operator of
the Homer City Power Station prior to its sale in 1999. The scope of Penelec’s indemnity obligation to and from Mission
Energy Westside, Inc. is under dispute and Penelec is unable to predict the outcome of this matter.
In January 2011, a complaint was filed against Penelec in the U.S. District Court for the Western District of Pennsylvania
seeking damages based on the Homer City Station’s air emissions. The complaint was also filed against the former co-
owner, NYSEG and various current owners of the Homer City Station, including EME Homer City Generation L.P. and
affiliated companies, including Edison International. The complaint also seeks certification as a class action and to enjoin
the Homer City Station from operating except in a “safe, responsible, prudent and proper manner.” Penelec believes the
claims are without merit and intends to defend itself against the allegations made in the complaint.
In August 2009, the EPA issued a Finding of Violation and NOV alleging violations of the CAA and Ohio regulations,
including the PSD, NNSR, and Title V regulations at the Eastlake, Lakeshore, Bay Shore and Ashtabula generating
plants. The EPA’s NOV alleges equipment replacements occurring during maintenance outages dating back to 1990
triggered the pre-construction permitting requirements under the PSD and NNSR programs. FGCO received a request
for certain operating and maintenance information and planning information for these same generating plants and
notification that the EPA is evaluating whether certain maintenance at the Eastlake generating plant may constitute a
major modification under the NSR provision of the CAA. Later in 2009, FGCO also received another information request
regarding emission projections for the Eastlake generating plant. FGCO intends to comply with the CAA, including the
EPA’s information requests, but, at this time, is unable to predict the outcome of this matter.
National Ambient Air Quality Standards
The EPA’s CAIR requires reductions of NOx and SO2 emissions in two phases (2009/2010 and 2015), ultimately capping
SO2 emissions in affected states to 2.5 million tons annually and NOx emissions to 1.3 million tons annually. In 2008, the
U.S. Court of Appeals for the District of Columbia vacated CAIR “in its entirety” and directed the EPA to “redo its analysis
from the ground up.” In December 2008, the Court reconsidered its prior ruling and allowed CAIR to remain in effect to
“temporarily preserve its environmental values” until the EPA replaces CAIR with a new rule consistent with the Court’s
opinion. The Court ruled in a different case that a cap-and-trade program similar to CAIR, called the “NOx SIP Call,”
cannot be used to satisfy certain CAA requirements (known as reasonably available control technology) for areas in non-
attainment under the “8-hour” ozone NAAQS. In July 2010, the EPA proposed the CATR to replace CAIR, which remains
in effect until the EPA finalizes CATR. CATR requires reductions of NOx and SO2 emissions in two phases (2012 and
2014), ultimately capping SO2 emissions in affected states to 2.6 million tons annually and NOx emissions to 1.3 million
tons annually. The EPA proposed a preferred regulatory approach that allows trading of NOx and SO2 emission
allowances between power plants located in the same state and severely limits interstate trading of NOx and SO2
emission allowances. The EPA also requested comment on two alternative approaches—the first eliminates interstate
trading of NOx and SO2 emission allowances and the second eliminates trading of NOx and SO2 emission allowances in
its entirety. Depending on the actions taken by the EPA with respect to CATR, the proposed MACT regulations discussed
below and any future regulations that are ultimately implemented, FGCO’s future cost of compliance may be substantial.
Management continues to assess the impact of these environmental proposals and other factors on FGCO’s facilities,
particularly on the operation of its smaller, non-supercritical units. In August 2010, for example, management decided to
idle certain units or operate them on a seasonal basis until developments clarify.