Vectren 2012 Annual Report Download - page 109

107
requirements are more stringent than those for existing plants. Utilities planning new coal-fired generation had argued
standards outlined in the MATS could not be attained even using the best available control technology.
Conclusions Regarding Air Regulations
To comply with Indiana’s implementation plan of the Clean Air Act, and other federal air quality standards, the Company
obtained authority from the IURC to invest in clean coal technology. Using this authorization, the Company invested
approximately $411 million starting in 2001 with the last equipment being placed into service on January 1, 2010. The pollution
control equipment included Selective Catalytic Reduction (SCR) systems, fabric filters, and an SO2 scrubber at its generating
facility that is jointly owned with ALCOA (the Company’s portion is 150 MW). SCR technology is the most effective method of
reducing NOx emissions where high removal efficiencies are required and fabric filters control particulate matter emissions. The
unamortized portion of the $411 million clean coal technology investment was included in rate base for purposes of determining
SIGECO’s new electric base rates approved in the latest base rate order obtained April 27, 2011. SIGECO’s coal fired
generating fleet is 100 percent scrubbed for SO2 and 90 percent controlled for NOx.
Utilization of the Company’s NOx and SO2 allowances can be impacted as regulations are revised and implemented. Most of
these allowances were granted to the Company at zero cost; therefore, any reduction in carrying value that could result from
future changes in regulations would be immaterial.
The Company is currently reviewing the sufficiency of its existing pollution control equipment in relation to the requirements
described in the MATS Rule and the 2015 requirement imposed by CAIR. Based upon an initial review, the Company believes
that it will be able to meet these requirements with its existing suite of pollution control equipment. However, it is possible some
operational modifications to the control equipment will be required. Additional capital investments, operating expenses, and
possibly the purchase of emission allowances may be required and could be significant depending on the required method of
compliance with the requirements. While the Company has not yet quantified what the additional costs may be associated with
these efforts, because the compliance is required by government regulation the Company believes that such additional costs, if
incurred, should be recoverable under Indiana Senate Bill 251 referenced above.
Notice of Violation Received
The Company received a notice of violation (NOV) from the EPA in November 2011 pertaining to its A.B. Brown power plant.
The NOV asserts that when the power plant was equipped with SCRs the correct permits were not obtained or the best
available control technology to control incidental sulfuric acid mist was not installed. Based on the Company’s understanding of
the New Source Review reform in effect when the equipment was installed, it is the Company’s position that its SCR project was
exempted from such requirements. At this time the Company is reviewing the potential impact this NOV could have on capital
expenditures and operating costs. To the extent costs to comply increase, they should be recoverable under Indiana law.
Water
Section 316(b) of the Clean Water Act requires that generating facilities use the “best technology available” to minimize adverse
environmental impacts in a body of water. More specifically, Section 316(b) is concerned with impingement and entrainment of
aquatic species in once-through cooling water intake structures used at electric generating facilities. In April 2009, the U.S.
Supreme Court affirmed that the EPA could, but was not required to, consider costs and benefits in making the evaluation as to
the best technology available for existing generating facilities. The regulation was remanded back to the EPA for further
consideration. In March 2011, the EPA released its proposed Section 316(b) regulations. The EPA did not mandate the
retrofitting of cooling towers in the proposed regulation, but if finalized, the regulation will leave it to the state to determine
whether cooling towers should be required on a case by case basis. A final rule is expected in 2013. Depending on the final
rule and on the Company’s facts and circumstances, capital investments could approximate $40 million if new infrastructure,
such as new cooling water towers, is required. Costs for compliance with these final regulations should qualify as federally
mandated regulatory requirements and be recovered under Indiana Senate Bill 251 referenced above.
Under the Clean Water Act, EPA sets technology-based guidelines for water discharges from new and existing facilities. EPA is
currently in the process of revising the existing steam electric effluent limitation guidelines that set the technology-based water
discharge limits for the electric power industry. EPA is focusing its rulemaking on wastewater generated primarily by pollution
control equipment necessitated by the comprehensive air regulations. EPA is under an April 19, 2013 deadline to complete its
rule proposal. It is not possible to estimate what potential costs may be required to meet these new water discharge limits,