Allegheny Power 2015 Annual Report Download - page 144

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128
ClimateChange
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ThereareanumberofinitiativestoreduceGHGemissionsatthestate,federalandinternationallevel.Certainnortheasternstates
areparticipatingintheRGGIandwesternstatesledbyCalifornia,haveimplementedprograms,primarilycapandtrademechanisms,
tocontrolemissionsofcertainGHGs.AdditionalpoliciesreducingGHGemissions,suchasdemandreductionprograms,renewable
portfoliostandardsandrenewablesubsidieshavebeenimplementedacrossthenation.AJune2013,PresidentialClimateAction
Planoutlinedgoalsto:(i)cutcarbonpollutioninAmericaby17%by2020(from2005levels)(ii)preparetheUnitedStatesforthe
impactsofclimatechangeand(iii)leadinternationaleffortstocombatglobalclimatechangeandprepareforitsimpacts.GHG
emissionshavealreadybeenreducedby10%between2005and2012accordingtoanApril,2014EPAReport.Duetoplant
deactivationsandincreasedefficiencies,FirstEnergyanticipatesitsCO2emissionswillbereduced25%below2005levelsby2015,
exceedingthePresident’sClimateActionPlangoalsbothintermsoftimingandreductionlevels.
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TheEPAreleaseditsfinal“EndangermentandCauseorContributeFindingsforGreenhouseGasesundertheCleanAirAct”in
December2009,concludingthatconcentrationsofseveralkeyGHGsconstitutesan"endangerment"andmayberegulatedas"air
pollutants"undertheCAAandmandatedmeasurementandreportingofGHGemissionsfromcertainsources,includingelectric
generatingplants.TheEPAreleaseditsfinalregulationsinAugust2015,toreduceCO2emissionsfromexistingfossilfuelfired
electricgeneratingunitsthatwouldrequireeachstatetodevelopSIPsbySeptember6,2016,tomeettheEPA’sstatespecificCO2
emissionrategoals.TheEPA’sCPPallowsstatestorequestatwoyearextensiontofinalizeSIPsbySeptember6,2018.Ifstatesfail
todevelopSIPs,theEPAalsoproposedafederalimplementationplanthatcanbeimplementedbytheEPAthatincludedmodel
emissionstradingruleswhichstatescanalsoadoptintheirSIPs.TheEPAalsofinalizedseparateregulationsimposingCO2emission
limitsfornew,modified,andreconstructedfossilfuelfiredelectricgeneratingunits.OnJune23,2014,theUnitedStatesSupreme
CourtdecidedthatCO2orotherGHGemissionsalonecannottriggerpermittingrequirementsundertheCAA,butthatairemission
sourcesthatneedPSDpermitsduetootherregulatedairpollutantscanberequiredbytheEPAtoinstallGHGcontroltechnologies.
NumerousstatesandprivatepartiesfiledappealsandmotionstostaytheCPPwiththeU.S.CourtofAppealsfortheD.C.Circuitin
October2015.OnJanuary21,2015,apaneloftheD.C.Circuitdeniedthemotionsforstayandsetanexpeditedscheduleforbriefing
andargument.OnFebruary9,2016,theU.S.SupremeCourtstayedtheruleduringthependencyofthechallengestotheD.C.
CircuitandU.S.SupremeCourt.Dependingontheoutcomeoffurtherappealsandhowanyfinalrulesareultimatelyimplemented,
thefuturecostofcompliancemaybesubstantial.
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Attheinternationallevel,theUnitedNationsFrameworkConventiononClimateChangeresultedintheKyotoProtocolrequiring
participatingcountries,whichdoesnotincludetheU.S.,toreduceGHGscommencingin2008andhasbeenextendedthrough2020.
TheObamaAdministrationsubmittedinMarch2015,aformalpledgefortheU.S.toreduceitseconomywidegreenhousegas
emissionsby26to28percentbelow2005levelsby2025andjoinedinadoptingtheagreementreachedonDecember12,2015at
theUnitedNationsFrameworkConventiononClimateChangemeetingsinParis.TheParisAgreementmustberatifiedbyatleast55
countriesrepresentingatleast55%ofglobalGHGemissionsbeforeitsnonbindingobligationstolimitglobalwarmingtowellbelow
twodegreesCelsiusbecomeeffective.FirstEnergycannotcurrentlyestimatethefinancialimpactofclimatechangepolicies,although
potentiallegislativeorregulatoryprogramsrestrictingCO2emissions,orlitigationallegingdamagesfromGHGemissions,could
requiresignificantcapitalandotherexpendituresorresultinchangestoitsoperations.TheCO2emissionsperKWHofelectricity
generatedbyFirstEnergyislowerthanmanyofitsregionalcompetitorsduetoitsdiversifiedgenerationsources,whichincludelowor
nonCO2emittinggasfiredandnucleargenerators.
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CleanWaterAct
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Variouswaterqualityregulations,themajorityofwhicharetheresultofthefederalCWAanditsamendments,applytoFirstEnergy's
plants.Inaddition,thestatesinwhichFirstEnergyoperateshavewaterqualitystandardsapplicabletoFirstEnergy'soperations.
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TheEPAfinalizedCWASection316(b)regulationsinMay2014,requiringcoolingwaterintakestructureswithanintakevelocity
greaterthan0.5feetpersecondtoreducefishimpingementwhenaquaticorganismsarepinnedagainstscreensorotherpartsofa
coolingwaterintakesystemtoa12%annualaverageandrequiringcoolingwaterintakestructuresexceeding125milliongallonsper
daytoconductstudiestodeterminesitespecificcontrols,ifany,toreduceentrainment,whichoccurswhenaquaticlifeisdrawnintoa
facility'scoolingwatersystem.FirstEnergyisstudyingvariouscontroloptionsandtheircostsandeffectiveness,includingpilottesting
ofreverselouversinaportionoftheBayShoreplant'scoolingwaterintakechanneltodivertfishawayfromtheplant'scoolingwater
intakesystem.Dependingontheresultsofsuchstudiesandanyfinalactiontakenbythestatesbasedonthosestudies,thefuture
capitalcostsofcompliancewiththesestandardsmaybesubstantial.
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TheEPAproposedupdatestothewastewatereffluentlimitationsguidelinesandstandardsfortheSteamElectricPowerGenerating
category(40CFRPart423)inApril2013.OnSeptember30,2015,theEPAfinalizednew,morestringenteffluentlimitsforarsenic,
mercury,seleniumandnitrogenforwastewaterfromwetscrubbersystemsandzerodischargeofpollutantsinashtransportwater.
Thetreatmentobligationswillphaseinaspermitsarerenewedonafiveyearcyclefrom2018to2023.Thefinalrulealsoallows
plantstocommittomorestringenteffluentlimitsforwetscrubbersystemsbasedonevaporativetechnologyandinreturnhaveuntil
theendof2023tomeetthemorestringentlimits.Dependingontheoutcomeofappealsandhowanyfinalrulesareultimately
implemented,thefuturecostsofcompliancewiththesestandardsmaybesubstantialandchangestoFirstEnergy'sandFES'
operationsmayresult.
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InOctober2009,theWVDEPissuedanNPDESwaterdischargepermitfortheFortMartinplant,whichimposesTDS,sulfate
concentrationsandothereffluentlimitationsforheavymetals,aswellastemperaturelimitations.Concurrentwiththeissuanceofthe
FortMartinNPDESpermit,WVDEPalsoissuedanadministrativeordersettingdeadlinesforMPtomeetcertainoftheeffluentlimits
thatwereeffectiveimmediatelyunderthetermsoftheNPDESpermit.MPappealed,andastayofcertainconditionsoftheNPDES
permitandorderhavebeengrantedpendingafinaldecisionontheappealandsubjecttoWVDEPmovingtodissolvethestay.The
FortMartinNPDESpermitcouldrequireaninitialcapitalinvestmentrangingfrom$150millionto$300millioninordertoinstall
technologyto meettheTDSand sulfatelimits,whichtechnology mayalsomeet certainoftheother effluentlimits.Additional
technologymaybeneededtomeetcertainotherlimitsintheFortMartinNPDESpermit.MPintendstovigorouslypursuethese
issuesbutcannotpredicttheoutcomeoftheappealorestimatethepossiblelossorrangeofloss.
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FirstEnergyintendstovigorouslydefendagainsttheCWAmattersdescribedabovebut,exceptasindicatedabove,cannotpredict
theiroutcomesorestimatethelossorrangeofloss.
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RegulationofWasteDisposal
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Federalandstatehazardous wasteregulationshavebeenpromulgatedasaresultof theRCRA,as amended,andtheToxic
SubstancesControlAct.Certaincoalcombustionresiduals,suchascoalash,wereexemptedfromhazardouswastedisposal
requirementspendingtheEPA'sevaluationoftheneedforfutureregulation.
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InDecember2014,theEPAfinalizedregulationsforthedisposalofCCRs(nonhazardous),establishingnationalstandardsregarding
landfilldesign,structuralintegritydesignandassessmentcriteriaforsurfaceimpoundments,groundwatermonitoringandprotection
proceduresandotheroperationalandreportingprocedurestoassurethesafedisposalofCCRsfromelectricgeneratingplants.
Basedonanassessmentofthefinalizedregulations,thefuturecostofcomplianceandexpectedtimingofspendhadnosignificant
impactonFirstEnergy'sorFES'existingAROsassociatedwithCCRs.Althoughunexpected,changesintimingandclosureplan
requirementsinthefuturecouldimpactourassetretirementobligationssignificantly.
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Pursuanttoa2013consentdecree,PADEPissueda2014permitrequiringFEtoprovidebondingfor45yearsofclosureandpost
closureactivitiesandtocompleteclosurewithina 12yearperiod,but authorizingFEtoseekapermitmodificationbasedon
"unexpectedsiteconditionsthathaveorwillslowclosureprogress."ThepermitdoesnotrequireactivedewateringoftheCCRs,but
doesrequireagroundwaterassessmentforarsenicandabatementifcertainconditionsinthepermitaremet.TheBruceMansfield
plantispursuingseveraloptionsfordisposalofCCRsfollowingDecember31,2016andexpectsbeneficialreuseanddisposal
optionswillbesufficientfortheongoingoperationoftheplant.OnMay22,2015andSeptember21,2015,thePADEPreissueda
permitfortheHatfield'sFerryCCRdisposalfacilityandthenmodifiedthatpermittoallowdisposalofBruceMansfieldplantCCR.On
July6,2015andOctober22,2015,theSierraClubfiledNoticeofAppealswiththePennsylvaniaEnvironmentalHearingBoard
challengingtherenewal,reissuanceandmodificationofthepermitfortheHatfield’sFerryCCRdisposalfacility.
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FirstEnergyoritssubsidiarieshavebeennamedaspotentiallyresponsiblepartiesatwastedisposalsites,whichmayrequirecleanup
under the CERCLA. Allegations of disposal of hazardous substances at historical sites and the liability involved are often
unsubstantiatedandsubjecttodisputehowever,federallawprovidesthatallpotentiallyresponsiblepartiesforaparticularsitemay
be liable on a joint and several basis. Environmental liabilities that are considered probable have been recognized onthe
ConsolidatedBalanceSheetsasofDecember31,2015basedonestimatesofthetotalcostsofcleanup,FE'sanditssubsidiaries'
proportionateresponsibilityforsuchcostsandthefinancialabilityofotherunaffiliatedentitiestopay.Totalliabilitiesofapproximately
$126millionhavebeenaccruedthroughDecember31,2015.Includedinthetotalareaccruedliabilitiesofapproximately$87million
forenvironmentalremediationofformermanufacturedgasplantsandgasholderfacilitiesinNewJersey,whicharebeingrecovered
byJCP&LthroughanonbypassableSBC.FirstEnergyoritssubsidiariescouldbefoundpotentiallyresponsibleforadditional
amountsoradditionalsites,butthelossorrangeoflossescannotbedeterminedorreasonablyestimatedatthistime.
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OTHERLEGALPROCEEDINGS
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NuclearPlantMatters
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UnderNRCregulations,FirstEnergymustensurethatadequatefundswillbeavailabletodecommissionitsnuclearfacilities.Asof
December31,2015,FirstEnergyhadapproximately$2.3billioninvestedinexternaltruststobeusedforthedecommissioningand
environmentalremediationofDavisBesse,BeaverValley,PerryandTMI2.ThevaluesofFirstEnergy'sNDTsfluctuatebasedon
marketconditions.Ifthevalueofthetrustsdeclinebyamaterialamount,FirstEnergy'sobligationtofundthetrustsmayincrease.
Disruptionsinthecapitalmarketsandtheireffectsonparticularbusinessesandtheeconomycouldalsoaffectthevaluesofthe
NDTs.FEandFEShavealsoenteredintoatotalof$24.5millioninparentalguaranteesinsupportofthedecommissioningofthe
spentfuelstoragefacilitieslocatedatthenuclearfacilities.AsrequiredbytheNRC,FirstEnergyannuallyrecalculatesandadjuststhe
amountofitsparentalguaranties,asappropriate.
InAugust2010,FENOCsubmittedanapplicationtotheNRCforrenewaloftheDavisBesseoperatinglicenseforanadditional
twentyyears.OnDecember8,2015,theNRCrenewedtheoperatinglicenseforDavisBesse,whichisnowauthorizedtocontinue
operationthroughApril22,2037.Priortothatdecision,theNRCCommissionersdeniedanintervenor'srequesttoreopentherecord
andadmit acontentionon theNRC’s ContinuedStorage Rule.OnAugust6,2015,thisintervenorsoughtreviewoftheNRC
Commissioners'decisionbeforetheU.S.CourtofAppealsfortheDCCircuit.FENOChasmovedtointerveneinthatproceeding.