Allegheny Power 2015 Annual Report Download - page 71
Download and view the complete annual report
Please find page 71 of the 2015 Allegheny Power annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.
54
includingcapitalprojectsundertakensince2009.FirstEnergyintendstocomplywiththeCAAbut,atthistime,isunabletopredictthe
outcomeofthismatterorestimatethelossorrangeofloss.
ClimateChange
ThereareanumberofinitiativestoreduceGHGemissionsatthestate,federalandinternationallevel.Certainnortheasternstates
areparticipatingintheRGGIandwesternstatesledbyCalifornia,haveimplementedprograms,primarilycapandtrademechanisms,
tocontrolemissionsofcertainGHGs.AdditionalpoliciesreducingGHGemissions,suchasdemandreductionprograms,renewable
portfoliostandardsandrenewablesubsidieshavebeenimplementedacrossthenation.AJune2013,PresidentialClimateAction
Planoutlinedgoalsto:(i)cutcarbonpollutioninAmericaby17%by2020(from2005levels)(ii)preparetheUnitedStatesforthe
impactsofclimatechangeand(iii)leadinternationaleffortstocombatglobalclimatechangeandprepareforitsimpacts.GHG
emissionshavealreadybeenreducedby10%between2005and2012accordingtoanApril,2014EPAReport.Duetoplant
deactivationsandincreasedefficiencies,FirstEnergyanticipatesitsCO2emissionswillbereduced25%below2005levelsby2015,
exceedingthePresident’sClimateActionPlangoalsbothintermsoftimingandreductionlevels.
TheEPAreleaseditsfinal“EndangermentandCauseorContributeFindingsforGreenhouseGasesundertheCleanAirAct”in
December2009,concludingthatconcentrationsofseveralkeyGHGsconstitutesan"endangerment"andmayberegulatedas"air
pollutants"undertheCAAandmandatedmeasurementandreportingofGHGemissionsfromcertainsources,includingelectric
generatingplants.TheEPAreleaseditsfinalregulationsinAugust2015,toreduceCO2emissionsfromexistingfossilfuelfired
electricgeneratingunitsthatwouldrequireeachstatetodevelopSIPsbySeptember6,2016,tomeettheEPA’sstatespecificCO2
emissionrategoals.TheEPA’sCPPallowsstatestorequestatwoyearextensiontofinalizeSIPsbySeptember6,2018.Ifstatesfail
todevelopSIPs,theEPAalsoproposedafederalimplementationplanthatcanbeimplementedbytheEPAthatincludedmodel
emissionstradingruleswhichstatescanalsoadoptintheirSIPs.TheEPAalsofinalizedseparateregulationsimposingCO2emission
limitsfornew,modified,andreconstructedfossilfuelfiredelectricgeneratingunits.OnJune23,2014,theUnitedStatesSupreme
CourtdecidedthatCO2orotherGHGemissionsalonecannottriggerpermittingrequirementsundertheCAA,butthatairemission
sourcesthatneedPSDpermitsduetootherregulatedairpollutantscanberequiredbytheEPAtoinstallGHGcontroltechnologies.
NumerousstatesandprivatepartiesfiledappealsandmotionstostaytheCPPwiththeU.S.CourtofAppealsfortheD.C.Circuitin
October2015.OnJanuary21,2015,apaneloftheD.C.Circuitdeniedthemotionsforstayandsetanexpeditedscheduleforbriefing
andargument.OnFebruary9,2016,theU.S.SupremeCourtstayedtheruleduringthependencyofthechallengestotheD.C.
CircuitandU.S.SupremeCourt.Dependingontheoutcomeoffurtherappealsandhowanyfinalrulesareultimatelyimplemented,
thefuturecostofcompliancemaybesubstantial.
Attheinternationallevel,theUnitedNationsFrameworkConventiononClimateChangeresultedintheKyotoProtocolrequiring
participatingcountries,whichdoesnotincludetheU.S.,toreduceGHGscommencingin2008andhasbeenextendedthrough2020.
TheObamaAdministrationsubmittedinMarch2015,aformalpledgefortheU.S.toreduceitseconomywidegreenhousegas
emissionsby26to28percentbelow2005levelsby2025andjoinedinadoptingtheagreementreachedonDecember12,2015at
theUnitedNationsFrameworkConventiononClimateChangemeetingsinParis.TheParisAgreementmustberatifiedbyatleast55
countriesrepresentingatleast55%ofglobalGHGemissionsbeforeitsnonbindingobligationstolimitglobalwarmingtowellbelow
twodegreesCelsiusbecomeeffective.FirstEnergycannotcurrentlyestimatethefinancialimpactofclimatechangepolicies,although
potentiallegislativeorregulatoryprogramsrestrictingCO2emissions,orlitigationallegingdamagesfromGHGemissions,could
requiresignificantcapitalandotherexpendituresorresultinchangestoitsoperations.TheCO2emissionsperKWHofelectricity
generatedbyFirstEnergyislowerthanmanyofitsregionalcompetitorsduetoitsdiversifiedgenerationsources,whichincludelowor
nonCO2emittinggasfiredandnucleargenerators.
CleanWaterAct
Variouswaterqualityregulations,themajorityofwhicharetheresultofthefederalCWAanditsamendments,applytoFirstEnergy's
plants.Inaddition,thestatesinwhichFirstEnergyoperateshavewaterqualitystandardsapplicabletoFirstEnergy'soperations.
TheEPAfinalizedCWASection316(b)regulationsinMay2014,requiringcoolingwaterintakestructureswithanintakevelocity
greaterthan0.5feetpersecondtoreducefishimpingementwhenaquaticorganismsarepinnedagainstscreensorotherpartsofa
coolingwaterintakesystemtoa12%annualaverageandrequiringcoolingwaterintakestructuresexceeding125milliongallonsper
daytoconductstudiestodeterminesitespecificcontrols,ifany,toreduceentrainment,whichoccurswhenaquaticlifeisdrawnintoa
facility'scoolingwatersystem.FirstEnergyisstudyingvariouscontroloptionsandtheircostsandeffectiveness,includingpilottesting
ofreverselouversinaportionoftheBayShoreplant'scoolingwaterintakechanneltodivertfishawayfromtheplant'scoolingwater
intakesystem.Dependingontheresultsofsuchstudiesandanyfinalactiontakenbythestatesbasedonthosestudies,thefuture
capitalcostsofcompliancewiththesestandardsmaybesubstantial.
TheEPAproposedupdatestothewastewatereffluentlimitationsguidelinesandstandardsfortheSteamElectricPowerGenerating
category(40CFRPart423)inApril2013.OnSeptember30,2015,theEPAfinalizednew,morestringenteffluentlimitsforarsenic,
mercury,seleniumandnitrogenforwastewaterfromwetscrubbersystemsandzerodischargeofpollutantsinashtransportwater.
Thetreatmentobligationswillphaseinaspermitsarerenewedonafiveyearcyclefrom2018to2023.Thefinalrulealsoallows
plantstocommittomorestringenteffluentlimitsforwetscrubbersystemsbasedonevaporativetechnologyandinreturnhaveuntil
theendof2023tomeetthemorestringentlimits.Dependingontheoutcomeofappealsandhowanyfinalrulesareultimately
55
implemented,thefuturecostsofcompliancewiththesestandardsmaybesubstantialandchangestoFirstEnergy'sandFES'
operationsmayresult.
InOctober2009,theWVDEPissuedanNPDESwaterdischargepermitfortheFortMartinplant,whichimposesTDS,sulfate
concentrationsandothereffluentlimitationsforheavymetals,aswellastemperaturelimitations.Concurrentwiththeissuanceofthe
FortMartinNPDESpermit,WVDEPalsoissuedanadministrativeordersettingdeadlinesforMPtomeetcertainoftheeffluentlimits
thatwereeffectiveimmediatelyunderthetermsoftheNPDESpermit.MPappealed,andastayofcertainconditionsoftheNPDES
permitandorderhavebeengrantedpendingafinaldecisionontheappealandsubjecttoWVDEPmovingtodissolvethestay.The
FortMartinNPDESpermitcouldrequireaninitialcapitalinvestmentrangingfrom$150millionto$300millioninordertoinstall
technologyto meettheTDSand sulfatelimits,whichtechnology mayalso meetcertainoftheothereffluentlimits.Additional
technologymaybeneededtomeetcertainotherlimitsintheFortMartinNPDESpermit.MPintendstovigorouslypursuethese
issuesbutcannotpredicttheoutcomeoftheappealorestimatethepossiblelossorrangeofloss.
FirstEnergyintendstovigorouslydefendagainsttheCWAmattersdescribedabovebut,exceptasindicatedabove,cannotpredict
theiroutcomesorestimatethelossorrangeofloss.
RegulationofWasteDisposal
Federalandstatehazardous wasteregulationshavebeen promulgatedasaresultoftheRCRA, asamended,and theToxic
SubstancesControlAct.Certaincoalcombustionresiduals,suchascoalash,wereexemptedfromhazardouswastedisposal
requirementspendingtheEPA'sevaluationoftheneedforfutureregulation.
InDecember2014,theEPAfinalizedregulationsforthedisposalofCCRs(nonhazardous),establishingnationalstandardsregarding
landfilldesign,structuralintegritydesignandassessmentcriteriaforsurfaceimpoundments,groundwatermonitoringandprotection
proceduresandotheroperationalandreportingprocedurestoassurethesafedisposalofCCRsfromelectricgeneratingplants.
Basedonanassessmentofthefinalizedregulations,thefuturecostofcomplianceandexpectedtimingofspendhadnosignificant
impactonFirstEnergy'sorFES'existingAROsassociatedwithCCRs.Althoughunexpected,changesintimingandclosureplan
requirementsinthefuturecouldimpactourassetretirementobligationssignificantly.
Pursuanttoa2013consentdecree,PADEPissueda2014permitrequiringFEtoprovidebondingfor45yearsofclosureandpost
closureactivitiesandtocompleteclosurewithina 12yearperiod,but authorizingFEtoseekapermitmodificationbased on
"unexpectedsiteconditionsthathaveorwillslowclosureprogress."ThepermitdoesnotrequireactivedewateringoftheCCRs,but
doesrequireagroundwaterassessmentforarsenicandabatementifcertainconditionsinthepermitaremet.TheBruceMansfield
plantispursuingseveraloptionsfordisposalofCCRsfollowingDecember31,2016andexpectsbeneficialreuseanddisposal
optionswillbesufficientfortheongoingoperationoftheplant.OnMay22,2015andSeptember21,2015,thePADEPreissueda
permitfortheHatfield'sFerryCCRdisposalfacilityandthenmodifiedthatpermittoallowdisposalofBruceMansfieldplantCCR.On
July6,2015andOctober22,2015,theSierraClubfiledNoticeofAppealswiththePennsylvaniaEnvironmentalHearingBoard
challengingtherenewal,reissuanceandmodificationofthepermitfortheHatfield’sFerryCCRdisposalfacility.
FirstEnergyoritssubsidiarieshavebeennamedaspotentiallyresponsiblepartiesatwastedisposalsites,whichmayrequirecleanup
under the CERCLA. Allegations of disposal of hazardous substances at historical sites and the liability involved are often
unsubstantiatedandsubjecttodisputehowever,federallawprovidesthatallpotentiallyresponsiblepartiesforaparticularsitemay
be liable on a joint and several basis. Environmental liabilities that are considered probable have been recognized on the
ConsolidatedBalanceSheetsasofDecember31,2015basedonestimatesofthetotalcostsofcleanup,FE'sanditssubsidiaries'
proportionateresponsibilityforsuchcostsandthefinancialabilityofotherunaffiliatedentitiestopay.Totalliabilitiesofapproximately
$126millionhavebeenaccruedthroughDecember31,2015.Includedinthetotalareaccruedliabilitiesofapproximately$87million
forenvironmentalremediationofformermanufacturedgasplantsandgasholderfacilitiesinNewJersey,whicharebeingrecovered
byJCP&LthroughanonbypassableSBC.FirstEnergyoritssubsidiariescouldbefoundpotentiallyresponsibleforadditional
amountsoradditionalsites,butthelossorrangeoflossescannotbedeterminedorreasonablyestimatedatthistime.
OTHERLEGALPROCEEDINGS
NuclearPlantMatters
UnderNRCregulations,FirstEnergymustensurethatadequatefundswillbeavailabletodecommissionitsnuclearfacilities.Asof
December31,2015,FirstEnergyhadapproximately$2.3billioninvestedinexternaltruststobeusedforthedecommissioningand
environmentalremediationofDavisBesse,BeaverValley,PerryandTMI2.ThevaluesofFirstEnergy'sNDTsfluctuatebasedon
marketconditions.Ifthevalueofthetrustsdeclinebyamaterialamount,FirstEnergy'sobligationtofundthetrustsmayincrease.
Disruptionsinthecapitalmarketsandtheireffectsonparticularbusinessesandtheeconomycouldalsoaffectthevaluesofthe
NDTs.FEandFEShavealsoenteredintoatotalof$24.5millioninparentalguaranteesinsupportofthedecommissioningofthe
spentfuelstoragefacilitieslocatedatthenuclearfacilities.AsrequiredbytheNRC,FirstEnergyannuallyrecalculatesandadjuststhe
amountofitsparentalguaranties,asappropriate.
InAugust2010,FENOCsubmittedanapplicationtotheNRCforrenewaloftheDavisBesseoperatinglicenseforanadditional
twentyyears.OnDecember8,2015,theNRCrenewedtheoperatinglicenseforDavisBesse,whichisnowauthorizedtocontinue