Georgia Power Says Compliance with Stricter Pollution Rules to Cost $7 Billion

Date: August 5, 2011

Source: Georgia Power

Georgia Power said that the cost of upgrading or replacing its power plants to meet stricter environmental rules could cost $5 billion to $7 billion through 2020. The Southern Company subsidiary also said that it will have to purchase power from outside suppliers to meet the electricity needs of its nearly 2.4 million customers in the coming years because pending anti-pollution rules may force the company to close or upgrade some of its existing plants. The company is currently asking regulators for permission to retire two of its coal-fired plants rather than incur he prohibitively high cost to upgrade them. The EPA published a suite of rules setting stricter maximum achievable control technology (MACT) standards for boilers ("Boiler MACT") as well as a new source performance standard (NSPS) to cut emissions from commercial and industrial solid waste incineration (CISWI) units and a waste definition rule that determines to which of the air rules combustion units are subject. After issuing the rules, EPA exercised its discretion to stay portions of the CISWI and boiler rules, to reconsider certain aspects of them after receiving an overwhelming response from industry, lawmakers and others. Georgia Power officials said they must see a final version of the multiple rules before deciding the long-term fate of six of its power plants. Currently, the company is said to be leaning toward converting some coal plants to natural gas, which burns cleaner and would not require as many regulations. The pending rules have the greatest impact and coal- and oil-fired plants.

August 4, 2011

Georgia Power Files Updated Energy Plan

  • Highlights uncertainty of environmental regulations

ATLANTA -- Georgia Power today asked the Georgia Public Service Commission (PSC) for approval of its updated integrated resource plan.

The plan outlines how Georgia Power plans to meet customers' demand and energy needs in light of the current and anticipated impact of environmental regulations on Georgia Power plants and the possibility that some units may have to be retired.

As part of the filing, Georgia Power is requesting the PSC approve the following:

  • The retirement of Plant Branch units 1 and 2 (569 megawatts) effective Dec. 31, 2013 and Oct. 1, 2013 respectively;

  • The retirement of Plant Mitchell unit 4C (33 megawatts) in March 2012;

  • Initiation of work needed for the possible installation of baghouses on Plant Bowen units 1-4, Plant Hammond units 1-4 and Plant Wansley units 1-2, which will be necessary to help Georgia Power strive to meet anticipated compliance deadlines for expected environmental rules and regulations;

  • Certification of four power purchase agreements (PPAs) totaling 1,562 MW of generation capacity identified through the 2015 request for proposals (RFP).

Due to the uncertainty created by pending environmental regulations, Georgia Power will defer decisions on its remaining fleet of coal- and oil-fired generating units until those regulations are finalized. These federal environmental regulations proposed by the U.S. Environmental Protection Agency (EPA) over the last several months would significantly expand the scope of regulations governing air emissions, water intake, and waste management at power plants. The regulations have the greatest impact on coal- and oil-fired plants, and if finalized as proposed would significantly increase the cost of electric power generation. In addition, some of the proposed rules would set unrealistically short compliance deadlines that could impact electricity reliability beginning in 2015.

"There is a great deal of uncertainty facing our business in both the near and long term," said Greg Roberts, Georgia Power's vice president of Pricing and Planning. "The complete effect of a host of new federal environmental regulations is still being assessed, but Georgia Power's actions are a necessary and preliminary part of responding to the negative economic and reliability challenges created by new and proposed federal regulations."

To help manage the uncertainty created by the regulations, Georgia Power initiated the 2015 RFP to identify the most cost-effective resources to help support reliability in the 2015 timeframe. The proposed power purchases from the 2015 RFP will help address the anticipated shortfall but cannot eliminate the reliability risks and uncertainties. The PSC's independent evaluator participated in the process to select resources from the 2015 RFP that offer the most reliable and cost-effective supply of electricity for Georgia Power's customers.

The PPAs include 564 MW of capacity with J.P. Morgan Ventures Energy Corporation, through its BE Alabama LLC subsidiary, from the Tenaska Lindsay Hill facility in Autauga County, Ala.; 625 MW with Southern Power from Plant Harris in Autauga County, Ala.; 298 MW with Southern Power from its West Georgia Generating Facility in Upson County; and 75 MW from Southern Power's Plant Dahlberg in Jackson County, Ga. The three Southern Power PPAs have term lengths of approximately 15 years. The J.P. Morgan Ventures Energy Corporation PPA has a term length of 12 years, seven months. All of the purchased power will come from electricity generated from natural gas. The PPAs will begin in 2015.

The company's energy plan also includes demand-side management (DSM), energy efficiency and renewables which will all continue to play an important role in reducing the need for new generation and ensuring Georgia Power has a balanced supply portfolio. Over the next ten years, the company expects to invest about $600 million on its DSM efforts, with the goal of reducing energy demand by a total of about 2,600 MW.

Georgia Power currently owns or purchases approximately 1,000 MW of renewable and hydro generation and expects to sign contracts for an additional 250 MW of renewable generation over the next few years.

The company also purchases 4.4 MW of solar energy from customers and is expected to add an additional 1 MW of solar energy by the end of 2011 through its recently issued solar RFP. All of the solar energy will be used to supply the company's Green Energy program.

Georgia Power also recently received approval from the PSC on its 2015 large scale solar proposal to purchase up to 50 MW of additional solar capacity. Under the proposal, the company has agreed to enter into power purchase agreements for individual solar projects of 30 MW or less.

The PSC will hold hearings over the next several months and is expected to make a decision about the updated IRP in spring 2012.

Georgia Power is the largest subsidiary of Southern Company, one of the nation's largest generators of electricity. The company is an investor-owned, tax-paying utility with rates well below the national average. Georgia Power serves 2.4 million customers in all but four of Georgia's 159 counties.

For further information: Media Relations, +1-404-506-7676 or 1-800-282-1696.

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