For Vectren, new 20-year energy plan a balancing act

Posted by Laura Arnold  /   November 13, 2016  /   Posted in Indiana Utility Regulatory Commission (IURC), Vectren  /   No Comments

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For Vectren, new 20-year energy plan a balancing act

Vectren Corp. this month will present a 20-year plan that will go a long way toward determining how much you’ll pay for power in the future, as well as how that power is produced.

It remains to be seen how Tuesday’s election of Donald Trump as president, and Trump’s possible loosening of current Environmental Protection Agency regulations on coal, might impact the utility's outlook.

Vectren must rewrite its integrated resource plan every two years. Utility officials said the process involves modeling dozens of scenarios which consider national economic factors, the cost of energy sources, the advanced age of Vectren’s coal-fired plants, federal government rules and consumer cost.

The plan is to be presented Nov. 29. It will be subject to Indiana Utility Regulatory Commission approval, following a public comment period

“Affordability is a big concern,” said Chase Kelley, vice president for marketing and communications. “We’re very sensitive to where our rates are now.”

Vectren’s residential electric rates are Indiana’s highest. Vectren also operates in an Ohio River valley region which, because of a preponderance of coal plants operated by multiple companies, has some of the dirtiest air in the United States, according to a September report by the Center for Public Integrity.

The Evansville metropolitan area currently meets federal requirements for ozone and fine particulate pollution, and Vectren is in compliance with its state air pollution permit.

Athough Vectren also is now in attainment of the federal Mercury Air & Toxics Standards Act (MATS), ratepayers have not yet felt the cost of meeting those requirements. Vectren has deferred passing on to consumers the about $70 million to $90 million cost to implement some of its pollution controls.

However, the region continues to walk a fine line in terms of air quality.

The American Lung Association, in its most recent State of the Air report issued in May 2015, gave Vanderburgh, Warrick and Henderson (Kentucky) an "F" grade for ozone pollution, although the area got passing grades on other air pollution.

The new 20-year-plan, according to Vectren, will evaluate if retirement dates are established for coal-fired plants in Posey and Warrick counties.

The oldest of those plants, Culley 2 in Warrick, was built in 1966. The newest, Brown 2, came online in 1986.

A reminder of that age occurred in late July. At the Culley 3 plant in Warrick (built in 1973), part of a silo filled with coal broke loose, falling through cables and electrical equipment before crashing on a concrete floor. Vectren still doesn’t know what caused the mishap. An investigation is going.

Vectren says its plan will evaluate the costs of continuing to run those plants, as well as the cost to use more natural gas and renewable energy sources.

EPA regulations on coal also are a factor.

In July, Vectren officials said complying with one EPA rule would cost $240 million, and they had not decided yet whether to make the investment. That rule has to do with how bottom ash, which settles in the bottom of a filter and is not burned, is handled.

“We slurry that into our ash pond,” Kelley said. “New rules say you can’t do that. It has to be dry. So it’s the handling system, where do we put it. … it must be in compliance in future years.”

Kelley said in an interview several days before Tuesday’s presidential election that the entire power generation industry “is in a state of transformation. The question is how long does that change take to occur and actually transition our portfolio, and that’s what this IRP will speak to.”

“I can’t tell you exactly what it’s going to say,” Kelley said of Vectren’s new IRP. “It feels like coal retirement is imminent. Is it tomorrow? No, but this is a 20-year study and exercise. You’ve got to think that’s what it’s going to lead to. It’s a just a matter of what (new types of energy) units, and what’s the right time.”

Trump, though, has signaled major change could be coming to national energy policy.

Trump’s campaign website states that as president, he will seek to” unleash $50 trillion in untapped shale, oil, and natural gas reserves, plus hundreds of years in ‘clean coal’ reserves.”

The website attacked Hillary Clinton for saying she would “defend and build on” President Barack Obama’s coal regulations, had she won the presidency.

Wendy Bredhold, campaign representative for the Sierra Club’s Beyond Coal effort, said much of Indiana and the nation already are moving toward renewable power-generating sources, and Trump’s election should not change that.

Bredhold said there is concern over the direction Trump will take EPA rules, but “I don’t think it’s going to be as easy as him just going in and upending current rules. There will have to be a process.”

Kelley, asked for an updated statement following last week’s election, said Vectren continues to weigh options for energy production.

“Like all stakeholders in the energy industry, especially those that operate coal-fired generation units, we are in the process of assessing the next administration’s ability to implement their energy and environmental policies, including the possibility that those actions may impact existing and/or planned Environmental Protection Agency regulations,” Kelley said in an email to the Courier & Press.

“Resource planning represents an effort to assess how alternatives fare under a wide range of potential future conditions, including policies that may be implemented under future administrations beyond the newly elected president,” Kelley continued. “We are modeling multiple scenarios for meeting our customers’ future energy requirements, including scenarios that include high and low regulatory environments, to ensure we arrive at a preferred generation portfolio that provides a reasonably priced, reliable and sustainable portfolio option for our customers in southwestern Indiana.”

Vectren says continuing to run the coal-fired plants would carry a cost, but so would a shift to more renewables.

“Renewable prices are still a little bit too high,” Kelley said. “One thing we are looking at in this IRP is, is there some sort of a bridge that helps us get to more affordable renewables 10 years out.  Because right now solar is going to have to have some sort of backup generation for when it’s cloudy, when the sun doesn’t shine. You have to have some sort of battery storage. You could see gas coupled with solar, so gas can kick on when the solar isn’t there. But the challenge is affordability. If you fast forward 10-15 years, it’s a different ballgame."

Citizens with interest in the environment have attended Vectren’s stakeholder meetings on the IRP, pushing for a transition to more renewables. They urge Vectren to move away from coal and also not build a natural gas plant to replace the Brown and Culley facilities.

They plant to be present again Nov. 29 when Vectren's updated 20-year plan is presented.

“I certainly hope they will do the right thing and not continue to burn coal with all the repercussions for our health in this region, and instead look at solar, wind, and innovations in battery storage,” Bredhold said. “Vectren likes to think of themselves as a progressive company even though they continue to invest in coal, which is why our rates are some of the highest in the state. I’m hopeful they have listened to people and will make a significant investment in renewable energy.”

Local environmental advocates took great interest in the September Center for Public Integrity report, which categorized this region as a super polluter. The report drew correlations between the presence of coal-fired plants run by a number of local companies, in communities from Owensville to Rockport, and poor community health data.

“I want to see them do at least up to 30 percent renewables,” Jean Webb, an Evansville resident, said of Vectren. “They should be able to absorb that without too much change. I think that’s a reasonable goal to get to. I don’t want to see them spend any of that $240 million that they are proposing to spend on coal plants. And I don’t consider it a win for them to switch from coal to gas, fossil fuel to fossil fuel.”

Nicole Pollard has lived in the area 17 years, and her second child has suffered from chronic asthma. The 8-year-old girl does regular breathing treatments and has had multiple hospital stays.

Pollard believes the region’s air quality could be the culprit.

“We never really understood where it came from or why she has it,” Pollard said. “But one thing that struck my husband and I is that when we leave this area, her chronic colds and wheezing go away.”

Jane Leingang, who has lived in Evansville 30 years, also suffers from asthma. She quoted the statement by Pope Francis that pollution harms the world’s marginalized people.

“I understand that there are going to be consequences from going away from coal-fired power plants, that there are going to be people who will be dislocated from their jobs,” Leingang said. “I have great confidence this country has a way of figuring that problem out and finding employment for people in other aspects of the energy industry, the kinds of energy that won’t make us suffer. We just have to do. It’s imperative we find a way to do a better job.

Vanderburgh County, according to the Center for Public Integrity, had higher levels of fine particles than nearly 90 percent of the U.S. counties with air monitors from 2013 to 2015. The report said Vanderbrugh was nearly on par with Manhattan in central New York City.

There is some positive trending, however. Local concentrations of fine particles dropped nearly 30 percent over the past decade, as EPA regulations have tightened. There were significant drops in power plants’ sulfur dioxide, nitrogen dioxide and carbon dioxide emissions.

Vectren says it has played a role in that, citing its heavy investment to control those pollutants.

As far as what comes next under a new presidential administration, Vectren says the integrated resource plan pegged for release on Nov. 29 will be a guidepost.

“We’re still running things through the risk model,” Kelley said. “We do have to reveal our preferred plan in this meeting and say that’s what we expect the future to entail.”

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Courier & Press reporter Mark Wilson contributed to this report.


 

To learn more and/or to participate in Vectren's IRP Stakeholder process see

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