Southern Co., the largest U.S. power company, would need to spend $13 billion to $18 billion through 2020 upgrading its coal-fired plants if U.S. EPA goes ahead with new and proposed rules for the power sector, the utility said yesterday.
Yesterday was the deadline to comment on a high-profile proposal from the Obama administration, known as the "Utility MACT" rule, that would limit the amount of mercury, acid gases and heavy metals that coal plants can release into the air.
Southern submitted more than 200 pages of comments yesterday, saying that between the air pollution standards and new rules that have been proposed for coal ash and cooling water, the company would need to retire boilers with 4,000 megawatts of capacity and install new pollution controls on another 12,000 megawatts.
In a statement, Thomas Fanning, the CEO of the Atlanta-based company, said that now is not the right time to make power companies spend money on new pollution controls.
"This unprecedented and ill-timed transformation of the nation's electricity infrastructure will only impede the U.S. economic recovery, reduce our ability to create jobs and add to the economic burdens of our customers," he said.
It is the first time that Southern has gone public with its preliminary plan for that transformation, which would lead to a heavier reliance on natural gas by a company that is now the second-largest producer of electricity from coal.
About 3,200 megawatts' worth of coal- and oil-fired plants would be converted to run on gas and another 1,500 megawatts would be replaced with new gas plants. When all is said and done, about 40 percent of Southern's coal fleet would be retired or replaced with gas.
That shift toward natural gas is already under way, mainly because the U.S. shale gas boom has led to a sharp drop in fuel prices. During an earnings call last week, Fanning told analysts that the company is now getting about 52 percent of its electricity from coal, down from about 70 percent historically, with gas picking up the difference.
Coal-fired power generation in the first quarter of 2011 had its smallest share of the market in more than 30 years, falling 3 percent from last year to 46 percent. EPA says that trend will make it easier to clean up older coal plants without causing a spike in electricity prices.
"Many retirements are expected just as a result of inexpensive natural gas," EPA air chief Gina McCarthy said during a recent Senate hearing. "But that gives us the opportunity at this point, frankly, to have an ability to bring cost-effective reductions to the table."
Southern argues the economy will suffer because of double-digit increases in electricity prices, but supporters of the rules say they would be a boon for the economy beyond the benefits for public health.
Upgrading and replacing old power plants will create hundreds of thousands of jobs, said Mindy Lubber, president of the environment-minded investor group Ceres, in a statement yesterday.
"Hands down, cleaner air is a worthwhile investment," Lubber said. "The opportunity to improve public health while creating high-paying jobs to retrofit outdated, high-polluting power plants and build cleaner new ones is a win-win we cannot ignore, especially while the economy struggles."
Southern declined to discuss its plans for specific plants, unlike the largest coal-burning power company, Columbus, Ohio-based American Electric Power Co. Inc., which went public earlier this summer with its plan to shutter coal plants across the Midwest.
Southern will wait until the EPA rules are final to discuss which plants will close down, spokeswoman Stephanie Kirijan said.
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