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Ameren planning for carbon rules while pushing back legally

Ameren planning for carbon rules while pushing back legally

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Ameren's Sioux plant

The new stack at Ameren's Sioux power plant spews water vapor adjacent on Friday, May 30, 2014. Ameren spent $600 million installing the newest scrubbers and environmental controls to limit sulfur dioxide release in the 47-year-old plant. Photo by Christian Gooden, cgooden@post-dispatch.com

With more than three-quarters of its electricity generated at coal power plants, Ameren Missouri has big concerns about the federal government’s plan to cut carbon dioxide emissions.

The St. Louis utility urged Missouri Attorney General Chris Koster to join a lawsuit challenging the rules, which the Democrat did last year. And though it hasn’t filed a court challenge itself, Ameren has asked the Environmental Protection Agency to stop implementation of the regulations and re-propose new ones.

Ameren is hedging its bets, working at the same time to develop a plan at the state level to cut Missouri’s carbon emissions just in case the legal onslaught against the Clean Power Plan falls short.

The rules will require a roughly 28 percent cut of carbon dioxide from Missouri power plants. That means replacing coal power plants with natural gas plants and wind and solar farms.

“The emission reductions required are extremely significant,” Ajay Arora, Ameren’s vice president for environmental services and generation resource planning, said at a Jefferson City conference on the new rules last week. The final version released last summer is more stringent than the initial proposed, he added, and they are “disproportionately hard on Missouri.”

Ameren argues that its existing plan can meet the Clean Power Plan targets — just five years later than the 2030 deadline set by EPA. It will cost customers a lot more to speed up a transition to more wind and natural gas generation, the utility says.

It already plans to retire its smaller Meramec coal plant in south St. Louis County by 2022, but it wants to keep its Sioux plant in St. Charles County open until 2033. Under the utility’s plans, its giant Labadie plant in Franklin County and its Rush Island plant in Jefferson County would keep pumping out carbon and particulates until the 2040s.

The Clean Power Plan threatens to throw a wrench in Ameren’s depreciation schedule of the plants it built 40 years ago and its carefully laid plans to replace them.

“I think the sticking point is really the timing of it,” said Andy Smith, a utilities analyst at Edward Jones.

Many utilities aren’t objecting publicly to the Clean Power Plan, and some have actually come to its defense within legal challenges brought against the EPA. Smith said utilities in regulated states like Missouri ultimately have an opportunity to earn their money back and justify big spending plans to their regulators.

But Ameren doesn’t appear as excited at that prospect, he said, worrying it will drive up rates too much too fast.

“In the end they have to please the customers like all utilities do, because if the customers aren’t happy and the (Missouri Public Service Commission) gets a lot of complaints, then the commission’s not happy and they take it out on the utility,” Smith said.

If rates go up too fast, one of the ways the PSC could address it is to cut the utility’s allowed profit, Smith said.

In its petition to the EPA, Ameren argues the final rule is so different from the proposed rule that EPA needs to re-propose it to allow utilities and other stakeholders more time to comment.

“Justice requires EPA to issue an administrative stay before state agencies charged with implementing the (Clean Air Act) and the regulated community take costly and irreversible actions,” Ameren wrote in its October petition to the EPA asking that the rules be reconsidered.

Even so, Ameren says it is still working with state regulators and other Missouri power plant owners to develop a state compliance plan. The request for administrative re-proposal, Arora said in an interview, is to “ensure the rule is legal before any more investment is made.”

“We’ll be looking to discuss how we plan to comply on a parallel path,” he said.

But how Ameren plans to comply, and what the costs might be, aren’t clear yet.

Ameren and other utilities met in Jefferson City Thursday for a conference hosted by the PSC, which had asked utilities to describe how they plan to comply.

But many utilities weren’t ready to tell their regulators much yet. Most responses utilities sent to the PSC indicate their analysis of the new rules isn’t complete — or that they didn’t yet want to share it, said PSC Chairman Daniel Hall.

“I encourage the utilities to work with us,” Hall told the workshop attendees. “We do share some common ground.”

How Ameren will produce its electricity in the future may not be clear until later next year, when the utility is required to update a long-range power generation plan. By then, Missouri Department of Natural Resources will be further along in crafting a state plan, and Ameren can change its existing plan to account for the new rules, Arora said.

But it will be watching the legal challenges as it works.

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