Pros and Cons of Flint Creek retrofit project

Wednesday, March 27, 2013

Editor’s Note: On Thursday the Arkansas Public Service Commission will conduct a hearing on a request from Swepco and AECC, the owners of the Flint Creek Power Plant near Gentry, to retrofit and update the 30-year-old coalfired electricity generating facility. The cost of the work is estimated at $408 million and the request also includes a rate increase for Swepco customers to help pay for it. The owners say the retrofit will protect the reliability and efficiency of their power grid. The Sierra Club opposes the request and the rate increase, saying that there are cheaper and more efficient sources for power. Representatives of Swepco and the Sierra Club provided NWA Media with these two guest columns explaining their positions.

By Brian Bond, Sandra Byrd;

If you live in Northwest Arkansas, you depend on the Flint Creek Power Plant for electricity.

The plant near Gentry has powered the region’s growth for many years. It is now poised to add new technology to continue that vital role. However, that proposal faces opposition from the Sierra Club.

Here’s why Flint Creek matters, and why the Sierra Club’s opposition misses the mark.

The 528,000-kilowatt facility near Gentry in Benton County anchors the region’s electric grid. It is the only generation plant located in Northwest Arkansas that provides “baseload” electric service (electricity that meets power needs on a 24/7 basis). Having Flint Creek in Northwest Arkansas is critical to maintaining reliability in this part of the state, particularly in light of its close proximity to the major electricity load centers of Fayetteville, Springdale, Rogers, Bentonville and surrounding cities and towns. In fact, even with Flint Creek’s significant generating capacity, Northwest Arkansas still relies heavily on power imported by transmission lines.

Flint Creek’s fuel - coal - is reliable and affordable. It provides fuel diversity in the generating fleets for the plant’s co-owners, Swepco and AECC. Fuel diversity avoids over reliance on any one fuel and has benefitted our customers and cooperative members for many years by moderating the influence of volatile natural gas costs.

Flint Creek’s employees and dollars make a difference in the local economy. Our 69 employees and $3.9 million payroll are just the start of an economic impact that spreads across Benton County and beyond, benefitting families, businesses, schools, local governments and communities. In addition, Flint Creek is home to the award-winning Eagle Watch Nature Trail and to year-round warm-water fishing at Swepco Lake - a prime example of Swepco’s commitment to environmental stewardship.

To continue these advantages for Northwest Arkansas, we have asked the Arkansas Public Service Commission to find the installation of additional environmental controls at Flint Creek is in the public interest.

Coal-based power plants across the country have certainly been affected by aggressive EPA regulations and lower natural gas prices. Swepco’s parent company, American Electric Power, has elected to retire some generating units - but also to invest in the retrofit of other units like Flint Creek where it makes economic and operational sense to do so.

Retrofitting Flint Creek is a more reliable and economic choice than other options, such as relying on new transmission lines to import more power, buying or building new natural gas generation or converting the existing unit to what would be an inefficient and expensive natural gasbased plant.

Not surprisingly, the Sierra Club opposes our Flint Creek proposal as part of their national campaign against coal.

The Sierra Club says they have offered cheaper and cleaner alternatives, but their calls to action talk mainly about energy efficiency and renewable energy. Swepco and AECC both have successful energy efficiency programs and significant amounts of renewable energy. These resources are important, but they cannot produce the 24/7 baseload electricity that is the foundation of a secure and reliable electric grid.

In testimony before the Commission, the Sierra Club argues Flint Creek should be retired and replaced with additional imported power through a new transmission line. Even more striking is their position that the replacement power should come from the expanded use of natural gas. Interesting - considering the Sierra Club is actively engaged in a national campaign against the expanded use of natural gas.

Their calls to action also inflate the cost of the project, claiming it will mean a $500 million rate increase. In fact, it is a $408 million project. Swepco’s residential rate increase in Arkansas would be approximately 3.8 percent. The impact on rates of the retail consumers of the electric cooperatives would be approximately 1.8 percent. In our analysis, the retrofit is a lower cost option than other alternatives for supplying baseload energy to Northwest Arkansas.

Flint Creek has received broad support from many individuals, businesses and elected officials who have told the Commission that Flint Creek is important to the economy. They appreciate the importance of an affordable and reliable supply of electricity to existing businesses and the attraction of new businesses across the region. At the plant itself, the retrofit project will create about 300 construction jobs and an estimated 20 additional permanent jobs to operate the new equipment.

We have presented a realistic solution that will allow Flint Creek to meet EPA deadlines, improve air quality and continue the affordable and reliable service required to power a thriving Northwest Arkansas economy.

Brian Bond is vice president of external affairs for Southwestern Electric Power Co. Sandra Byrd is vice president of member and public relations for Arkansas Electric Cooperative Corp.

By Lev Guter, Terry Tremwell

The $500 million secret here is we don’t need Swepco’s Flint Creek coal-fired power plant.

Dozens of states have addressed the question Arkansas now considers - whether to prop up old coal-fired power plants with rate-payer dollars - and it’s clear coal is a losing choice. More than 140 coal-burning power plants like Flint Creek have been retired in the past five years or are scheduled to retire within the next few years. Other states have realized energy efficiency and cleaner, cheaper sources of electricity are better options and do not pose the same risk of escalating costs to ratepayers as does coal.

Retrofitting the Flint Creek plant would lock us in to burning coal for decades to come, and it would lock us out of a market to access cheaper, cleaner fuels. To be clear: This is not about futuristic fuel sources or technology to power Arkansas in 2063. Wind and natural gas power are standing ready to meet our electricity needs and are already cheaper than coal.

Arkansas is blessed to be next door to the windiest part of the country. In fact, neighboring Texas is already getting 10 percent of its electricity from wind power, and nearby Iowa gets 20 percent from wind. Arkansas already taps into wind-powered electricity through our existing power grid.

Swepco has recently purchased about 400 megawatts of wind energy - more than 88 percent of the generation capacity of Flint Creek - at “very attractive costs” as their representatives told the Public Service Commission in a recent hearing. Swepco admitted the price of wind was “lower than (our) average cost of generation online today.” Despite the obvious availability and affordability of wind energy, Swepco did not consider any wind power as part of an alternative to retrofitting the Flint Creek facility.

When Swepco actually tested the idea of buying existing, under-utilized natural gas capacity and 95 megawatts of wind energy, their economic modeling showed that option to cost no more than retrofitting Flint Creek, even using inflated assumptions about the cost of wind and natural gas. However, when Swepco ran the tests again using the more realistic assumptions about future wind and gas prices advocated by the Public Service Commission’s staff, it turned out retrofitting Flint Creek plant was much more expensive than the alternative of purchasing gas and wind energy. In fact, it became the worst option by far - “way out of the money” in the words of Swepco’s attorney.

Despite what the evidence showed - buying wind and gas is cheaper overall than retrofitting the plant or, at worst, equally expensive - Swepco chose not to recommend any plan that included wind power.

Swepco sidestepped the compelling evidence that alternatives including wind power are less costly by arguing the federal Production Tax Credit for wind would not be renewed. Since the October 2012 Commission hearing, the U.S. Congress has in fact renewed the credit. The wind credit has created thousands of jobs in the United States, including Arkansas, in an era of high unemployment and widespread concern about the decline of the American manufacturing sector.

The gas price forecasts from the U.S. Energy Information Administration - relied upon by Swepco - are now much lower than forecasts used by Swepco in October. Information provided by Swepco shows there is excess natural gas generating capacity in our grid region that Swepco could purchase. This surplus means prices to purchase those plants or their power are low right now, an opportunity Swepco would just let slip away. That’s why purchasing existing natural gas and wind power is cheaper for ratepayers than retrofitting Flint Creek.

If the rate hike Swepco wants is not approved, Swepco will need to phase out the Flint Creek plant during the next three to four years, giving ample time for a smooth and structured transition.

The $500 million dollar secret here is we don’t need the Flint Creek coal-fired power plant. Arkansans need our utilities to choose the cleanest, cheapest path.

Lev Guter is the Arkansas representative for the Sierra Club’s beyond coal campaign. Dr. Terry Tremwel is chairman of the boards of Silicon Solar Solutions LLC, Picasolar Inc. and Tremwel Energy LLC and is an adjunct instructor of business at the University of Arkansas and US-Fort Smith.

Opinion, Pages 7 on 03/27/2013