Vectren’s electric generation fleet ready to comply with new EPA clean air standards

Source: Vectren Corporation

Earlier this month, the U.S. Environmental Protection Agency (EPA) finalized additional Clean Air Act protections that will reduce hundreds of thousands of tons of smokestack emissions from power plants throughout the nation. Given Vectren's (NYSE: VVC) significant investment in emissions control equipment over the past decade, the utility is well-positioned to comply with the new mandate, known as the Cross-State Air Pollution Rule, without additional, significant capital investments. 

Since 2001, Vectren has installed more than $410 million of emissions control equipment on its predominantly coal-fired generation fleet in southwestern Indiana. As a result, Vectren's electric generation fleet is now 100 percent scrubbed for sulfur dioxide, 90 percent controlled for nitrogen oxide and substantially controlled for particulate matter and mercury. 

"As seen with EPA rules proposed in March, which focused on mercury and other hazardous pollutants, our significant investment in emissions control equipment for this region is again paying off and will ensure we comply with this new rule," said Carl Chapman, Vectren's chairman, president and CEO. 

The rule, which was proposed last summer and finalized July 7, 2011, will be implemented next year. According to EPA estimates, the rule will cost U.S. power plant operators $800 million annually in 2014. That's in addition to the $1.6 billion in capital investments already being spent each year to comply with the 2005 rule that remained in effect until the EPA drafted a new one. According to a May 2011 study done by NERA Economic Consulting for the American Coalition for Clean Coal Electricity, electricity sector costs will increase by $184 billion through 2030, or $17.8 billion per year, to comply with the new emissions standards. These expenditures include coal unit compliance costs (approximately $72 billion), fuel price impacts and costs of replacement energy and capacity. 

"More than a decade ago, we chose to move forward with these investments to improve the air quality for our region, which has positively impacted southwestern Indiana's quality of life and serves as an advantage from an economic development standpoint," added Chapman. "As such, our customers' rates increased throughout the past 10 years to reflect the cost of these investments. However, we now find ourselves in a position to comply, while other regional utilities may be required to consider retiring some uncontrolled coal generation units or make significant investments to lower emissions." 

The 27 states subject to the rule are: Alabama, Arkansas, Florida, Georgia, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maryland, Michigan, Minnesota, Mississippi, Missouri, Nebraska, New Jersey, New York, North Carolina, Ohio, Pennsylvania, South Carolina, Tennessee, Texas, Virginia, West Virginia and Wisconsin.
Vectren has nearly 1,300 megawatts (MW) of generating capacity of which 1,000 MW is coal-fired. Vectren has two power plants; F.B. Culley in Warrick County and A.B. Brown in Posey County. The utility shares ownership of Warrick Unit 4, a 150-MW unit, with Alcoa. Vectren serves 142,000 electric customers in Dubois, Gibson, Pike, Posey, Spencer, Vanderburgh and Warrick counties.

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