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APCO chief: Coal use in decline

CHARLESTON, W.Va. -- Appalachian Power officials said Wednesday they hope to avoid further rate increases amid a long-term national energy transition that includes a continued -- but perhaps significantly reduced -- role for the coal industry.

Part of Appalachian's plan is the proposed acquisition of additional coal-fired generation from a sister American Electric Power unit and the conversion of other plants to natural gas.

AEP hopes to transfer more than 2,000 megawatts of generation capacity from the coal-fired John Amos and Mitchell plants in West Virginia to Appalachian, as part of a plan that includes converting the Clinch River plant in Virginia to burn natural gas instead of coal, and start-up of the Dresden plant in Ohio, which also burns gas.

The proposal, pending before regulators, has been previously discussed by AEP and Appalachian Power, but company officials this week met with Gazette editors as part of an effort to make their intentions clear to the public and to power customers.

Historically, Appalachian has purchased power from those facilities, currently owned by sister AEP unit Ohio Power. The proposed transfer would allow Appalachian to generate for its customers directly from those plants.

"Our plan to replace and increase Appalachian's generating capacity is a cost-effective solution that will have little or no effect on customer rates," the company said in a flier describing its proposals.

Appalachian had already planned to retire its Kanawha River and Philip Sporn plants in West Virginia by 2020. Both are small and aging facilities that are less efficient than other pants, and are not equipped with the latest pollution control equipment.

Last year, the company announced plans to speed up those plant closures, citing their inability to meet the timeline to comply with the first-ever U.S. Environmental Protection Agency rules to limit toxic air emissions from coal-fired power stations.

On Wednesday, Appalachian Power President Charles Patton said the moves allow his company to focus its coal generation for the next 25 to 30 years at larger plants where advanced sulfur dioxide scrubbers and nitrogen oxide controls have already been installed.

Patton said the smaller plants targeted for closure would have been retired anyway, and that the latest EPA regulatory proposal -- to limit greenhouse gas emissions from newly constructed power plants -- had nothing to do with those decisions.

"The stuff that isn't scrubbed, the greenhouse gases aren't the issue," Patton said. "They're just so old that it doesn't make sense to spend the money to make them comply with the existing rules. Under any scenario you looked at, regardless of EPA rules, all those plants were gone anyway."

The plant closures and proposed transfers would reduce the share of Appalachian's power generation that comes from coal from 74 percent today to 71 percent in 2015.  The share generated from gas would increase from 15 percent to 20 percent over the same time period, officials said.

More broadly, parent company AEP has said coal's share of its generation will drop from 67 percent in 2011 to 50 percent in 2020. Nationally, government data shows coal's share of power generation has been dropping for years and reached 36 percent during the first quarter of 2012 -- far below the "nearly half" figure frequently cited by coal officials and the industry's political supporters.

"Coal is going to continue to be here," Patton said. "But that huge advantage we were getting as coal, we're not getting that again."

Patton predicted that no companies would build any new coal-fired generation anytime soon. He said that low natural gas prices, and not EPA's proposed rules to limit greenhouse gas emissions are the reason.

"Nobody is building any new coal," Patton said. "The economics just aren't there.

"Gas is just so cheap," he said. "You cannot deny that natural gas is the fuel of choice."

Patton said that advances in natural gas drilling -- such as horizontal drilling and hydraulic fracturing -- that have created a boom in the Marcellus Shale region have reduced industry concerns about the price volatility of natural gas over the long term.

"I don't care what you read, I don't think anybody is going to build a coal plant, given natural gas prices," Patton said. "It's just economics."

Reach Ken Ward Jr. at kward@wvgazette.com or 304-348-1702.


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