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Salem Harbor Station: Can

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... year-round and implement Burner Tip Optimization Program) ... may continue to operate so long as needed by ISO for reliability purposes ... USGenNE and ISO ... – PowerPoint PPT presentation

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Title: Salem Harbor Station: Can


1
Salem Harbor StationCant Live With It Cant
Live Without It
  • Sanford L. Hartman
  • Vice President and General Counsel
  • National Energy Gas Transmission, Inc.
  • Presentation to
  • Electric Industry Restructuring Roundtable
  • June 18, 2004

2
Brief Chronology
  • Sept. 1998 USGen New England purchases electric
    generating assets from New England Power
    subject to the requirements of Consumers
    First
  • May 2000 Press conference with Gov. Cellucci to
    announce voluntary reductions at Salem
    Harbor including repowering of large oil
    unit at Salem
  • May 2001 Massachusetts DEP promulgates new air
    regulations for older power plants (7.29
    regulations).
  • - eliminates long-standing policy of
    bubbling across Brayton and Salem to
    achieve compliance at least cost

3
Brief Chronology
  • Dec. 2001 Salem Harbor submits ECP to comply by
    2006 repowering no longer cost effective
    in New England market
  • June 2002 DEP approves Salem Harbors ECP but
    with 2004 compliance date
  • Dec. 2002 DEP issues draft approval of revised
    ECP with 2006 compliance date
  • Jan. 2003 Romney Administration begins
  • Feb. 2003 DEP reverses its position and issues
    disapproval of ECP with 2006 compliance
    date Salem Harbor appeals

4
Brief Chronology
  • April 2003 Salem Harbor files an 18.4 request to
    ISO New England to retire by October 1, 2004
  • June 2003 ACO signed with DEP, City of Salem,
    CLF, HealthLink, Wenham Watershed Association
    and MASSPIRG
  • July 2003 USGenNE files for bankruptcy
  • ISO denies USGenNE request to retire
  • Salem Harbor

5
Competing Objectives
  • Environmental Community make further
    environmental improvements as quickly as possible
    or retire the plant
  • ISO do not retire the plant needed for
    reliability on the North Shore and in the Boston
    Import Area
  • City of Salem sudden plant closure will mean
    catastrophic loss of tax revenues supporting
    schools, police and fire
  • USGenNE in bankruptcy compliance equipment
    investment not cost-effective (irrelevant
    ofbankruptcy) no access to capital

6
ACOs Resolution of Competing Objectives
  • Environmental Improvements
  • Near Term Compliance Measures
  • Immediate SO2 reductions from Unit 4 (lower
    sulfur oil)
  • Immediate NOx reductions from Units 1, 2 and 3
    (run SNCRs year-round and implement Burner Tip
    Optimization Program)
  • Accelerate permitting of SNCR (NOx) for Unit 4
  • Implement dust mitigation measures re coal pile
  • Issue RFP for coal pile windscreen

7
ACOs Resolution of Competing Objectives
  • Environmental Improvements
  • Long Term Compliance Measures
  • Initiate critical path permitting for compliance
    equipment
  • Implement Compliance Account which tracks
    emissions of SO2 and NOx in excess of 7.29 regs
    as of Oct. 1, 2005, for payback once compliance
    equipment installed
  • Seek funding for compliance equipment
  • Install compliance equipment within 32months of
    initiation of funding

8
ACOs Resolution of Competing Objectives
  • Reliability
  • If compliance equipment funding is delayed,
    day-for-day extension allowed in construction
    milestone schedule
  • Salem Harbor units may continue to operate so
    long as needed by ISO for reliability purposes

9
ACOs Resolution of Competing Objectives
  • Tax Revenues
  • Units will continue to operate so long as needed
    for reliability purposes by ISO tax payments
    can continue so long as units operate
  • Units may continue to operate up to one
    additional year after reliability need ceases to
    allow for an orderly transition
  • Units may continue to operate indefinitely after
    reliability need ceases if in compliance with
    7.29 regs and all other applicable regulations

10
ACOs Resolution of Competing Objectives
  • Access to Funding
  • Salem Harbor has obligation to seek funding
  • Filed petition for approval of Reliability
    Agreement negotiated with ISO
  • FERC approval of Reliability Agreement could
    occur within third quarter

11
Overview of Reliability Agreement
  • Negotiated between USGenNE and ISO
  • Enabling Agreement which establishes a mechanism
    for funding an escrow account for costs actually
    incurred by Salem Harbor in construction
    compliance equipment
  • Also establishes a mechanism for USGenNE to repay
    funds drawn from the escrow account assuming one
    or more of the units continue to operate

12
Innovations in Reliability Agreement
  • Repayment mechanism
  • Explicitly requires consultation between ISO and
    state agencies in process of deciding whether to
    initiate funding or halt funding
  • Minimizes the type of market interference created
    by traditional RMR contracts

13
Possible Outcomes
  • FERC approves funding mechanism
  • Trigger may or may not be pulled on funding
  • If trigger is pulled, Salem Harbor will submit to
    ISO cost estimates for project
  • Project costs will be reviewed by ISOs
    Independent Engineer
  • If costs are approved, escrow will be funded
  • Construction will commence

14
Possible Outcomes
  • FERC does not approve funding mechanism
  • Salem Harbor will continue to comply with the
    7.29 regs by implementing the Near Term
    Compliance Measures in the ACO
  • ISO will continue to assess whether some or all
    of the units at Salem Harbor are needed for
    reliability
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