Electric Power Daily

12/23/2011 10:49:15 AM

Electric Power Daily

www.platts.com

Thursday, December 22, 2011

Alabama Power to fire plant primarily with gas

Alabama Power will fire its two-unit Plant Gadsden in northeastern

Alabama primarily with natural gas instead of coal,

mostly to reduce costs but also to trim generation-unit emissions

in an era of tightening federal environmental rules, the

Southern Company subsidiary said Wednesday.

The two 60-MW units at Plant Gadsden both came online

in 1949; neither unit is fitted with a scrubber. “Plant Gadsden

has always had the capability to switch between coal and

gas, without major operational change requirements,” said

Alabama Power spokesman Michael Sznajderman. “While we

are switching to predominantly gas, we will continue to keep a

small supply of coal onsite, and burn coal periodically to keep

the coal-handling equipment in shape, in case there’s a decision

to switch back.”

Sznajderman said that the move from coal to gas at Plant

Gadsden was “mainly an economic decision. With the price of

natural gas down, it makes economic sense for us and for our

customers since fuel is a factor in everyone’s bills.” The NYMEX

January natural gas futures contract is currently about $3.10/

MMBtu, down about $1/MMBtu from mid-December a year ago.

In a related development, the Alabama Public Service

Commission on January 10 is expected to approve a new fiveyear

contract under which Plant Gadsden will continue to

supply steam to the Goodyear Tire & Rubber manufacturing

plant in Gadsden.

Terry Dunn, a Republican who was elected to the PSC in

November 2010, said in a statement that he grew up near

Gadsden and as a teenager worked at the Goodyear plant. “In

my first meeting with executives of Alabama Power, only a day

or two after I took office, a new contract with Goodyear was

near the top of my agenda,” he said.

Dunn said that new Environmental Protection Agency regulations,

“coupled with low prices in the current natural gas market,

made operating [Alabama Power’s] Gadsden plant on natural

gas a more economic alternative than operating it on coal.”

David Rountree, Dunn’s chief of staff, said in an interview

that Dunn did not participate in contract negotiations between

Alabama Power and Goodyear, but encouraged the parties to

continue talking and to reach a deal that would help preserve

jobs at Goodyear for at least another five years.

Financial terms of the new steam contract with Goodyear

are proprietary, said Alabama Power’s Sznajderman. “Of course,

we’re pleased the negotiations with Goodyear were completed

successfully,” he said.

Dunn has made economic development an important element

of his efforts at the PSC. Earlier this year, he helped

advance a PSC-approved program under which Alabama Power

offers significant retail-rate discounts to small- and medium-size

business customers who hire employees and expand into nowvacant

commercial and industrial space. Rountree said that the

program has had modest success to date.

— Housley Carr

Link to this article: http://www.TerryDunnPSC.com/1/main/Blog/Blog.aspx?PostId=12232011104915AM

The five-year agreement announced recently for Alabama Power Co. to supply steam to the Goodyear Tire & Rubber Co. plant in Gadsden is good news on a couple of fronts.

12/23/2011 8:10:05 AM

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OUR VIEW: A welcome move to gas

Published: Thursday, December 22, 2011 at 6:38 p.m.

The five-year agreement announced recently for Alabama Power Co. to supply steam to the Goodyear Tire & Rubber Co. plant in Gadsden is good news on a couple of fronts.

One, the pact will help keep Goodyear viable long term; and two, it’s good for the environment because Alabama Power is switching from using coal to generate electricity and steam to mostly natural gas, which produces fewer emissions.

New Environmental Protection Agency guidelines go into effect Jan. 1, requiring most of the country’s coal-fired plants to reduce emissions of 84 different toxic chemicals. By switching to natural gas for most of its operations at the Gadsden plant, Alabama Power will be able to keep the rates it charges Goodyear lower because it won’t have to pass along higher costs associated with burning coal. Alabama Power spokesman Michael Sznajderman said the plant is not completely weaned off coal, but the relatively lower cost of natural gas, coupled with potential future costs to control emissions from coal, makes this a good economic decision.

Local lawmakers and officials have been working to ensure Goodyear maintains a strong presence in Etowah County, and the contract is part of that. Public Service Commissioner Terry Dunn of Southside said a new contract has been a goal of his since he took office in January. State Rep. Blaine Galliher, R-Rainbow City, said the contract is part of continuing efforts “to work with corporate Goodyear (to show) that we are extremely interested in its long-term viability, and this is another step in that direction.”

The new EPA regulations have been roundly criticized by the coal industry while being praised by environmentalists and health agencies. The coal industry says the rules, which were mandated by Congress 21 years ago, will destroy thousands of jobs. The American Lung Association says they will save thousands of lives each year and reduce exposure across the country to a multitude of toxic chemicals. Each side has its spin on the overall effect on the economy, and we won’t attempt to decipher which one is telling the truth. We suspect it’s somewhere in the middle of the two extremes.

What we do believe is that the change at the local plant will be beneficial to the health of area residents, and the economy.

Link to this article: http://www.TerryDunnPSC.com/1/main/Blog/Blog.aspx?PostId=1223201181005AM

Goodyear released a statement: “Goodyear-Gadsden appreciates the efforts of Commissioner Dunn and our elected officials in their quest to retain current industry in Etowah County and the entire state of Alabama.

12/23/2011 8:10:05 AM

Alabama Power's switch to natural gas an asset for Goodyear

By Dana Beyerle Times Montgomery Bureau

Published: Monday, December 19, 2011 at 6:04 p.m.

MONTGOMERY — Alabama Public Service Commission member Terry Dunn on Monday announced a five-year steam supply contract between Alabama Power Co. and the Goodyear Tire & Rubber Co. plant in Gadsden.

Dunn said the contract is subject to PSC approval this week.

"In my first meeting with executives of Alabama Power, only a day or two after I took office, a new contract with Goodyear was near the top of my agenda," Dunn said in a statement.

The story behind the story is about the fuel used to produce steam and electricity at the Alabama Power plant and the cost savings to both Alabama Power and Goodyear.

Alabama Power is switching from coal to mostly natural gas, a cheaper fuel, at the Gadsden electricity generating plant, partly because of new environmental regulations.

Any savings from cheaper fuel could be instrumental to lessen or nullify the need for Alabama Power to pass higher costs from coal burning mitigation efforts on to Goodyear, a major employer that local and state officials are trying to keep in Gadsden.

"We continue to work with corporate Goodyear (to show) that we are extremely interested in its long-term viability and this is another step in that direction," state Rep. Blaine Galliher, R-Rainbow City, said.

Alabama Power’s electric generating plant uses steam to produce electricity, and steam also is required in tire making at Goodyear.

Alabama Power’s Gadsden plant has the capability to produce steam and electricity using coal or natural gas, or both. The plant also was an experimental site for burning wood biomass and switch grass fuels, but the plant now does not burn biomass. It’s using more natural gas than coal, company spokesman Michael Sznajderman said.

He said the relatively lower cost of natural gas, coupled with potential future costs associated with coal burning exhaust mitigation equipment, means natural gas is more economical.

"We’re not completely weaned off coal," Sznajderman said. "The goal is to have flexibility. It’s good economics at the plant because the price of natural gas is coming down."

Natural gas also is cleaner burning than coal, which can require expensive pollution reducing equipment.

Dunn said negotiations took on greater significance because of the tougher air pollution rules that take effect Jan. 1.

"The new environmental requirements, coupled with low prices in the current natural gas market, made operating the company’s Gadsden plant on natural gas a more economic alternative than operating it on coal," he said. "The new contract minimized the cost impacts of the new requirements both to Goodyear and Alabama Power," he said.

Goodyear released a statement: "Goodyear-Gadsden appreciates the efforts of Commissioner Dunn and our elected officials in their quest to retain current industry in Etowah County and the entire state of Alabama. We have had a long-standing relationship with Alabama Power Co., and we’re proud that it will continue."

Link to this article: http://www.TerryDunnPSC.com/1/main/Blog/Blog.aspx?PostId=1223201181005AM

PSC’s Dunn, AG Luther Strange discuss impact of clean-air rule

7/15/2011 12:15:48 PM

Published 1:10pm Thursday, July 14, 2011

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MONTGOMERY – Alabama Public Service Commission member Terry Dunn met this week with state Attorney General Luther Strange to discuss the potential impact on electricity rates – and the Alabama economy – of a new federal rule on air quality.

The new “Cross-State Air Pollution Rule” was made final by the U.S. Environmental Protection Agency (EPA) on July 6. It requires Alabama and 26 other states in the eastern half of the country to reduce power-plant emissions that cross state lines. The first round of emission reductions under the new rule is effective Jan. 1,2012.

“We let the attorney general know that we are ready to work with him in any way we can to prevent these regulations from causing electricity prices to increase,” Dunn said. “Attorney General Strange has been right on top of this issue for some time, and we appreciate his efforts.”

The commissioner said Alabama Power Co. is analyzing the potential effects of the new pollution rule and should report its findings to the PSC soon.

Dunn said maintaining healthy air quality in the state’s metropolitan areas is important, “but this is not the time to implement a regulation that will put a greater financial burden on Alabama households and businesses.”

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Link to this article: http://www.TerryDunnPSC.com/1/main/Blog/Blog.aspx?PostId=7152011121548PM

Alabama Power Receives A Boost to Storm Reserves

7/14/2011 4:02:45 PM

PRESS RELEASE

MONTGOMERY – Commissioner Terry Dunn praises the Alabama Public Service Commission staff for its recommendation this week that the PSC act now to replenish Alabama Power Company's storm reserve.

"In the name of transparency, let's be clear that this vote will produce $153 million in revenue for Alabama Power," Dunn said. "The first $30 million-plus will go directly to the storm reserve. And a large share will pay for nuclear-plant maintenance that the previous Commission voted in 2010 to delay until this year."

At this week's meeting, the PSC staff recommended that commissioners change a tax-related tariff that no longer applies under the company's rate structure, which is a formula called "Rate Stabilization and Equalization," or RSE. Under RSE's forward-looking budget, the PSC staff members said, it is already clear that the company would collect more than $153 million for 2012 in order to stay within RSE's allowed range of return.

The PSC order implementing this week's unanimous decision will state explicitly that there will be no upward adjustment in RSE for 2012.

Dunn told a company executive that Alabama Power should plan on zero increase in 2013 as well. Still, Dunn praised the company's performance in the wake of the tornadoes of April 27 and strongly supported the move to replenish the storm reserve.

"Mid-August is when the Atlantic hurricane season begins its peak period," the commissioner said. "Heaven forbid we should have to deal with more storms, but we need to be prepared. We can't play games with the reliability of electricity going to homes and businesses."

Maintenance at Plant Farley, Alabama Power's nuclear plant outside of Dothan, is "expensive but necessary," Dunn said.

More than 240 people died in Alabama as a result of the April 27 storms, which spawned 64 tornadoes.

(Source: Alabama Public Service Commission)

Link to this article: http://www.TerryDunnPSC.com/1/main/Blog/Blog.aspx?PostId=714201140245PM