IN THE MATTER OF THE APPLICATION OF 1 SOUTHWESTERN ELECTRIC POWER COMPANY ) FORA CERTIFICATE OF ENVIRONMENTAL 1 COMPATXBILITYAND PUBLIC NEED FORTHE ) DOCKJZT NO. 06-154-U CONSTRUCTION, OWNERSHIP, OPERATION AND ) ORDERNO. 11 MAINTENANCE OF A COAL-FIRED BASELOAD ) GENERATING FACILITY IN HEMPSTEAD 1 COUNTY, ARKANSAS 1
ORDER
Pursuant to Ark. Code Ann. 5 23-18-501 et seq., on December 8, 2006, Southwestern Electric Power Company1 (SWBPCO or the Company), a .rvholly-owned subsidiaiy of American Electric Power, Inc. (AEP} filed in the above-styled Docket its
Application for a Ceriijicate of Envirunmentd Compatibility and Public Need for the
Construction, Ownership, Operation and Maintenance of a Coal-Fired Baseload Generating Facility in Hempstead County, At.knnsas (Application). The proposed facilities to be constructed under this Application constitute a major utiIity facility as defined in Ark. Code. Ann. 5 23-18-503(5)(A). By its Application SWEPCO requests that this Commission issue an order granting it a Certificate of Environmental Compatibility and Public Need (CECPN or
Certificate) to construct, maintain, and operate a coal-fired baseIoad electric generation
I In the States of Arkansas, Texas, and Louisiana, SWEPCO engages in the general electric utility busincss of gcnerating, transmitting, distributing and selling, at wholesale and retail, electric power and energy to customers in its service areas. SWEPCO is a pubIic utiIity within the meaning of Ark. Code Ann. 8 23-1-101,and is, therefore, subject to the jurisdiction of this Cornmission. SWEPCO is also subject to thc public utiIity regulatory jurisdiction of the Louisiana and Texas public utility commissions. Applications simiIar to that filed in this Docket are also pcnding before the Louisiana and Texas commissions. Docket NO.06-154-U OrderNo. 11 Page 2 of 76 facility in Hempstead County, Arkansas engineered to generate approximately 600 MW of net generating capacity (the Turk Plant or the plant).
Pursuant to Ark. Code Ann. 5 23-18-513 and the Commission’s Rules ofPractfce and Procedure (the Rules), Rule 7.08, SWEPCO provided notice of its Application to all
Iegally-designated state agencies and governmental bodies.
On the same day that SWEPCO filed its Application, the General Staff of the Commission (the Staff), pursuant to Ark. Code Ann. 5 23-18-514, invited comments from all state agencies entitled to notice of the Application. These state agencies are the
Attorney General of Arkansas, Arkansas Commissioner of State Lands, Arkansas WateMtays Cornmission, Arkansas Geological Commission, Axlmnsas Natural Resources Commission (ANRC), Arkansas Energy Office, Arkansas Game and Fish Commission (AGFC), Arkansas Forestry Commission, Arkansas Department of Environmental Qua1it-y (APEQ), Department of Arkansas Heritage [DAH), Arkansas Highway and
Transportation Deparhnent, Arkansas Department of Health and Human Services,
Arkansas Department of Finance and Administration, the Governor of the State of Arkansas, Arkansas Department of Economic Development and Arkansas Department of Aeronautics .
Staffs notification to these legally-designated state agencies resuhed in the receipt by the Staff of responsive letters from four divisions of three state agencies stating concerns that the Application was deficient, was incomplete in its scope, or had failed to provide the information that the specific state agency needed to evaluate the
Application. However, no governmental agencies intervened as a party in this Docket NO. 06-154-U OrdcrNo. 11 Page 3 of 76 proceeding.' After Staff notification to SWEPCO, by letter dated February 23, 2007,
SWEPCO addressed the stated deficiencies and responded directIy to the designated state agencies.
On October 5, 2007, after the conclusion of 17 days of evidentiary hearings and before closing arguments, the Commission requested the DAH, ADEQ, AGFC, ANRC, the Department of the Army, and the Vicksburg District Corps of Engineers to provide updates of the status of each agency's review of SWEPCO's Application. On October 17,
2007 the ANRC responded to the request. Responses were received by ADEQ and AGFC on October 18,2007. The DAH,on behalf of the Vicksburg District Corps of Engineers, also responded on October 18,2007.3 The Parties, Witnesses and Pre-Filed Testimonies In addition to SWEPCO,the other parties to this proceeding are the Staff, the Consumer Utilities Rate Advocacy Division of the Office of the Attorney General of the
State of Arkansas4 (AG) and certain Intervenors who OM^ property adjacent to or in the general proximity of SWEPCO's proposed Hempstead County plant site.
On December 28, 2006, the SchuTtz Family Limited Partnership, and its Genera1 Partner, Schultz Family Management Company, and F. Patrick Schultz, individually and as Vice-president of Schuh Family Management Company (Schultz), petitioned to intervene as a pam in this docket pursuant to Rule 3.04@)(1) of the Commission's
~ ~
2 Federal, state, and/or local agencies have intervened in previous APSC dockets wherein eIectric utiIities sought CECPNs for generating plants, including Dockc t Nos. 73-048-U,74-015-U, and 77-003-U. 3 All correspondence between the Staff, SWEPCO and these governrnentd agencies was filed in the official record of this Docket. 4 On December 15, 2006, pursuant to Ark, Code Ann. 5 23-4-301et seq, On December 15,2006,the AG notified the Commission of its intention to participate as a party in tiis procceding. Docket No. 06-154-U OrderNo. 11 Page 4 of 76
Rules. Schultz stated that it owned property adjacent to the proposed generating faciliv that is used for hunting, fishing and other recreational purposes. Schultz alleged that its propem would be adversely impacted by the construction and operation of the proposed faciliv as a direct result of environmental impacts.
On January 4,2007,Emon Mahony, Jr., individualIy, and as a shareholder of the Yellow Creek, Po-Boy, Cypress Bayou and Bee Bayou Hunting Clubs (Mahony) filed a
Petition to Intervene in this docket. Likewise, on January 4, 2007, the Hempstead County Hunting CIub, Inc., Po-Boy Land Company, Inc., Cypress Bayou Corporation and Yellow Creek Corporation (Hempstead) filed a separate Petition to Intervene in this docket. In his Petition to Intervene, Mahony stated that the hunting dubs in which he is a member “would be adversely impacted by the environmental impact of mercury discharged into the atmosphere in the vicinity of these lands“ and that “the withdrawal of 6000 gallons of water per minute from the Litde River will adversely impact the availability of water for hunting purposes ....” (Mahony Petition at 4) In its Petition to
Intervene Hempstead alleged that “[tJhe potential impact of the water to be withdrawn by the proposed facility is of grave concern ....” Hempstead also alleged that “[t]he release of the toxic metal mercury, which is a by-product of the burning of coal, has the potential of contaminating the watersheds of Yellow Creek and Little River,” Finally,
Hempstead expressed concern about “the impact of coal train arrival and departures”. (Hempstead Petition at 2-3)
On January 24,2007,the Commission issued Order No. 2 granting the Petitions to Xnteelwene of Schultz, Hempstead and Mahony (collectively, the Inteervenors) on the Docket NO.06-154-U OrderNo. 11 Page 5 of 76 condition that “these entities intervene and participate in this proceeding as a single and united interest represented by common legal counsel.” The Initial Direct Testimony and Exhibits of SWEPCO witnesses Venita McCellon-Allen, Renee V. Hawkins, John C. Hendricks, Timothy A. Hostetler, James A.
Kobyra, Mark W. Marano, and Donald R. Moncrief were filed on December 8,2006,in support of SWEPCO’s Application. Supplemental Testimony and Exhibits were filed on
March 22, 2007, by SWEPCO witnesses Venita McCellon-Allen, Bruce H. Braine, and Scott C. Weaver. The Direct Testimony and Exhibits of SWEPCO witness Rob R. Reid were filed on April 18, 2007. Additional Supplemental Testimony and Exhibits were filed on April 19, 2007, by SWEPCO witness John C. Hendricks and on June 18-19,
2007,by SWEPCO witnesses Venita McCeTlon-Allen, Scott C. Weaver, James A. Kobyra, and Judah L. Rose.
Pursuant to Ark, Code Ann. 523-18-511,SWEPCO’s Application, and supporting witnesses’ testimonies and exhibits, included
(I) A general description of the proposed Iocation and type of the major utility facility proposed to be built; (Test. Tr. 191, 19&7,327-8)
(2) A general description of any reasonable alternate location or locations considered for the proposed facility; (Test.Tr. 199-202)
(3) A statement of the need and reasons for construction of the faciliv; (Test. Tr. 73-4)
(4) A statement of the estimated costs of the facility and the proposed method of financing the construction of the facility; (Test. Tr, 223-30,305- 9) (5)(A) A general description of any reasonable alternate methods of financing the cons~ctionof the facility and a description of the comparative merits and detriments of each alternate financing method considered; (Test. Tr. 309-13) Docket NO. 06-154-U OrdcrNo. 11 Page 6 of 76
(6) An analysis of the projected economic or financial impact on the applicant and the local community where the faciIiv is to be located as a result of the const-ruction and the operation of the proposed faciliw; (Test. Tr. 313-21,485-6)
(7) An analysis of the estimated effects on energy costs to the consumer as a result of the construction and operation of the proposed facility; (Hr. Tr. 1910-1; Test. Tr. 484-5)
(8)(A) An exhibit containing an environmental impact statement (EIS), developing the following four factors listed in subdivision (S)(B>: (Test. Tr. 328-34;EX. Tr* 1723-4246)
i. The environmental impact of the proposed action; (Test. Tr. 332-33 ii. Any adverse environmental effects which cannot be avoided; (Test. Tr, 333)
iii. A description of the comparative merits and detriments of each alternative energy production process considered, and a statement of the reasons why the proposed location and production process were selected for the facility; and (Test. Tr. 213-4)
iv. Any irreversible and irretrievable commitments of resources which would be involved in the proposed action should it be implemented. (Test. Tr. 334).
The Intervenors filed the Direct Testimony and Exhibits of Mickey E. Heifmeyer, Mary O’Boyle, F. Patrick Schultz, Yancey Reynolds, James I. Mangi, Emon A. Mahony,
Daniel M. Scheiman, and Randy Wilbourn on June 29, 2007, On July 27, 2007, the Intervenors filed the Surrebuttal Testimony and Exhibits of Mr. Reynolds, Mr. Mangi, and Mr. Heitmeyer.
The Staff filed the Direct Testimony and Exhibits of Mr, Clark Cotten on June 29,
2007. On July 27,2007,Staff witnesses Cotten, Jefiey M.biter, and David A. Schlissel filed Surrebuttal Testimony and Exhibits. The AG filed no testimony in this proceeding. Docket No. 06-154-U OrdcrNo. 11 Page 7 of 76
Public Hearing
Pursuant to Order No. 7, issued by the Commission in this docket on July 16,
2007, a public hearing on SWEPCO's Application was convened by the Commission at its offices in Little Rock, Arkansas beginning on August 9, 2007. After 17 days of evidentiary hearings, the hearing concluded on September 13, 2007. The parties filed post-hearing Briefs and Findings of Fact and Conclusions of Law on October 5, 2007.
Reply Briefs were filed on October 17, 2007 and closing arguments were heard by the
Commission on October 22,2007.
Also, pursuant to its Notice, filed in this docket on September 17, 2007, the Commissioners, accompanied by the parties and their Iegal counsel, and representatives of the news media, toured SWEPCO's existing Flint Creek coal-fired electric generation pIant5 located in Gentry, Benton County, Arkansas. On September 20, 2007, the
Commissioners, again accompanied by the parties and their legal counsel, and representatives of the news media, toured SWEPCO's and the Intervenors' properties in
Hempstead County, Arkansas. Public Comments
Pursuant to Ark. Code Ann. §z3-z-i03@), an opportuniw for public comments on SWEPCO's Application was extended by the Commission during the evidentiary hearing. At the evidentiary hearing, 51 individuals offered public comments on SWEPCO's Application. Forty-three of these comments were in support of SWEPCO's
Application and eight were opposed. Also, the Commission received6 a total of 5,075
5 The Hint Creek facility wits placed into commercial operation in 1978. 6AS of noon on November 2x,2007. Docket NO.06-154-U OrderNo. 11 Page 8 of 76 written, email or telephone comments regarding the Company's Application. Of these 5,075 comments, 4,328 were in support of SWPCO's Application and 747 were opposed.
Although public comments are highly valued by the Commission, the Commission cannot lawfulTy base its decisions upon the public comments of the
Company's customers without violating the due process rights of the Company or the other official parties in this Docket. Public comments are not subject to pre-hearing evidentiary discovery by the oficid parties, are not subject to cross-examination by the official parties during the evidentiary hearing, and are not given under oath, Thus, public comments do not constitute substantial evidence upon which the Cornmission by law must base its decisions. However, the Commission does take such public comments into consideration in its efforts to reach a balanced decision that is lawful and fair to all parties and to the Company's customers.
Determination of Need For Additional Electric Generation Resources Prior to filing its Application in this docket, SWEPCO filed with the Cornmission its Application for a Declaration of Need to Acquire New Power Supply Resources (Declaration of Need AppTication), in Docket No. 06-024-U. In support of its Declaration of Need Application SWEPCO filed testimony that addressed both its resource planning process and resource procurement process, and provided a detailed analysis of its need for additional electric power resources based on its zoo5 Integrated Resource Plan (XRP), which indicated the need for additional electric power capacity resources of up to 500 MW of peaking capaciv by 2008, up to 500 MlnJ of intermediate capacity by 2010, and up to 600 MW of baseload capacity by 2011. Docket No. 06-154-U OrderNo. 11 Page g of 76
SWEPCO also stated that it intended to acquire these resources through a market-based, competitive solicitation via a Request for Proposals (WP) as required by the Louisiana Public Senice Commission (the LPSC). In 2004, the LPSC issued an order known as the Market-Based Mechanism or MBM Order. The MBM Order required utilities to use a market-based competitive solicitation through an RFP to acquire or construct new generation resources and, among other requirements, required the use of an Independent Monitor, to oversee the entire RFP process.
As a public utility also subject to the jurisdiction of the LPSC, SWEPCO used a market-based, competitive solicitation RFP process to identify generating capacily or purchased power contracts that were available, including self-build proposals, to meet the Company‘s resource needs. This process was initiated on December 8, 2005, when SWEPCO issued its RFP for both short-term and long-term capacity and energy resources.
In support of SMPCO’s Declaration of Need Application in Docket No, 06-024- U,SWXPCO witness Nicholas K. Akins7, then President and Chief Operating Officer for SWEPCO, testified that “[t]he growth in demand on SWEPCO‘s system requires that
SWEPCO acquire additional power supply resources to serve [its] customers and maintain reIiability. To ensure that these resources are acquired at the lowest reasonable cost to customers, SWEPCO has initiated a market-based, competitive soIicitation using a request €or proposals (RFP) under the direction of an independent monitor. SWPCO is soliciting both short-term and long-term capacity and energy
7 Nicholas K. Akins was the President and CEO of SWEPCO at the time the Commission hcard Docket No. 06-024-U.Venitn McCelIon-Allen current holds that position. Docket No. 06-154-U OrderNo. 11 Page 10 Of 76 resources. The short-term resources are peaking resources for annual periods through
2009, with up to 500 MW being sought. The long-term resources consist either of purchased power contracts for at least 20-year terms or generation that the Company will purchase or build itself. The long-term resources also cover the spectrum of peaking (up to 500 MW beginning in 2008), intermediate (up to 500 MW beginning in zoio), and baseload (up to 600 MW by 2011) resources.”8
Mr. Alcins further testified that ”[a]lthough it is too soon to lmow precisely what resources SWEPCO will acquire, SWEPCO requests that the Commission issue findings concerning SWEPCO’s need for these resources as a predicate to the filing of the
[applications for the] required CCNs or CECPNs. Timely approval is also necessary to allow sufficient lead-time to have the long-term resources in place and available when they are needed to sewe customers.”9
In response, the Staff concluded that the Company had demonstrated that its
Declaration of Need Application was justified.10 SpecificaTly, Staff witness CIark Cotten testified that “(I) the data used by SWEPCO to determine its estimate of future loads was reasonable; (2) SWEPCO evaluated the impact that changes in key economic factors would have on its load forecast; and (3) SWEPCO’s load forecast was reasonable bemuse
(a) it was based on modeling processes and techniques that are widely used and accepted in the electric utiliv industry; (b) it used data from reliable sources; (c) key economic impacts were evaluated; and (d) the forecast was benchmarked to SWEPCO’s historical load. Mr. Cotten €urkher testified that, given SWEPCO’s forecasted load,
~ ~ 8 Docket No. 06-024-U,Direct Testimony of Mr. Nick AIiins at 6. 9 Id. at io. The only parties to Docket No. 06-024-Uwcre the Company and Staff. Docket NO.06-154-U OrderNo. 11 Page 11 of 76 existing generation capaciv, and its 13.6% reserve margin requirement, SWPCO has demonstrated a need for additional capacity resources.”ll
In conclusion, Mr. Cotten recommended that: (I) the Commission issue an order declaring that SWEPCO has demonstrated a need to acquire new power supply resources specifically as a predicate to the filing of an application for a certificate under
Ark, Code Ann. 923-3-201or $23-18-510;(2) the Commission’s finding of need should have no impact on any other statutory filing requirements, including but not limited to
523-18-104,requiring the approval of the Commission for the construction of any power generating faciliv located outside the state’s boundaries; and finalIy (3) the Commission should declare that its findings in this docket have no value for ratemaking or cost recoveiy purposes.12
By Order No. 3 of Docket No. 06-024-U,issued on June g, 2006, the Commission ruled that “SWBPCO has demonstrated a need for additional. power supply resources” and granted SWPCO’s Declaration of Need Application. Order No. 3 also found that
“nothing in this order represents a Commission finding (I) regarding any specific proposal(s) SWEPCO may proffer to address its need for additionaI power supply resources; or (2)any vahe for ratemaking purposes or cost recovery purposes.”13 Pursuant to Order No. 3 of Docket No. 06-024-Uand the completed RFP process,
SWEPCO subsequently requested in Docket Nos. 06-100-U and 06-120-U this
Commission’s approval to construct the needed natural gas-fired peaking and natural gas-fired intermediate electric generation facilities.
11 Docket No. 06-024-U,Cotten Direct: Testimony at 4-6, g 12 Id. at 10-11 13Docket No. 06-024-U,Order No. 3, pgs. 4-5 Docket NO.06-154-U OrderNo. 11 Page 12 of 76
By Order No. 4 of Docket No. 06-100-U,pursuant to the provisions of Ark. Code
Ann. 523-18-501,et seq., and Rule 7.08 of the Commission’s Rules, the Commission approved SWEPCO’s request for a CECPN to construct and operate a na-tural gas-fired peaking facility that will generate approximately 332 MW of net dependable summer peaking capacity, The faciTiQ, located in Washington County, Arkansas, was completed and placed into commercial operation on July 12,2007. SWEPCO’s pending request for approval to construct and operate a 500 MW natural gas-fired combined cycle intermediate electric generation faciIity in Louisiana is currently pending before the LPSC and also before this Commission in Docket No. 06-120-U. American Electric Power Service Corporation (AEPSC), on SWEPCO’s behalf and in response to the RFP, prepared and submitted four different cost-of-sentice alternative bids to meet SWEPCO’s baseload electric generation needs. SWPCO’s selection process focused on the evaluation of four self-build options that would utilize solid bel.
The evaluations used criteria that considered price and non-price factors. The four bids submitted by AEPSC for coal-fired baseload resources included two projects proposed to be constructed at SWEPCO’s existing Pirkey FIant in Texas using locaIly mined lignite and two projects proposed to be constructed at a greenfield site in Hempstead Counv, Arkansas using Powder River Basin [PRB) coal. One proposaI at each site utilized ultra-super critical pulverized coal (USCPC)technology and the other proposal used integrated gasification combined cycle (IGCC) technology. Ultimately, the alternative of building a nominal 600 MW coal-fired power plant in Hempstead
County was determined by SWEPCO, based on cost among other criteria, to be the most attractive alternative to meet its long-term baseload electric generation needs. Docket NO.06-154-U OrderNo. 11 Page 13of 76
In the instant proceeding, SWEPCO seeks this Commission’s approval of its
Application for a CECPN for the construction and operation of the proposed Hempstead
County coal-fired basdoad electric generator. If approved, the proposed coal-fired plant wiIl satisfy SWEPCO’s baseload electric power resource needs for the year 2011 as previously determined and approved by this Commission in Docket No. 06-024-U. The Commission’s ruling on SWEPCO’s Declaration of Need Application in
Docket No. 06-024-Uwas not appealed and, therefore, represents the Commission‘s final ruling on the matters at issue therein, Accordingly, this Commission will not revisit in the instant proceeding its final dingin Docket No. 06-024-U. Discussion
Intervenors are rightly concerned that their properties located near or adjacent to SWEPCO’s proposed coal plant will not be harmed. Having toured Intervenors’ unique and beautiful properties, ‘chis Commission understands and respects the concerns of the
Intervenors. The Intervenors are to be cornmended for vigorously and professionally representing their interests in this proceeding. The participation of the Intervenors has certainly enlightened and informed the Commission about a number of issues, for which the Commission is appreciative.
SWEPCO has also done an excellent job in this proceeding of vigorously and professionally supporting its Application and responding to the concerns of the
Intervenors. As such, SWEPCO is to be commended as well. Having also toured SWEPCO’s nearly thirty year-old FIint Creek coal-fired electric generation plant, the Commission also has a much better appreciation of SWEPCO’s commitment to the environment and its opinion that the proposed coal-fired plant in Hempstead County Docket No. 06-1544 OrderNo. 11 Page 14 of 76 will have an acceptable environmental impact on Intervenors’ properties. In the words of SWEPCO President Venita McCellon-Allen describing the properties of the Intervenors, “..+It is a beautiful place ... it will be just as beautiful thirty years after this plant has been in operation.” Tr. 2871-2872 The Commission also appreciates the professional and very helpful contributions of the Staff and the AG in this proceeding to better inform the Commission regarding the various contested issues, They too are to be commended. The testimony of the Staff witnesses and the input of the AG have greatly assisted the Commission in balancing the interests and concerns of the Intervenors and SWEPCO and its customers. In short, the Intervenors believe that their properties and the local Hempstead
County area ~411be harmed by the proposed coal-fired plant. Intervenors cite numerous anticipated “harmful” environmental impacts upon their properties - to the soil the air, the water, and to the existing natural view - and upon the surrounding area which they believe will resdt from operation of the proposed plant. Given their environmental and aesthetic concerns the Intervenors strenuously oppose the construction of the coal plant adjacent to their properties. Not only do the Intervenors oppose the coal plant, and essentially want nothing to be constructed on the propem owned by SWEPCO - no coal-fired plant, no natural gas-fired plant, no wind farm electric generators, no industrial or manufacturing operations. See Tr. 3219,3255,3288-90,3457,3472. In his closing argument, Counsel for Intervenors, Mr. Rick Addison, summarized the position of Intervenors with these declarations, “The macro issue in this case is the days of pulverized coal are over.” Tr. 3921. “The day of pulverized coal has to end.” Tr. 3904. “The greenhouse gas issue is too complicated, too serious, too dangerous to deal Docket No. 06-154-U OrderNo. 11 Page 15 of 76 with any further. It’s time to cross the bridge. We’re leaving the world of pulverized cod. ... Wehave to run away from pulveiized cod. We have to reject pulverized coal,” Tr. 3921.
In response to Mr. Addison’s plea that this Commission just ,,say no” to the proposed coal plant, the Chairman of the Commission asked Mr. Addison, “What do we do in the interim untiI we know if nuclear [power] is going to be an option? ... What do we do in the interim as regulators?” Tr. 3923-24, Notably, Mr. Addison offered no solid viable alternatives in response to the Chairman’s question, However, Mr. Addison did argue that, “Wedon’t know how much capaci’cy is in the system we might be able to use. We don’t how how much energy efficiency or demand procedures we could use to lower the amount [of electric capacity] we use. We’ve got to Took at all those options before we embrace pulverized coal. We may be able to use their gas plants. We may be able to use [a] merchant plant.” Tr. 3924. In closing Mr. Addison said, “And I would like to say I know the exact technology that would solve that question for you, but I don’t. What’s evident, though, is we’ve got to get off pulverized coal. We’ve got to be weaned .from it.’’ Tr. 3925. Unfortunately, it is not as simple as just saying “no” to pulverized coal. In order for the Commission to meet its duties to ensure that Arkansas’s residential, commercia1 and industrial ratepayers have cost effective and reliable electric service, it cannot simply adopt a policy of saying “no” to pulverized coal considering the current state of electric generation technoIogy for baseload generation and the lack of better alternatives to generate the needed electricity for SWPCOcustomers. Docket NO.06-154-U OrderNo. 11 Page 16 of 76
The facts are that this Commission has already established that SWPCO has a need €or up to 600 MW of baseload electric capacity, up to 500 MW of intermediate electric generation, and up to 500 MW of peaking electric generation*% The base load generation is needed by 2011 -- just three years away. To meet these needs, SWEPCO proposes to construct a 600 MW baseload coal-plant in Hempstead County. The
Hempstead plant is in addition to a proposed 500 Mw intermediate plant in Louisiana and a 332 MW peaking plant that is currently on line in Washington County, Arkansas. To diversity its portfolio, the intermediate and peaking electric generation plants are natural gas-fired. The Commission finds that diversity in a generation porthlio is sound public policy.15 Further, given that it would likely take four or five times as many years or even Ionger to secure license approval from the federal government and to complete construction of a nuclear baseload electric generator, coal-fired baseload generation is the only realistic option to reliably and affordably meet SWEPCO's need for additional baseload capacity in 2031 while diversifying its generation portfolio.16
This Commission is actively promoting the deployment of energy efficiency, conservation and demand response measures to reduce the demand for electricity in
14 Docket NO.06-0%-U. 15 SWEPCO is attempting to diversity new generation facilities between coal and natural gas by proposing a 600 MW of coal-fired generation and 832 MW of natural gas-fired generation with its intermediate pIant (500 MWin Louisiana and its peaking plant (332 MW)in Washington County, Arkansas. The Commission finds that this diversification is sound policy. See PERC Opinion No. 480,111FERC 161,311 (June I, 20051 and Arkansas PubIic Service Commission Docket No. 06-101-Uin which Entergy Arkansas' ratepayers must pay $231 million in increased costs under Enter& System Agreement due to Entergy Louisiana heavy reliance on natural gas-fired generating plants. *b It is a we11 established that the only viabk means of haseload generation is from coal, natural gas or nuclear dectric generating facilities. Docket NO.06-154-U OrderNo. 11 Page 17 of76 kkansas.17 Despite these efforts, no credible expert would even suggest that such measures can obviate SWEPCO’s need for 600 MW of baseload capaciv in 2011, At best such measures could account for only an extremely small portion of such a great need. Further, the testimony in this case does not show anything even approaching 600 MW of available electric baseload capacity, SWPCO owned or otherwise, that could be appropriated to meet SWEPCO’s baselaad capacity needs in 2011.
So, what must the Commission do? The Commission has a duv and responsibiliiy to insure that adequate and reliable electric energy at reasonable and affordable rates is available to SWPCO’s Arkansas customers at the “flick of a switch” in their homes, in their work places, in the businesses in which they shop, in the schools of their children, and in many other places necessary for the maintenance of their health, safety, protection and quality of life. Without an adequate supply of affordable energy, our culture and the economy of this State cannot be sustained. Unlike the Intervenors, who have made it clear through their sworn oral testimony that they not only are opposed to the construction of a coal plant, but they are also opposed to any type of energy generator or any other indusbial or manufacturing facility being constructed on the SWEPCO properly, this Commission must make a decision that best protects the overall public interest. We cannot simply reject this request then walk away from the unavoidable consequences of such a decision. Pursuant to our statutory duties under Arkansas law, this Commission’s decision must be based on the environmental impact of the proposed coal plant: as well as the economic impact. Although the
17 Scc APSC Dockets No. 06-004-R,07-o7$TF, 07-076-TF,07-077-TF, 07-078-TF, 07-07g-TP, 07-081- TI?, 07-082-TF,07-083-TF, 07-084-TF and 07-085-TF. Docket No. ob-154-U OrderNo. 11 Page 18 of 76 environmental impact of the proposed coal plant is a significant and important factor that must be weighed and determined by the Commission in this matter, it is just one of many significant and important factors that must be taken into consideration by the Commission.
It is important to note that the General Assembly, in enacting the CECPN statute, recognized that a major utility facility would likely have an “adverse environmental impact.” However, recognizing the public need for such facilities, the General Assembly only required that the Cornmission determine whether a proposed facili5 “represents an acceptable adverse environmental impact ....” (Emphasis added) More specifically, Ark. Code Ann. 5 23-18-519@)(4] provides that the Commission must determine whether, “the facility represents an acceptable adverse environmental impact, considering the state of available technology, the requirements of the customers of the applicant for utility service, the nature of and economics of the proposal, and the various alternatives, if any, and other pertinent considerations.”
The statute does not define what constitutes an “acceptable” adverse impact nor is the term defined by any applicable legal precedent. This Commission is of the opinion and herein concludes that the Commission has a duiy to determine if a proposed major utility faciliv, as defined by the CECPN statute, is environmentally “acceptable”even if it is determined that the faciliv meets or exceeds all existing environmental standards as required by the laws of the United States, the rules and regulations of the
Environmental Protection Agency of the United States, the Taws of the State of Arkansas, and the rules and regulations of the Arkansas Deparhnent of Environmental Quality
[ADEQ). Because this Commission must issue its final ruling in this matter within 60 Docket NO.06-154-U OrderNo. 11 Page 19 of 76 days of the close of the evidentiary hearing18, this Commission must make this determination before the Arkansas Department of Environmental Quality has issued its final determination of whether the proposed major utility faciIity will meet all applicable environmental rules and regulations. As established in this proceeding, ADEQ’s investigation, compliance determination and compliance enforcement responsibilities are an ongoing process that continues throughout the operational life of a major utility faciIity. SWEPCO’s Application in the instant Docket must be evduated by the Commission pursuant to the provisions of Ark, Code Ann, 5 23-18-501 et seq., the CECPN statutes. Pursuant. to Ark. Code Ann. 5 23-18-519,the Commission must make specific findings on the following issues based upon the record in this proceeding: (I) the basis of the need for the facility; (2) that the facility will serve the public interest, convenience and necessity; (3) the nature of the probable environmental impact of the facility; (4) that the faciliv represenb an acceptable adverse environmental impact, considering the state of available technology, the requirements of the customers of the applicant for utility service, the nature and economics of the proposal and the various alternatives, if any, and other pertinent considerations; (5) the nature of the probable economic impact of the facility; (6) that the facilily financing method either as proposed or as modified by the commission represents an acceptable economic impact, considering economic conditions and the need for and cost of additionaI public utility services; (7)that the energy efficiency of the power production faci2ity has been given
18 Ark. Code Ann. 5 23-18-5191e) Docket No. 06-154-U Order No. 11 Page 20 of76 significant weight in the decision-making process; and [8) that the location of the faciliw as proposed conforms to state, regional and local laws.
Findings of Fact and Conclusions of Law
Description of Proposed Facilities:
The proposed Hempstead power plant, to be known as the John W. Turk, Jr. power plant (the plant or the Turk plant) is a nominal 600 MW (net) coal-fired plant to be located in southwest Arkansas and projected to be placed in service in June 2011. The proposed plant will consist of a single pulverized cod (PC) ultra-supercritical steam generator with advanced steam conditions powering a single reheat steam turbine. This type of technology has the advantage of creating a relatively low heat rate for the unit, which will increase its efficiency and reduce emissions for a given output of energy. The source of the coal will be the PRB in Wyoming. (J. Kobyra Direct Testimony, p. 8). Combustion products produced by the generating plant will be cleansed using the
Best Available Control Technology (BACT) approach, which consists of devices and systems that will reduce the nitrogen oxide (NOx), sulfur dioxide (SO,), mercury, and particulates to comply with the applicable regulatory requirements. There will be incorporated into the project Air Quality Control Systems [AQCS) designed to meet
BACT standards for attainment areas such as the area in which the fadiw wiIl be located. These systems consist of low NOx burners with close-coupled over-fire air and selective catalytic reduction systems for NOx control; spray dryer absorber for flue gas desulfurization; and pulse-jet fabric filter baghouse for (SOI) and particuIate control. The removal efficiency of the AQCS will meet all outlet emission permit limits, The plant design also will include a Powder Activated Carbon (PAC) injection system to Docket NO.06-154-U OrdcrNo. 11 Page 21 of76 address revised mercury emission requirements recently adopted by the Environmental Protection Agency. (J. Kobyra Direct Testimony, pp. 31-36). Fly ash from the combustion process and solids from the emission control systems will be disposed of in an on-site state permitted Class 3N landfill, along with all other non-hazardous waste generated on-site. (Exhibit JCH-1 Revised EIS, p. S-I). Water for the plant will be supplied from Millwood Lake, via the Little River, through a contract with the Southwest Arkansas Water District. This water will be used primarily for makeup water purposes. The plant vi11 include a circulating water system with a mechanical draft cooling tower and a closed cooling water system. Wastewater from the plant will be discharged under a state National Pollutant Discharge Elimination System (NPDES) permit, and will primarily consist of treated cooling tower blowdown, (Exhibit JCH-1 Revised EIS, p. 3-2;1-11].
Coal and lime delivery to the plant will be by rail. A rail loop will be constructed on-site to facilitate unloading of the coal using a rotary car dumper. Conveyors will transport the unloaded coal to on-site storage piles, and from the storage piles to the generator. (Exhibit JCH-i Revised EIS, p. S-2). The plant will be operated as a baseload facility, which means that it normally wilI be scheduled to run when available because of its relatively low fuel costs. This me of operation is in contrast to peaking generation, which is used in response to short periods of high demand for electricity that often occur during summer, and intermediate generation, which is deployed in the dispatch cycle after baseload generation and before peaking generation. (J. Kobyra Direct TesEimony, p. 9). The plant will be located on a 2,875 acre site in Hempstead County Arkansas, 3.5 miles north of Interstate Highway 30 between the towns of Fulton and McNab. The City of Texarkana, Arkansas is approximately 15 miles to the southwest. Highway 355 Iies along the project site to the west. The Little River and Red River border the southern portion of the plant properly. Lake Millwood is located approximately 12 miIes to the northwest of the project site. The proposed site is located in an unincorporated area of
Hempstead County. No zoning restrictions apply in the area of the project. SWPCO purchased the propem fiom the Weyerhaeuser Company, (J. Kobyra Direct Testimony, p. 12).
The site selection process began with the commissioning of Sargent & Lundy,
LLC, an experienced engineering consulting firm, to conduct a site seIection study. The site selection process evaluated a total of nine sites-four sites in Arkansas, four sites in Louisiana and one site in Texas-as potential baseload facility sites according to 27 characteristics. The objective was to determine the suitabiliv of each site to host the construction of a generating unit (from a fuel type, cost, environmental and technical perspective). The study was used as a screening tool to further evaluate potential sites in SWPCO's sentice territory. (3. Kobyra Direct Testimony, pp. 16-17), After further evaluation of potential sites, the Hempstead County site was selected because it has the acreage to accommodate the facility, sufficient raw water and potable water sources, competitive rail access for delivery of fuel, and a property owner who was willing to sell. Construction of the plant at this location also will bring needed generation to this area of SWEPCO's service territory and, along with it, upgrades to the Docket No. 06-154-U OrderNo. 11 Page 23 of 76 transmission system that will improve the ability to move power in this region. (J. Kobyra Direct Testimony, p. 18). Alteinatitres ConsideredforProvidinq Needed Baseload Resources:
Purchases on the market were solicited as part of the RFP process, but onIy one Purchased Power Agreement was proposed. This proposal was eliminated because it proposed an impermissible pass-through of fhel costs to S'WISPCO and a physical tolling arrangement not allowed under the terms of the RFP. (T. Brice (Marano)
Direct Testimony, p. 9; C. Cotten Direct Testimony, p. io),
Severe transmission constraints in the southwest Arkansas service territory of
SWEPCO make reliance on the transmission grid for the importation of baseload power supplies a risky strategy that could jeopardize senice rdiabiliw. (J. Rose
Commission Questions, Tr. 1138-1141; C. Cotten Commission Questions, Tr. 3871-
3373). Demand Side Management (DSM) and energy efficiency programs will delay the need for future units after zon. However, DSM and energy efficiency measures
.Mill not eIiminate SWEPCO's need to add basdoad capacity in 2011. (C. Cotten Direct
Testimony, p. 27; D. Schlissel Surrebuttal Testimony, pp. 30-31).
Construction of a baseload generation facility is the most economical, timely, and reasonable approach to meet the established baseload needs of SWEPCO's customers,
Fuel Alternatives
A generation portfolio that includes diverse fuels is an attractive long-term risk minimization tool. For baseload electric generating facilities, the only viable he1 Docket NO.06-154-U OrderNo. 11 Page 24 of 76 candidates are coal, natural gas, lignite, and nuclear. (Exhibit JCH-I Revised EIS, p.
1-24;J. Kobyra Direct Testimony, p. 19).
As a part of its RFP process leading to the selection to build and operate a PRB coal plant in Hempstead County, SWEPCO considered each of these fuel candidates,
Due to the lengthy time requirements for planning, licensing, and constructing a nuclear generation plant (as well as concerns regarding the financing of costly nuclear pIants), a nuclear facility could not be placed in service by the required 2011 service date. Also, there has been no new nuclear generating facility licensed by the federal
Nuclear Regulatory Commission in over 15 years.*g Natural gas has certain advantages
(e.g., less emissions), but prices have been subject to great volatiliv in recent years as a result of greater demand and decreasing supply. (J. Kobyra Direct Testimony, p. 19).
Arkansas Iignite was also considered as a potential fuel source for the plant as there are local reserves nearby. However, it was determined that the potentially available reserves were not economic to mine based on the qualiv and the inherent overburden strip ratio (estimated removal of at least 20 tons of dirt and other materials to recover i ton of lignite). The required lead-time to acquire the land and/or mineral rights leases necessary for mining operations was also expected to be challenging given the 2011 service date. Petcoke was not selected primarily because of long-term supply uncertainties. (J. Kobyra Testimony, Tr. 1198, 1327, 1488-1489;
Exhibit JCH-I Revised EIS, p. 1-24).
19 Thc most recent nuclear electric generator to be placed in commercia1 operation is the Watts Bar No. I nuclear unit located in Tennessee. This unit went on-line in 1996. (June 2007, NucIear Enera Institute Report) Docket NO.06-154-U OrderNo. 11 Page 25 of 76
Sub-bituminous coal from PRB was selected because of its very low suIfur content, an available and abundant long-term supply, and favorable pricing relative to other potentid coal sources. PRB coal meets current clean air emission standards. (J.
Kobyra Direct Testimony, p. 22;Exhibit JCH-i Revised EIS, p. 1-24). Power Generation Process Alternatives
Energy conversion processes, including ultra-supercritical and sub-critical steam generation, integrated gasification combined cycle (XGCC), natural gas combined cycle, or nuclear power could serve some of the necessary baseload functions and were evaluated as alternatives to the ultra-supercritical pulverized coal process proposed for the Hempstead plant. (J. Kobyra Direct Testimony, p. 30;
Exhibit JCH-I Revised EIS, p. 1-25). The primary reasons for proposing an ultra supercritical pulverized coal steam generating plant are a reliable technology, operating efficiency, and fuel diversiv. (J.
Kobyra Direct Testimony, p. 30; Exhibit JCH-I Revised EIS, p. 1-25). SWEPCO’s current generating capacity is approximately 60% solid fuel (coal and lignite) and 40% natural gas. For the three-year period 2003 through 2005~89.5% of SWEPCO’s total generation output [on a MWh basis) was supplied by solid fuel and the remaining 10.5% by gas (along with oil). (V. McCelTon-Allen Direct Testimony, p.15). SWEPCO’s solid-fuel plants are baseload plants that generally run when available because of their lower fuel costs. SWEPCO’s generation dispatch cycle is designed to run the lowest variable cost units first and then run higher variable cost units as needed to meet demand. The solid-fuel plants produced nearly go% of SWEPCO‘s energy Docket: NO.06-154-U OrderNo. 11 Page 26 of 76
because operating them that much reduces SWEPCO's overall he1 costs compared to
using relatively higher-priced natural gas-fired generation. (V. McCellon-Allen Direct Testimony, p. 15- 16). For many years SWEPCO has been a Tow-cost electric provider. This is in large measure due to the fact that SWEPCO's generation mix allows it to take advantage of fuel diversity. SWEPCO has been fortunate not to be overly-dependent on natural gas and is less vulnerable to the significant price volatility to which natural gas has been subject. (V. McCellon-Allen Direct Testimony, p.16).
If all of the generating resources SWEPCO has proposed to satisfy its peaking, intermediate and baseload requirements are installed, the Company's generating capaciw will marginally rely more on natural gas. The percentage of solid-fuel capacity wilI decrease from 60% to 54.4%. The percentage of natural gas-fired generation till increase from the current 40.0% to 45.6%. This diverse mix of generation 1411 provide
SWEPCO and its customers protection against over-reliance on natural gas. Based on the Company's forecast of generation dispatch, solid fuel units will produce 85% of
SwI3.PCO's generation in 2012, after the new plants are in service. SWEPCO projects that the generation output by fuel type, after adding the new plants, would be at a ratio similar to that achieved during the period of zoo3 through 2005. (V. McCellon-Allen
Direct Testimony, p.173. Dun-srnission Issues:
SWEPCO has not requested in this Docket a CECPN for the transmission lines necessary to serve the proposed coal plant. SWEPCO will be required to seek certification of such transmission Tine routes in a future Commission Docket. However, Docket No. 06-154-U OrderNo. ii Page 27 of 76 at the request of SWEPCO, the PBS&J Corporation (PBSJ), a well-established national engineering, planning and environmental consulting firm, delineated a study area for the proposed transmission projects that ~ Turk plant is constructed. (R. Reid Direct Testimony, p.7). Letters requesting comments and input concerning electric transmission line route delineation and evaluation in Arkansas were sent on February 23, 2007 to the Arkansas Game & Fish Commission, Arkansas State Highway & Transportation Department, Arkansas Water Ways Commission, Arkansas State Land Information Board, Natural Resources Conversation Service, Southwest Planning & Development District, Arkansas History Commission, Arkansas Archeological Survey, Arkansas Department of Parks & Tourism, the Nature Conservancy, Arkansas Preservation Commission, Arkansas Natural Heritage Commission, United States Army Corps of Engineers - Little Rock, Vicllsburg, & Tulsa Districts, U.S. Fish & Wildlife Service, and the Federal Aviation Administration. (R. Reid Direct Testimony, p. 8). PES&J received responses from Arkansas Natural Heritage Commission, Arkansas State Highway & Transportation Department, Department of Arkansas Heritage and Arkansas Historic Presewation Program. (R, Reid Direct Testimony, p. 10). PBS8rJ reviewed information available on various state and federal agency websites, reviewed published information and maps, conducted a records review at the Arkansas Archeological Survey, analyzed aerial photography and U.S. Geological Survey (USGS) topographical maps, conducted a +day reconnaissance of the area with two PBS&J staff, an ecologist and a land planner. (R. Reid Direct Testimony, p. 9). Docket No. 06-1544 OrdcrNo. 11 Page 28 of 76 Using constraints information placed upon maps in conjunction with aerial photography, PBS&J established possible corridors of various widths (the narrowest being approximately 400 feet wide), These corridors avoid or minimize potential impacts on the constraints to the extent possible and depending on the specific constraint, The establishment of the proposed corridors also took into account the potential for paraIleling existing manmade linear features such as highways, roads, railroads, and transmission lines as well as minimizing potential impacts to areas with high quality ecological value. In addition, an effort was made to estabIish possible corridors which made use of the Turk plant propee feasible to the maximum extent practical. (R. Reid Direct Testimony, pp. io-11). Constraints on transmission from the Turk plant include the state-owned Nacatoch Ravines National Area, the LittTe River and Bois’d Arc Wildlife Management Area, recorded archeological sites, property owned by the Nature Conservancy, and the high ecological value area called “Grassy Lake” located northwest of the Turk plant. (R. Reid Direct Testimony, p. 12). There are a number of transmission corridors available out of the proposed Turk plant location, (R. Reid Direct Testimony, p. 13). Two possible alternative corridors exit to the east. One parallels an existing railroad right-of-way and the second is located on a portion of the proposed Turk plant property and private properly, Both corridors then paralIel an existing transmission line right-of-way southeast to the Interstate Highway 3olState Highway 67 corridor and then southwest/south towards Texarkana, in both Arkansas and Texas. (R. Reid Direct Testimony, p. 13). Docket No. 06-154-U OrdcrNo. II Page zg of 76 There is a possible alternative transmission corridor exiting in a generally southerly direction which proceeds east from the Turk plant, then mns south on Turk plant property and private property where it joins the Interstate Highway 3o/State Highway 67 corridor. A second southern alternative corridor generally bisects the Turk plant property and utilizes private land north and west of the City of Fulton, Arkansas, crosses the Red River, and joins the Interstate 3o/State Highway 67 corridor. (R. Reid Direct Testimony, pp. 13-14). There are two potential southern alternative segment corridors south of the Interstate Highway 3o/State Highway 67 corridor, one west of the Red River and one east of the Red River, generally paralleling Red Lake Road. [R. Reid Direct Testimony, P*133. There are three possible alternative corridors delineated exiting the Turk plant propem to the west. The northern most of these corridors parallels an existing railroad right-of-way. If a transmission line were constructed on the south side of the railroad right-of-way, it would encroach an state propem within the Lide River Wildlife Management Area, and possibly a small portion of the Nacatoch Ravines Natural Area. The middle, western alternative corridor would exit the Turk plant propem south of the Nacatoch Ravines Natural Area and join the railroad corridor. The southern mast western alternative corridor passes through Turk plant property to the Little River, crosses the Little River and Red River, and joins the Interstate Highway 3o/State Highway 67 corridor. (R. Reid Direct Testimony, p. 14). Docket No. 06-154-U OrderNo. II Page 30 of 76 Some of the possible alternative corridors presented provide reasonable and practicaI exits from the proposed Turk substation and generating plant property. (R. Reid Direct Testimony, p. 15). More than one possible transmission line could be located within the alternative corridors. For example, two of the lines could be placed on a single structure (double circuit) for less than one mile. Two or more lines could also be constructed on separate strucfxres in parallel, adjoining right-of-way for much longer distances. (R. Reid Direct Testimony, p. 16). The reliability of the transmission system will be improved by geographically separating the transmission lines, (R. Reid Direct Testimony, p. 16). To the extent there are existing wetland reserve program easements, the transmission corridors could route around the easements so as to avoid any impact on the easements. (R. Reid Cross-examination, Tr. 1831). To the extent there are impacts to wetlands within the transmission corridors, there is ample opportunity and land available for mitigation on the Turk plant site. (R. Reid Re-direct examination, Tr. 1855). When SWEPCO submits its application for a CECPN for the transmission lines to run out of the Turk plant, a transmission line EIS 1411 be required. This will provide the public, any intervenors, staff and all various identified state agencies and the Commission to comment on the potential adverse environmental impacts associated with the siting of the transmission Tine. (R. Reid Re-direct examination Tr. 1857). SWEPCO has committed on the record that it will not propose or build a transmission line across Grassy Lake. (Commissioner quest.ioning of R. Reid, Tr, 1866). Docket No. 06-1544 OrdcrNo. 11 Page 31 of 76 The final determination of the transmission facilities and upgrades required to deliver power and energy from the Turk plant will be performed by the Southwest Power Pool (SPP)20 as part of an aggregate study. (T. Mosteettler Direct Testimony, p. io). Network Integration Transmission Service (NITS) is a me of transmission senice SPP provides under Part 3 of the SPP Open Access Transmission Tariff. SWEPCO, like any other eligible wansmission customer responsible for serving Ioad, can purchase NITS from SPP. NITS allows a network customer to integrate, economically dispatch, and regulate its current and planned network resources, including generation, to serve its network load. NITS may also be used by the network customer to deliver economy energy purchases to its network load from non-designated resources on an as- available basis without additional transmission service charges. SPP will not support SWEPCO’s application for NITS for the Turk power plant until two conditions occur: first, SPP must conduct an aggregate study and post the results; and second, SWEPCO must agree to remedy any reliabiliw deficiencies found in the SPP study under the terms and conditions stated in the Federal Energy Regulatory Commission (FERC) approved SPP Open Access Transmission Tariff (OAlT) relative to NITS approval. (T. Hostettler Direct Testimony, p. 11). SPP provides Generation Interconnection Senice under its FERC-approved OATT in accordance with FERC Order 2003-C. The OATT requires that three studies be performed. These studies are a project specific feasibility study, impact study and 20 The Soutiitvest Power Pool is a Regional Transmission Organization, mandated by the Federal Energy Regulatory Commission to ensure reliable supplies of power, adequate transmission infrastructurc, and competitive wholesale prices of clccb.icity within its certificated region. SWEPCO is subject to the SPP’s regional transmission operations jurisdiction. Docket No. 06-1544 OrderNo. 11 Page 32 of 76 facilities study. SPP uses the current models of the SPP Transmission System that include in the base case all previously queued generation interconnection requests. An overview of these studies is described in the Large Generator Interconnection and Procedure located on the SPP website. The final step for the interconnection process is the Large Generator Interconnection Agreement. The appendices of the Interconnection Agreement are negotiated by the transmission provider, transmission owner, and the interconnection customer. (T.Hostettler Direct Testimony, p. 12). In addition to following the interconnection procedures, SWEPCO must also request transmission service. In this instance, SWEPCO is a network service customer and will request designation of the Turk plant as a Designated Network Resource. SPP assesses the availability of transmission service through an aggregate study process in accordance with Attachment 2 of the SPP OAT. (T.Hostettler Direct Testimony, p. 12). The aggregate study process commences with the initiation of an open season. AI1 requests for service entered in the open season will be studied in aggregate. The open season is four months in duration. At the close of the open season, the Aggregate System Impact Study (ASIS) will include only queued requests for which ASIS agreements have been executed. (T.Hostettler Direct Testimony, p. 12). The ASIS is conducted to identify those facilities limiting the availabiIiw of the requested service in aggregate and the system upgrades required to provide this service. The allocation of the estimated upgrade costs to each reservation will be provided to enable the transmission customers to estimate their cost of service. Subsequently, SPP performs an aggregate facilities study including the requests of dl transmission customers who, having executed an aggregate facilities study agreement remain in the Docket No. 06-1544 OrderNo. 11 Page 33 of 76 study. Upon completion of the aggregate facilities study, an dlocation of the upgrade cost to each reservation is made to enable the transmission customers to assist their cost of service and conclude their commitments to take this senice. (T. HostettIer Direct Testimony, p. 13). The SPP has published seven drah of the aggregate study but the final aggregate study has yet to be published. (T.Hostettler Cross-examination, Tr. 1714). There are two parts to the process of interconnecting a generation plant with the transmission system, First, transmission facilities are needed to interconnect the plant without any guarantee of getting any transmission service from the plant. Second, transmission facilities are required to get transmission service from that plant to SWEPCO’s customer at some megawatt level. The interconnect portions of transmission faciIities do not require an SPP aggregate study. The facilities necessary for transmission service do require approval of the SPP through the aggregate study. (T. HostettTer Cross-examination Tr, 1715-1716). SWEPCO’s estimated combined cost of both interconnection facilities and transmission service facilities is approximately $136,000,000.00,(T. Hostettler Cross- examination, Tr. 1715-1716). As of the date of this Order, the SPP has neither completed the aggregate study nor given SWEPCO an authorization letter to proceed with the upgrades necessary for interconnection. (T. Hostettler Cross-examination, Tr. 1726), While the interconnection study has been completed and the facilities required identified, the SPP has not executed an interconnection agreement as of the date of the hearing. (T.Hostettler Redirect examination, Tr. 1742). Docket No. 06-15447 OrderNo. 11 Page 34 of 76 There are two 138kV transmission lines contemplated for interconnection purposes. (T+ Hosteder Redirect examination, Tr. 1743). There is a 3451cV transmission line contemplated to provide transmission service to the grid which is awaiting SPP approval through the aggregate study. (T. Hostettler Redirect examination, Tr. 1743). The total cost for the transmission facilities including interconnect and transmission service facilities is approximately $205,000,000.00 for all SPP participants. (T. Hostettler Commissioner questioning, Tr. 1747). The transmission service cost will be approximately $71,000,000.00. SWEPCO’s interconnect transmission facilities cost will be a portion of $88,000,000.00.The total percentage amount of the $88,000,000.00 has yet to be negotiated. (T, Hostettler Commissioner questioning, Tr. 1748). The fact that generation capacity may be available is not dispositive on this point. The transmission system is constrained such that there is an inability to deliver the excess generation capacity to where the need is, (T. Hostettler Commissioner questioning, Tr. 1750-1751). There are zero megawatts of generation available on the transmission system for Southwest Arkansas. Firm transmission capacity is required for baseload purposes. Firm transmission capacity essentially means uninterruptible transmission capacity such that a utility could access the power 24 hours a day, 7 days a week, 365 days a year. (T,Hostettler Commissioner questioning, Tr. 1752). The transmission system is virtually sold out within the SPP footprint. (T. Hostettler Commissioner questioning, Tr. 1753). Docket No. 06-1544 OrderNo. 11 Page 35 of 76 There is no single market resource availabk to meet SWEPCO’s capacity needs. If the proposed power plant is denied, SWEPCO will have to go through the process of identifying several different resources multiple times. In addition, SWEPCO will have to go through a number of aggregate study processes with the SPP. (T*Hostettler Commissioner questioning, Tr. 1755-1757). Citing the difficulties it has had determining what specific facilities will be required for the SPP study process; SWEPCO states that it did not feel it was prudent to include potential transmission facilities in its application for a CECPN for the Turk plant. IT. Hostettler Commission questioning, Tr. 1764). The addition of 600 megawatts of generation in Southwest Arkansas will provide substantial voltage support in Southwest Arkansas and portions of the Northeast Texas area. This will enhance the reliability of the other electric utilities in that area. Furthermore, the SPP region will benefit through the addition of the transmission upgrades. (T.Hosteder Direct Testimony, p. 20). Pindinzs Required bv Ark. Code Ann. 5 23-18-519: (I) The Basis of the Need for the Facilittl. In Docket No. 06-024-U,SWEPCO sought a declaration of need to acquire new power supply resources as a predicate to its subsequent filing in the instant Docket of the required CECPN for the Turk plant. In that docket SWEPCO presented evidence, including the results of the Company’s 2005 IRP, in support of its need to acquire new peaking, intermediate and basdoad resources to meet increases in customer demand and to maintain its required capacit.y reserve margin. Docket NO.06-154-U OrderNo. 11 Page 36 of 76 On June 8,2006,the Commission issued Order No. 3 in Docket No. 06-024-Uin which it found that SWEPCO had demonstrated a need for the additional power suppIy resources. Thereafter, SWEPCO sought approval to construct natural gas-fired peaking and intermediate generating facilities in Docket Nos. 06-100-U and 06-120-U, respectively. This filing represents the final step to implement SWEPCO’s power resource acquisition plans presented in Docket No. 06-024-U.(V. McCellon-Allen Direct Testimony, pp. 8,g). There€oore, the Commission finds that the approval of a CECPN for the Turk Plant addresses the need for baseload power supply resources established in that docket. (2) The Facilitli Will Serue the Public Interest, Convenience and Necessitu. The Commission having found in Docket No. 06-024-Uthat SWEPCO has a need for additional baseload power supply resources to serve the needs of its customers in 2011, and upon a finding that the proposed plant otherwise meets the requirements of Ark. Code Ann. 5 23-18-519,it necessarily foTlows and is the finding of this Commission that the construction of such facility will serve the public interest, convenience and necessity. (3) The Nature of the Probable Emironmental Impact. Env ir o nrn enta 1 Impact Statement As required by Ark. Code Ann. 9 23-18-511,SWEPCO provided an EIS in its initial filings as Exhibit JCH-i to the Direct Testimony of John C. Mendricks. (J. Hendricks Direct Testimony, p. I). Then, SWEPCO revised and expanded the EIS, filing a revised EIS on April 19, 2007, as Exhibit JCH-i to the Supplemental Testimony of John C. Hendricks (Revised EIS); hereinafier both EXS documents are Docket No. 06-1544 OrderNo. 11 Page 37 of 76 cumulatively referred to as the EIS. (J. Hendricks Supplemental Testimony, p. 1). SWPCO served both in accordance with Ark. Code Ann. 5 23-18-513.(C, Cotton Direct Testimony, p. 37; Affidavits of Service, docket entries f 36 and # 171.) By letter dated December 8, 2006, Staff invited comments from all state agencies entitled to service under Ark. Code Ann. 5 23-18-513 and 514 as to the adequacy of SWEPCO’s statements. In response, Staff received four comments Ietters from three state agencies, i.e., ADEQ, the Department of Arkansas Heritage (DAH) and the AGFC. On February 23, 2007, Staff mailed to SWEPCO a letter of deficiency pursuant to Ark. Code Ann. 5 23-18-514.SWEPCO addressed the concerns raised by these state agencies by filing written responses to the agencies’ comments and by filing a revised EIS as well as by conducting meetings with each agency. Mer SWEPCO filed its revised EIS, the Staff received additional letters of comment from the AGFC and the DAH. Subsequently, on May 24,2007,Staff mailed a second notice of deficiency to SWEPCO. Again, SWEPCO responded to the additional comments of the AGFC and the DAH. Thereafter, Staff received letters from the AGPC, AHPP, DAH and ADEQ evidencing that the agencies’ concerns had been addressed. (Clark Cotten Direct Testimony, p. 38). With the filing of the testimony of Staff Witness Cotten, the Staff determined that SWEPCO’s EIS was no longer deficient and that SWEPCO had satisfied the requirements of Ark. Code Ann. 5 23-18-501 et seq, including sections 511,513,and 514. (C, Cotten Direct Tes’cimony, p. 40). As evidenced by the Staffs determination regarding the adequacy of SWXPCO’s statements in its Application and EIS and SWEPCO’s satisfaction of the state agencies’ Docket NO.06-154-U OrderNo. 11 Page 38 of 76 concerns, SMPCO’s Application and EIS are deemed adequate and compliant with the requirements of Ark. Code Ann. § 23-18-501et seq. The Intervenors argue that the EIS performed by SWEPCO is deficient. The Commission disagrees. The differences between a federal EIS and those done pursuant to the CECPN statute (Ark. Code Ann. 5 23-18-501 et seq.) are profound. Federal EISs are prepared in compliance with the National Environmental Policy Act. (R. Reid Redirect, Tr. 1851.) In a federal EIS, the preparation of the documents occurs at the end of the process rather than before the faciIities are designed and located. (R. Reid Redirect, Tr. 1850-1851). A federal EIS is a much more rigorous document than the environmental impact statement required under Arkansas major utility siting cases. (Id.) Also, federal EISs are required only if there are significant impacts. (R. Reid Redirect, Tr. 1853). The requirements of the CECPM statute clearly state the requirements for an EIS before this Commission. Having reviewed the matter and heard the testimony, the Commission finds that the EIS presented by SWEPCO complies with state law. Phzisioqraphii Construction of the plant will necessitate changes to existing ground contours, temporarily increase soil erosion on the plant site, and include construction and operation of a solid waste landfill on the plant propem. (Exhibit JCH-1 Revised EIS, p. 3-41. Such changes to the physiography are within acceptable limits and will not impose an unacceptable impact on the area. Docket No. 06-1544 OrderNo. 11 Page 39 of76 Air Environment Air emissions are regulated by the ADEQ air permitting program, which incorporates both state and federal requirements. SWEPCO submitted an air permit application to the ADEQ on August 9, 2006. ADEQ, which is the delegated permitting authority, determined the application to be administratively and technically complete and has issued a draft permit with provisions based on applicable state and federal requirements. The ADEQ will issue a final permit that is applicable to the construction and operation of the proposed facility. (J. HendriclG Additional Supplemental Testimony, Exhibit JCH-3;J* Jewel1 Rebuttal Testimony, p. 7). The Clean Air Act requires the federal Environmental Protection Agency CEPA) to set national ambient air quality standards (NAAQS)for pollutants considered harmful to public health and the environment. The Clean Air Act established two types of national air quality standards. Primary standards set limits to protect public health, while secondary standards set limits to protect public welfare, including protection against decreased visibility, damage to animals, crops, vegetation, and buiIdings. EPA has established NAAQS for six principal or “criteria”pollutants The plant will have the potential to emit both criteria pollutant emissions (carbon monoxide (CO), nitrogen oxides (NOx), sulfur dioxide (SO,), particulate matter (PM), volatile organic compounds (VOC), and lead), as well as non-criteria pollutants (e,g. mercury). (Id.) Criteria Po I1u tan ts Genera11 y Potentid emissions of the criteria pollutants from the plant were shown to have Docket No. 06-1544 OrderNo. 11 Page 40 of76 either very low or insignificant:impacts to local ambient air quality standards. This was determined through air quality modeling analyses of potential impacts, which is a key component of the ADEQ air permitting process designed to address both state and federal regulatory requirements, (Id,) Hempstead County is currently in attainment with all NAAQS. Results of the air quality modeling analysis demonstrate that Hempstead County and the surrounding areas 1411 remain in attainment ~ithall NAAQS (as well as the ADEQ Non-Criteria Pollutant Control Strategy (NCPCS)) once the plant is in operation. (J. Hendriclcs Additional Supplemental Testimony, Exhibit JCH-3; J. JewelT Rebuttal Testimony,p. 9) The modeling analysis was completed in accordance with state requirements and with the regulatory requirements and goals of the applicable federal air permitting programs - Title V of the Clean Air Act and the Prevention of Significant Deterioration (PSD) programs. The goals of the PSD program are: (I) to ensure fiat: economic growth will occur in harmony with the presentation of existing dean air resources to prevent the development of any new nonattainment problems; (2)to protect the public health and welfare from any adverse effect which might occur even at air pollution levels better than the NAAQS; and (3) to preserve, protect, and enhance air qualiw in areas of special natural recreational, scenic, or historic value, such as national parks and wilderness areas, (J, Hendricks Additional Supplemental Testimony, Exhibit JCH-3; J. Jewel1 Rebuttal Testimony, p. 7). By showing through air dispersion modeling that air emissions from the plant will not cause or contribute to any violation of a NAAQS, SWEPCO has demonstrated that the proposed plant’s criteria pollutant emissions will not endanger the surrounding Docket NO.06-154-U OrdcrNo. 11 Page 41 of 76 population and area. This conclusion was reaffirmed by the ADEQ in the issuance of the draft air permit for the plant, which was issued after the agency had processed the permit application and reviewed dl modeling analyses to ensure that the proposed plant will meet all air quality standards and regulations. (J. Hendricks Additional Supplemental Testimony, Exhibit JCH-3; J, Jewel1 Rebuttal Testimony, p. 8). SWEPCO has demonstrated through approved modeling practices that impacts horn the plant’s potential air emissions, including mercury (and other non-criteria air pollutants), are well below all acceptable, scientific and regulatory-based thresholds. That is, results of the required air qualiw modeling analyses predict that the potential impacts associated with emissions from the plant to Hempstead and neighboring counties will be minimal and will meet all applicable state and federal regulations and permitting requirements. (Exhibit JCH-I Revised EIS, p. S-4, 2-15;J. Jewel1 Rebuttal Testimony, p. g, XI). Sulfirr Dioxide Emissions The plant is designed with a dry flue gas desulfurization (FGD) system to control SOn emissions. (J. Robyra Direct Testimony, p. 31,331. The draft air permit issued by ADEQ provides for a 0.1 lb/mmBTU SOz limit, but SWEPCO has commit-t.edto the ADEQ to accept a permit limit of 0.08 lb/mmBTU limit with the dry PGD system. (J. Hendricks Cross Examination, Tr. 2181,2308). As compared to a wet FGD, a dry FGD will result in lower particulate matter, nitrogen oxides, sulfuric acid mist, and carbon dioxide emissions. A dry FGD system will also reduce the amount of solid byproduct to be placed in a landfill and will reduce the annual total plant water use. In addition, a dry FGD will have a smaller Docket NO. 06-154-U OrderNo. 11 Page 42 of 76 equipment footprint and iVill consume of a lower amount of raw materials. A dry PGD system requires less energy to operate further reducing emissions on a per MWhr of electriciw produced basis. Aesthetically, a dry FGD dlresult in a less visible plume, less delivery traffic to the faciliv, and lower potential noise from the facility. (J. Hendricks Cross Examination? Tr. 2304 - 2307; J. Hendricks Commission Questions, Tr. 2445-2448). While a wet FGD results in a very small incremental reduction in SO2 emissions over dry FGD, this estimated difference would result in only a miniscule reduction in ambient SO2 concentrations. In fact, based on results from the modeling already done as part of SWEPCO’s air permit application, it was determined that the difference in modeled SO2 impacts to ambient SO2 concentrations from a wet FGD system, when compared to impacts from a dry FGD system, amounts to only a fraction of a percent of the SO2 air quality standard. (J. Hendriclcs Cross Examination, Tr. 2306 - 2307; J. Hendricks Commission Questions, Tr. 2445). The ADEQ has reviewed SWEPCO’s air permit application and issued a draft air permit that concurs 14th SWEPCO that a dry FGD is the most appropriate technology for reducing potential SO2 emissions at the plant. (J, Hendricks Additional Supplemental Testimony, Exhibit JCR-3). The ADEQ has the responsibility of assuring that the final air permit contains an emission limits that meets EPA’s Best Available Control Technology regulatoiy requirements. (Jeremy Jewel1 Redirect Testimony, Tr. 3083 - 3084; Venita McCellon-Allen Commission Questions, Tr. 2906), Although the CECPN statute provides this Commission the authoriw to place conditions upon granting a CECPN permit, this Commission finds that the issue as to Docket No. 06-1544 OrdcrNo. 11 Page 43 of 76 whether the Turk plant should be required to utilize the wet or dry FGB technology would best be decided by ADEQ. Mercury Emissions Mercury is a “non-criteria” air pollutant; emissions of mercury are regulated by ADEQ through its air quality Taws, regulations, guidance and permits. As part of its air permit application to ADEQ, SWEPCO performed analysis of potential emissions of non-criteria pollutants from the plant as required by the ADEQ Non-Criteria Pollutant Control Strategy (NCPCS). Results of this analysis determined that the potential impacts of non-criteria pollutant emissions, including mercury, are below all applicable regulatory standards, including ADEQ-defined Presumptively Acceptable Impact Levels (PAILS). (Exhibit JCH-1 Revised EIS, p. 2-15; J. Jewel1 Rebuttal Testimony,p. 7-11). The plant is designed with a state of the art mercury control technology, a Powder Activated Carbon Injection system. The plant’s other state of the art air emission control technoIogies will further increase the control of mercury emissions. (J. Kobyra Direct Testimony, p. 31, 34; Exhibit JCEI-i Revised EIS, p. 1-13; J. Jewell Redirect Testimony, p. 7; J. Jewell Redirect Testimony, Tr. 3041 - 3042). Any ADEQ-issued air permit for the plant will require mercury emission offsets. (Exhibit JCH-1 Revised EIS, p. 2-2). In addition to the analyses conducted as a part of its air permit: application to ADEQ, SWEPCO conducted and reviewed additional modeling that predicted the anticipated deposition of mercury from the plant’s emissions to the Intervenors’ properties. This additional modeling was conducted by AEPSC and Dr. Christian Docket No. 06-154-U OrderNo. 11 Page 44 of 76 Seigneur, who is a world renowned expert ox1 mercury deposition from power plants. The modeling report was further reviewed and sponsored by SWEPCO witness, Mr. Jeremy Jewell, of Trinity Consultants, which is a well-known consulting group with expertise in air quality modeling and permitting. (J. Jewel1 Rebuttal Testimony, p. 7; J, Jewel1 Redirect Testimony, Tr. 3044). The plant’s mercury contributions are extremely small and essentially immeasurable as compared to the amount modeled to already deposit to the local area. (Exhibit JCH-i Revised EXS, p. 2-6; J. Jewel1 Rebuttal Testimony, p. IO; J. Jewell Redirect Testimony, Tr. 3041-342). The very small modeled deposition of mercury to the Intervenors’ properties is comparable to what can be expected to be deposited on the communities of Fulton and McNab. (J. Jewell Commission Questions, Tr. 3119). Given how small the plant mercury deposition to the local area will be, particularly in light of the current mercury deposition, the necessary conclusion is that lowering mercury emissions from the plant, even to the point of eliminating the emissions, would have no identifiable impact on the area surrounding the plant site. The total mercury deposition to areas in the vicinity of the plant, including any contribution from the plant, is anticipated to decrease from current levels of deposition due to implementation of the Clean Air Interstate Rule (CAIR) and the Clean Air Mercury Rule (CAMR). (Exhibit JCH-1 Revised EIS, p.2-20 - 2-23; J. Jewel1 Rebuttal Testimony, p. lo; J. Jewel1 Redirect Testimony, Tr, 3055 - 3056). According to EPA’s risk analysis protocols, there will be no increase in the area’s health risk from mercury deposition from the plant, (J. Jewell Redirect Docket No. 06-1544 Order No. 11 Page 45 of 76 Testimony, Tr. 3042, 3068-3070). Therefore, based upon the evidence of record, the Commission finds that the projected mercury depositions from the proposed Turk plant are acceptable. Class I A~eaConsiderations As a part of the ADEQ air permitting process, SWEPCO (through its consultants) performed modeling to assess impacts of the plant's emissions on two federally protected Class I areas (Caney Creek and Upper Buffalo Wilderness Areas) in Arkansas. This modeling was performed using the most accurate and advanced models available including the version recently approved by EPA. The modeling results demonstrate that, when natural conditions are taken into account, which is the most realistic and accurate scenario to model the impacts, there are no significant impacts to visibility at either of these Class I areas. (Exhibit JCH-1 Revised EIS, p. 2-14; 3. Hendricks Additional Supplemental Testimony, p. 6 - 7; J. Hendriclrs Additional Cross Examination, Tr. 3156 - 3159,3164,3166;SWEPCO Hearing Exhibit 7). Fuqitiues Fugitive emissions from the plant, including those associated with, for example, the coal handIing and storage areas, the lime handling and storage areas, and the fly ash systems, will be regulated and permitted by the ADEQ-issued air permit. The expected fugitive emissions from the plant are expected to be minimal, (Exhibit JCH- 1 Revised EIS, p. 2-7; 2-8 J. Jewel1 Redirect Testimony, Tr. 3073 - 3079). Fugitive emissions of coal dust from the delivery of coal to the plant by rail are also expected to be minimal and will not result in any significant environmental Docket No. 06-1544 OrderNo. 11 Page 46 of 76 impacts. (J. Hendricks Rebuttal Testimony, p. 4 - 7; G. Tucker Rebuttal Testimony, p. 5171 26). Carbon Dioxide KO22 The plant will emit approximately four to five million tons per year of CO,; this represents approximately 0,2 percent of the total. estimated emissions of carbon dioxidefrom electric generation in the United States per year (based on the year 2004.) (D. Schlissel Surrebuttal Testimony, p. 26; Exhibit DAS-3, p. 17). There are no knorvn local environmental impacts of C02 emissions. Carbon dioxide is a global issue. (B. Braine Commission Questions, Tr. 706; Exhibit JCEI-i Revised EIS, p. 2-18,2-23;J. Hendricks Cross Examination, Tr. 2327). There are currently no regulatory programs that regulate carbon dioxide and other greenhouse gas emissions from electric utilities in the United States. (Exhibit JCH-i Revised EIS, p. 2-18) There are no currently commercially available technologies for the control of C02 emissions for power plant applications of this size. Studies are underway for amine scrubbing and chilled ammonia C02 technologies as well as for storage and injection sequestration systems. It is anticipated that widely available commercially viable technology for the control of carbon dioxide in power plant applications will not be ready before 2011. (Exhibit JCH-1 Revised EIS, p. 2-23; B. Braine SuppIemental Testimony, p. 6). By choosing the ultra-supercritical design, the Cornmission finds that SWEPCO is utilizing the most efficient, technically proven type of coal-fired generation available using Powder River Basin fuel to minimize the greenhouse gas emissions of Docket No. 06-154-U OrderNo. 11 Page 47 of 76 the plant. The design’s high efficiency in converting coal to electricity means less coal consumed and lower emissions of C02, as well as other pollutants, compared to less efficient processes. (Exhibit JCH-i Revised EIS, p. 2-23; B. Braine Supplemental Testimony, p. 5, 15-16). The plant will be designed so that potential future carbon- capture technology may be constructed at the site. (Exhibit JCH-1 Revised EIS, p. 2- 24). Water Resoumes: Water Supp1q Once the plant is operational, average annual water usage will be approximately 6,000 gpm. To avoid any potentially adverse impacts to the flow regime of the LittIe River during low-flow or drought conditions, the water supply required to support continuous plant operations will be provided by supplemental water releases from MiIlwood Lake, upstream of the intake location, through a contract with the Southwest Arkansas Water District (SAWD), The water supply contract with the SAW for MiIlwood Lake storage will be sufficient to supply an average annual io million gallons per day, or 6,944 gpm, and exceeds the amount required to provide the plant’s entire annual water usage requirements. (Exhibit JCH-1 Revised BIS, p. 2-41; D. Ford Rebuttal Testimony, p. 7; J. Hendriclcs Commission Questions, Tr. 2442- 2445). Continued water use by the plant during drought conditions equal to those on record would not diminish the othenvise expected flow regime of the Little River below the water intake location due to the supplemental releases from Millwood Lake storage under contract. (Exhibit JCEI-i Revised EIS, p. 2-47; D. Ford Rebuttal Docket NO.06-154-U OrderNo. 11 Page 48 of 76 Testimony, p. 11; D. Ford Commission Questions, Tr. 2601, 2604 ; J. Hendricks Commission Questions, Tr. 2442-2445). Based upon the testimony, the Commission finds that the impacts from the supplemental releases from Millwood Lake rvill be minimal, if not imperceptible, to the downstream flow regime of the Little River as well as to the Little River Bottoms, including the Intervenors’ property, and Millwood Lake. (D. Ford Rebuttal Testimony, p. g - 11; D. Ford Commission Questions, Tr. 2604). Water Discha roes Control of possible surface water and groundwater impacts during construction and operation of the plant will be managed, at a minimum, under ADEQ-issued National Pollutant Discharge Elimination System (NPDES) permits and the associated Stormwater Pollution Prevention Plans (SWPPP). (Exhibit JCEI-i Revised EIS, p. 2-38,2-39,2-48).Impacts are expected to be insignificant. (Id.) The plant is expected to produce approximately 530 gpm of wastewater, which will be reIeased to the Little River pursuant to an NPDES permit to be issued by ADEQ. Wastewater releases are expected to have insignificant impacts to the temperature, chemistry, and water qualily of the Little River and the Red River. (Exhibit JCH-i Revised EIS, p. 2-42,2-48). RaiZ Transportation and Coal Dust The probable environmental impacts in die vicinity of the plant rail Iines are expected to be insignificant. SWEPCO will be using state-of-the-art rail cars and operation and maintenance procedures at the plant. Since coal will be unloaded using a rotary dump process, the rail cars carrying coal to the plant will be of aluminum tub Docket NO.06-154-U OrderNo. 11 Page 49 of 76 construction, rather than bottom dump designs, which dlminimize coal dust hgitive emissions and leakage during transit. (Exhibit JCH-x Revised EIS, p. 2-44;J. Hendricls Rebuttal Testimony, p. 5). Additionally, coal dust emissions from rail transpofi will be extremely low, if not immeasurable, because, the size of the coal being transported will be significantly increased from the standard 2" topsize to 4" topsize. And, the cars will be loaded from '%read loaf" style chutes at the mine which results in minimal dusting during transit. Finally, since the distance from the Wyoming PRB mines to the plant is well over 1,000 miles, due to settling, any minute amounts of dust lost during bansit is likely to occur well before the train approaches Hempstead County. (J. Hendricks Rebuttal Testimony, p. 5). Coal dust will not result in any measurable impact to the surrounding areas for the reasons stated above, but also because the traces of toxic components in coal are primarily bound within the structural matrix of the coal, meaning that coal is simiIar to many other native geologic materials whose constituents leach from the surface, at most, extremely sTowly. The evidence of record does not support st finding that any fugitive coal dust emissions will negatively impact the land or natural resources of the area. [J. Hendricks Rebuttal Testimony, p. 6). The Commission additionally notes that the coal fine dust release from the coal pile and other coal handling areas of the plant will be negligible. Fugitive emissions of coal will also be regulated by the ADEQ-issued air permit, (Exhibit JCH-i Revised EXS, p. 2-44; J. Jewel1 Redirect, p. 3079). Docket No. 06-154-U OrdcrNo. 11 Page 50 of 76 Landfill Plant design includes a Class 3N (non-commercial) landfill for disposal of fly ash and bottom ash from the steam generator, dry sorbent from the FGS system, and other non-hazardous wastes generated at the plant. The landfill cells are 25 acres each, with a maximum of ten cells planned. Each cell is designed to hoId approximately 7 years of waste production for the unit. One cell will be completed at the time of commercial operation, with the other cells to be constructed as needed. The construction and operation of the solid waste landfill will be pursuant to ADEQ- administered laws, permits and regulations. The landfill will be constructed per ADEQ requirements and will include a synthetic liner, leachate collection system, and groundwater monitoring wells to ensure protection of the groundwater resources near this site. (Exhibit JCH-1 Revised EIS, p. 1-16). While mercury is known to exist in fly ash and FGD material which wilI be deposited in the on-site landfill, studies have shown that mercury releases from these products at extremely low levels, (Exhibit JCEI-i Revised EIS, p. 2-46; J. Jewel1 Re- direct Testimony, Tr. 2460; SWPCO Hearing Exhibit No. 6). Given these extremely low leachate levels along with the groundwater protection measures to be utilized in the landfill design (liner, leachate collection system, and groundwater monitoring wells), impacts to groundwater from release of mercury during landfill operation will be negligible, (Exhibit JCH-r Revised EIS, p. 2-46). Due to the ADEQ permitting requirements and SWEPCO's planned mitigation measures the Commission finds that the adverse environmental impact fiom the Docket NO.06-154-U OrderNo. IT Page 5 I of 76 construction and operation of the landfill to the air, water, and ecology is expected to be minimal and, therefore, acceptable. Wetlands Expected impacts of proposed conshuction of the plant to wetlands and water resources on the plant property will be small, including the filling of an ephemeral tributary channel to Bridge Creek on the site property, addition of approximately 50 acres of manmade ponds to the site [each will meet required standards for liners), the addition of bridge crossings over Bridge Creek, localized channel modification and potential temporary water quality changes associated with the water intake, and elimination of about 8 to IO acres of potential wetlands. (Exhibit JCH-1 Revised EIS, p. 3-5; G. Tucker Rebuttal Testimony, p. 7-9; Exhibit JCH-6 to Additional Supplemental Testimony). Rail spur construction or rail upgrading has the potential for minimal localized impacts to streams and/or wetlands along the route, (Exhibit JCH-i Revised EXS, p. 2-3,2-4;G. Tucker Rebuttal Testimony, p.8). Any impacts to jurisdictional waters, including wetlands, from the plant construction and operation will be permitted and mitigated through the jurisdiction of the United States Army Corps of Engineers and its duly promulgated rules, regulations and permits. (Exhibit JCH-1 Revised EIS, p. S-5, 2-4; J. Hendricks Additional Supplemental Testimony, p. 8-10). There are no anticipated wetTands impacts from off-site activities, including the potential upgrade and use of the Kiamichi Rail Line. (G. Tucker Rebuttal Testimony, p. 8, M. Bader Rebuttal Testimony, p. 7). Docket NO.06-154-U OrdcrNo. 11 Page 52 of 76 Analysis of expected air emissions from the plant indicate that no adverse impacts to water or ecological resources are expected to result from those emissions. (Exhibit JCH-1 Revised EIS, p. 2-94; J. Jewel1 Rebuttal Testimony, p. 7; G. Tucker Rebuttal Testimony, p. 7,25). Eco losical Resources: The impact to the ecological resources on the plant property will be minor. The probable impacts will be limited to filling of about 8 to io acres of degraded Section 404 wetlands [including minimal localized impacts to streams and/or wetlands along the rail spur route), mitigated impacts to one small area of highly degraded blackland prairie habitat, and potential minor impacts to small areas that support the plant species American cupscale, which is not a federally listed species but a peripheral species of interest at the state level and which in the last survey was not found on the property. (G, Tucker Rebuttal Testimony, p. 7;Exhilit JCH-i Revised EIS, p. 2-97). The impacts of physical activities on the plant properw to area ecological resources, such as the Little River Bottoms, including Grassy Lake, will be insignificant, if not immeasurable. Ecological resource values of the plant property have been largely destroyed from past land management activities, Furthermore, almost all of the plant propem is effectively buffered from contact relationships with the Little River Bottoms and other areas to the north and west. (G. Tucker Rebuttal Testimony, p. 7-8, 25; G. Tucker Commission Questions, Tr. 2678 - 2679; Exhibit JCH-I Revised EIS, p. 2-97). At the coal-fired Flint Creek, White Bluff and Independence Plants, the coal car traffic has not been shown to have any adverse environmental effect on-site or to area Docket No. ob-154-U OrderNo. 11 Page 53 of76 resources. (G. Tucker Commission Questions, Tr. 2678 - 2679, 2684 - 2685; T. Stanfill Commission Questions, Tr. 2706 - 2707). Coal dust from these plants has also not been shown to be of concern. (Id.) With regard to the impact on ducks, the Thompson study of 1978 (Intervenors’ Hearing Exhibit #g), states that a tenth of a percent or less of duck mortaliv is caused by striking wires nationwide yet in many areas, hunting mortaliw is in the 20 to 30 percent range of duck populations. (R. Reid Re-direct examination, Tr. 1859). Therefore, based upon the Thompson Study and the evidence presented, the Commission finds that the Intervenors’ concern regarding duck rnorta1it-y resulting from striking transmission wires is minimal as compared with the impact of hunters shooting duclcs on the Intervenor’s property. If the Kiamichi Rail Line is used to transport coal to the coal plant, the impacts to area ecological resources from possible maintenance to and use of the Kiamichi Rail Line will be insignificant. [G.Tucker Rebuttal Testimony, p. 8-9,23; G. Tucker Commission Questions, Tr. 2684). If used, the Rail Line improvements will be made as routine and lowimpact maintenance activities. (M. Bader Rebuttal Testimony, p. 7-8). Noise and vibration from possibIe use of the Kiarnichi Rail Line is also expected to pose only an insignificant disruption to area wildlife resources. (G.Tucker Rebuttal Testimony, p. 8, 24-25; G. Tucker Commission Questions, Tr, 2685 - 2686). However, the Commission, at this time, will defer a final ruling on SWEPCO’s request to use the Kiamichi for the purpose of transporting coal to the proposed cod plant. As conditioned hereinafter, SWEPCO may file a subsequent application requesting approval of this Cornmission to use the Kiamichi for coal transport. If SWEPCO elects Docket No. 06-154-U OrderNo. 11 Page 54 of 76 to file such application the Commission’s decision thereon. will depend upon the environmental and economic evidence presented at that time. Land Use The nature of the probable impact on land use will be the conversion of land from primarily a site of commercial pine plantations to one of generation and transmission of electric power. Other land use impacts to the area include increased highway trafic during construction and operation of the plant, road relocation and consfxuction activities if a rail spur to the Union Pacific Railroad is constructed, upgrades to the Fulton Publicly Owned Treatment Works (“POTW”), and increases in mi1 traffic to deliver coal for plant operation. None of these probable impacts are anticipated to be significant. (Exhibit JCH-i Revised EIS, p. 2-107). Park and Recreational Areas Located within fifteen miles of the plant property are the Little River Wildlife Management Area YWMA”), the Bois $Arc WMA, the Rick Bvans/Grandview Prairie WMA, the Nacatoch Ravines Natural Area, which is adjacent to the northwest boundary the Project property, Millwood State Park and other recreation areas on Milhood Lake. (Exhibit JCH-1 Revised EIS, p. 2-83). Also in the vicinity of the plant are the Little River Bottoms, which includes the approximately 18,000 acres owned by various Intervenors in this matter. No credible evidence has been provided that demonstrates with scientific validity or certainty that the plant will have a measurable impact on the recreational, natural, historic, or scenic values of these nearby areas. (Exhibit JCH-I Revised EIS, p. 2-97; G. Tucker Rebuttal Testimony, p. 26; J* Jewel1 Rebuttal Testimony, p. 9). Docket No. 06-1544 OrderNo. 11 Page 55 of 76 Accordingly, the Commission finds the probable environmental impact in this regard will be minimal. However, as discussed below, the plant will represent a change to the local landscape, altering the viewsheds from some areas in the plant vicinity. (Exhibit JCH-1 Revised EXS, p. 2-124). Socioeconomic Resources: Cultural Resources As part of the Corps of Engineers’ permitting process for impacts to jurisdictional waters (Sections IO and 404 of the CIean Water Act), SWEPCO states that it has and will continue to conduct surveys for cultural resources in the areas potentially affected by the plant and its ancillary activities pursuant to Section 106 of the National Historic Presewation Act. (Exhibit JCH-i Revised EIS, p. 2-108; J. Hendricks Additional SuppTemental Tes’cimony, p, 9; Exhibit JCH-2 to Additional Supplemental Testimony; J. Hendricks Commissioners Questions, Tr. 2438 - 240). Only one site eligible for the National Register of Historic Places has been documented thus far in the cultural resources review process. Taking into consideration SWEPCO’s proposed mitigation measures, the Corps of Engineers has determined that the plant will have no adverse effect on the archeological site. (J. Hendriclrs Additional Supplemental Testimony, p. 9; Exhibit JCH-2 to Additional supplemental Testimony; J. Hendricks Commissioners Questions, Tr. 2438 - 2440). Due to Section 106 review process, the plant should have no significant, unmitigated impacts to historic properties. (Id; Exhibit JCH-r Revised EIS, p. 2-125). Noise Docket NO.06-154-U OrderNo. 11 Page 56 of76 Construction and operation of the plant will have a minimal, but unavoidable, impact on local noise levels. (JCH-1 Revised EIS, p. S-7; J. Hendricks Commission Questions, Tr. 2414). SWEPCO has committed to work with area residents to determine if there are negative impacts from the noise and then implement mitigation steps to eliminate the impacts as possible. (J, Hendricla Commission Questions, Tr. Aesthetics There will be short-term visual impacts from construction activities as well as minor visual impacts from light associated with the plant operation. (JCH-1 Revised EIS, p. 2-126). The 643-foot stack will be visible from nearby areas. The visual effect of the plant and the stack 1411 vary by the observer's location, but the effect should be minimal, because much of the area surrounding the proposed plant is forested, within which views of the plant and stack will be blocked. Elsewhere, at most locations, the line of sight to the plant and stack will be blocked by the presence of intervening terrain, vegetation, structures and other obstacles, depending on their size and proximity in the direction to the plant, (JCH-1 Revised EIS, p. 2-124; J. Jewel1 Rebuttal Testimony, p. 13). (41 The Facilitu Represents and Acceptable Adverse Environmental Impact, Considerinn the State o fAuailable Technolow+the Requirements of the Customers uf the Applicant for Utilitu Swvice. The Naiure and Economics of the Proposal and The Various Alternatives, ifanu. and Other Pertinent Considerations: Docket: No. ob-154-U OrdcrNo. 11 Page 57 of 76 Wet us. Dt’u FGD Scrubber Technolomi Extensive evidence was presented on the relative merits of wet and dry FGD technologies. The evidence showed that a small incremental benefit to sulfur dioxide removal from a wet FGD system is outweighed by the additional adverse environment effects and additional cost of the wet process. Although the CECPN statute provides this Commission with the authoriv to place conditions upon granting a CECPN permit, this Commission finds that the issue as to whether the Turk plant should be required to utilize the wet or dry FGB technology would best be decided by ADEQ. There€ore, if ADEQ finds that the plant should be designed with a wet or a dry PGD system the Commission finds either to be deemed acceptable. Merc u rzi Emission Contru 1 Given that the plant is designed with state of the art technology for air emission control, that any ADEQ-issued air permit for the plant will require mercury emission offsets, that the total mercury deposition to areas in the viciniof of the plant will decrease due to the CIear Air Interstate Rule (TAIR”)and the Clean Air Mercury Rule (“CAMR”),that the plant’s mercury contributions are infinitesimal and essentially immeasurable as compared to the amount modeled to already deposit in the local area, that according to EPA’s risk analysis protocols, there will be no increase in the area’s heakh risk from mercury deposition from the plant, and that SWEPCO has committed to a pre and post-operational mercury study, the Commission finds that the projected mercury emissions from the plant represent an acceptable adverse environmental impact. Docket No. 06-154-U OrderNo. 11 Page 58 of76 Caney Creek Class IArea Given that any impacts within the Caney Creek Class I Area from the plant will be fully reviewed and considered by the ADEQ as part of its air permit process and that the extensive modeling conducted as part of that permit process determined that under realistic weather and atmospheric conditions the plant’s impacts within the Caney Creek Class I Area are insignificant, Therefore, the Commission finds that the impact from the plant‘s air emissions on the Caney Creek Class I Area is acceptable. C02 Emissions Given that there are no known local environmental impacts of carbon dioxide emissions (carbon emissions are a global issue], that the plant’s expected carbon emissions are miniscule relative to nationwide and global rates, that there are currently no regulatory programs that regulate carbon dioxide and other greenhouse gas emissions from electric utilities in the United States, and in consideration of the immature state of technology to control carbon emissions, the Commission finds that the possible adverse environmental impacts from the plant’s carbon emissions are acceptable. Water The water needs of the plant will be provided through a contract with the Southwest Arkansas Water District (“SAW”) for supplemental (low flow) releases from Millwood Lake and no credible adverse environmental impact has been identified from either the releases or the plant’s withdrawals. Therefore, the Docket NO. 06-154-U OrderNo. 11 Page 59 of 76 Commission finds that the environmental impacts, if any, associated with the plant’s water use are acceptable. No noteworthy issues or adverse impacts have been identified with the plant’s wastewater system or water discharges; the environmental impacts, if any, of that aspect of the plant’s construction and operation are deemed acceptable. A11 other probable adverse environmental impacts of the proposed facility (not othenvise herein discussed) represent acceptable environmental impacts considering the state of available technology, the requirements of the customers of SWEPCO for the utility service, the nature and economics of the proposal and the various alternatives, and other pertinent considerations. (5) The Nature of the Probable Economic Impact of the Facilitu: (a) The Estimated Cost of the Faditti SWEPCO’s ownership share of the plant will be 73% or approximately 438 MW. Three other parties have given notices of intent to participate as follows: Oldahoma Municipal Power Authority (OMPA) (7% or 42 JNW); Northeast Texas Electric Cooperative Xnc, (NTEC) (8% or 48 MW); and Arkansas Electric Cooperative Corporation (AECC) (12% or 72 MW). SWEPCO will be the project manager and operator of the Turk plant and the co-owners will pay their share of the plant’s costs. (V. McCdon-Allen Direct Testimony, p. 9). The total estimated direct capital cost of the plant is approximately $1.344 billion, of which SWEPCO’s 73% share is approximately $986 million. SWEPCO estimates $136 million of transmission investment will be necessary to bring the plant on line, resulting in a total investment by SWEPCO of $1.122 billion. The estimated amount of allowance Docket No. 06-154-U OrderNo. 11 Page 60 of76 for funds used during construction (AFUDC) on SWEPCO’s investment is approximately $231 million for the generating plant, and approximately $21 million for the transmission facilities, for an overall total cost to SWEPCO of approximately $1.374 billion. (R. Hawkins Direct Testimony, pp. 6,7; J. Kobyra Supplemental Testimony, p. 4). Since the filing of the Application in this docket, the estimated cost of the plant has increased approximately $3 milIion due to a scope change to add an Activated Carbon Injection (ACI) system for enhanced mercury control. This system is necessary in order for the proposed faciliv to comply with the May 2006 New Source Performance Standards for mercury emissions set forth by the EPA. Xn addition, it is anticipated that SWEPCO will select and procure spares for the critical plant equipment whose failure would result in a prolonged plant outage while awaiting the manufacture of unique or long lead materials. The cost of these parts is expected to be in the range of $20 to $30 million. (J. Kobyra Supplemental Testimony, p. 5). Approximately 83% the estimated project cost (7% of the project cost relates to Owner’s costs) is currently under contract, of which, go% is on a firm price basis with some aspects subject to escalation. (JXobyra Supplemental Testimony, p. 6). (b] The Economic Impact on the Applicant The construction costs of the proposed Turk Plant and associated transmission facilities tvill be financed with (1) short-term borrowings, (2) long-term debt, (3) retained earnings through dividend reductions, and [4) in addition to the foregone payment of dividends during portions of the construction phase, equity contributions from the Company’s parent, UP. (R. Hawkins Direct Testimony;-p, 7). Docket NO.06-154-U OrderNo. 11 Page 61 of 76 Currently, SWEPCO’s senior unsecured debt is rated Baal by Moody’s Investors Service, BBB by Standard & Poor’s, and A- by Fitch Ratings. SWEPCO’s financial analysis indicates that the construction of all three long term resources (peaking, intermediate and baseload) will cause SWEPCO’s financial and cash flow ratios to decline from the upper end of the range of the credit rating guidelines to the lower end or below the lower end ofthat: range. (R. Hawkins Direct Tedmony, pp. 16-18). In order to maintain appropriate financial ratios, SWBPCO plans to receive equity contributions from AEP, as well as retain earnings by reducing or eliminating the amount of dividends that it contributes to AEP at various times during the construction phase. SWEPCO also currently anticipates filing rate cases by 2008 after the completion of the pealcing units, and in 2011 after the completion of the Turk Plant. SWEPCO also states that it will seek approval from this Commission to currently recover the carrying cost on CWIP on the intermediate and baseload facilities in a 2008 rate case. (R. Hawlhs Direct Testimony, p. 14). The Company anticipates the need for $618 million of additional equity (representing approximately 45% of the total SWEPCO plant: and transmission costs) to maintain a reasonable capital structure. The Company also anticipates the need for $756 million of additional debt (representing approximately 55% of the total SWEPCO plant and transmission costs) to finance the project. The $1.374 billion total project cost, including the associated transmission costs, and inclusive of AFUDC through the date the plant is recorded as plant in service, will constitute an increase to SWEPCO‘stotal assets of approximately 46% and an increase of 98% to SWEPCO’s rate base. (R. Hawkins Direct Testimony, p. 21). Docket NO.06-154-U OrderNo. 11 Pagc 62 of 76 In order to assess the economic impact of the proposed facility, Staff requested that SWEPCO update its 2005 IRP analysis with current information and conduct additional analysis using a range of Con price assumptions and energy efficiency assumptions. The assumptions regarding COT.price trajectories and energy efficiency were developed by Staffs consultant, Synapse Energy Economics (“Synapse”).(C. Cotten Direct Testimony, p. 26). CO1 currently is not regulated, but Staff, SWEPCO, and Interveners’ witnesses generally agree that the United States Congress is expected to enact legislation to control C02 emissions at some point: in the future., These regulations could be via a federal carbon tax or a cap-and-trade system similar to regulation now in place for sulfur dioxide, nitrogen oxide and mercury. (D.Schlissel Cross Examination, Tr. 3540,3574; B. Braine Cross Examinaeon, Tr. 498). SWPCO’s 2005 IRP was developed using the Company’s Strategist model. Staff requested that SWEPCO rerun this model using updated capital costs and the assumed C02 prices and energy efficiency assumptions developed by Synapse. The new runs compared hypothetical combined cycle and combustion turbine natural gas units to the Turk Plant, and various energy efficiency scenarios, to produce an “optimized system expansion plan. The results of the modeling runs using the Synapse assumptions are set forth in the direct testimony of Staff witness Clark Cotten. (C. Cotten Direct Testimony, p. 26). The Commission finds that it is reasonable to consider the potential cost of future CO1 regulation, and commends Staff on its effort to quantify the economic impact of Docket NO.06-154-U Order No. 11 Page 63 of 76 such regulation. However, the extent to which Congress will regulate C02emissions, and when such regulation will be implemented, is presenfiy unknown and speculative, While witnesses for Staff and SWEPCO agree that any reguIation enacted by Congress will be reasonable, and will not likely be so stringent as to adversely affect the nation’s economy or jeopardize our energy security (ID. Schlissel Cross Examination, Tr. 3535-3538; Braine Supplemental Testimony, p.5), much remains to be learned before assumptions about the hhre cost of C02 regulation can serve as a firm basis for evaluating the economic impact on generating facilities. The future cost of CO1 regulation cannot be known with any certainty until Congress enacts legislation which defines the target for emissions reductions and the implementation date of regulation. Furthermore, the ~vit.nessesfor SWEPCO and Staff agreed that the level of COz allowance prices will be greatly affected by whether legislation includes provisions for safe5 valve prices, offsets, and allowance allocations to new and existing plants. None of these issues have been resolved by Congress, and yet each will have a significant impact on the cost of C02 regulation. (D. Schlissel Cross Examination, Tr. 3543-3544,3582-3583). In fact, a number of bills have been proposed in Congress with no proposal passing both the U.S. House of Representative and the V.S. Senate, Clearly, any estimate of CO1 allowance prices based on what we know today 1411 have a significant margin of error. Finally, the witnesses agreed that technological innovation can be expected to lessen the cost of Concompliance costs. For instance, once carbon capture technology is commercially available there will be a point at which the level of COa allowance prices can be expected to make it more economic to install carbon capture equipment. At that Docket No. ob-1544 OrdcrNo. 11 Page 64 of 76 price point, future C02allowance prices will be capped. (D.Schlissel Cross Examination, Tr. 3570-35721. The Stwtegist modeling runs which incorporated a range of assumptions regarding future CO, alloivance prices yielded total production cost differences among the various scenarios over the 25-year study period of only a few percentage points. As Mr. Cotten noted, “differences among the scenarios analyzed are not such that a clear winner emerges”. (C. Cotten Direct Testimony, pp. 26,28). Given the substantial uncertainw regarding legislation, if any, Congress may enact and the level of C02 allowance prices that may result, the Commission finds that the margin of error in the Synapse COn allowance price assumptions (particularly when combined with assumptions regarding Tong-term commodity prices and capital costs) is likely greater than the differences in the modeling runs which are based on those assumptions. Accordingly, such evidence does not offer a sound basis for decision in this case. The Commission finds that the economic impact of the proposed facility on SWEPCO will be significant but manageable. The parties appear to agree that future COz regulation will be reasonable, and will not be so stringent as to adversely affect the nation’s economy or jeopardize our energy securiv. This country has an abundant supply of coal that is readily available for baseload electric generation at relatively stable prices. On the other hand, natural gas, while well-suited for peaking and intermediate generation, has become much less desirable as a he1 for baseload generation.because of price volatility as a result of greater demand and decreasing supply. In summary, the Commission finds that coal-fired generation using ultra-supercritical pulverized coal Docket NO.06-154-U OrderNo. 11 Page 65 of 76 technology is a reasonable solution to the baseload electriciv needs of SWEPCO’s customers. The Commission finds that the use of coal-fired baseload generation is even more reasonable when considering that the coal-fired plant proposed in this case is in addition to other SWEPCO-owned natural gas-fired peaker and intermediate generation facilities. As stated supra, the Commission finds that SWEPCO’s attempt to diversify its generation portfolio is sound public policy and in the public interest. (e) The Economic Impact on the Local Communiiv Where the Facilitu is to be Located In order to determine the economic impact of the plant on the local community, SWEPCO requested the Louisiana State University, Center for Business and Economic Research, to conduct an economic impact analysis of the project. The analysis determined that a total of 395 new jobs (111 direct and 284 indirect) will be created once the plant is operational, and those jobs will generate $9 million of permanent new earnings annualIy. The analysis determined that 2,568 direct and indirect temporary jobs will be created during construction, and those jobs will generate $887 million in direct and indirect earnings. In addition, $38.5 million in state and county sales and use taxes wilI be generated during construction, and $3.9 million in annual property taxes 1411 be paid to relevant taxing authorities once the plant is operational. (V. McCelIon- Allen Direct Testimony, Exhibit VMA-2). The Commission finds that the Turk Plant will bring significant direct and indirect economic benefits to Hempstead Coun’cy and the surrounding areas. Docket No. 06-154-U OrderNo. 11 Page 66 of 76 (d) The Economic Impact on Enerw Costs to Consumers Assuming new rates went into effect with the first full year of commercia1 operation of the Turk Plant, which is assumed to be 2012, the incremental effect of adding this new basdoad power plant to SWEPCO’s rate base would be an increase in base rates of approximately $11.95 per month to an Arkansas residential customer using 1,000 kWh.21 The incremental effect of adding the Turk Plant would decrease SWEPCO’s incremental production costs (fuel and purchased power) by approximately ($3.45) per month to an Arkansas residential customer using 1,000 lrwh. When the base rate increase is offset by the reduced incremental production costs, the net impact would be an increase of approximately $8.51 per month to an Arkansas residential customer using 1,000 kwh. (D. Moncrief Direct Testimony, p. 8). The combined effect of all three projects (peaking, intermediate and baseload) would be an increase in base rates of approximately $15.91 per month to an Arkansas residential customer using 1,000 kwh. The combined effect would decrease SWEPCO’s incremental production costs by approximately ($5.51) per month to an Arkansas residential customer using 1,000 kWh. The combined net impact would be an increase of approximately $10.40 per month to an Arkansas residential customer using 1,000 kWh. (D.Moncrief Direct Testimony, pp. 8,g). The annual revenue requirement for the Turk Plant is approximately $223.5 million for base rates, offset by an annual revenue requirement of approximately ($84.1) million of Incremental Production Costs, for a net annual revenue requirement of Docket No. 06-154-U OrdcrNo. 11 Page 67 of76 approximately $139.4 million. The allocation to the Arkansas jurisdiction results in an increase in net annual revenue requirement of approximately $16.7 million, which is a 5.80% increase in total rates for the first full year of commercial operation of the Turk Plant, which is assumed to be 2012. (D. Moncrief Direct Testimony, p. 9). The combined annual revenue requirement increase for the pealung, intermediate and baseload facilities is approximately $297.5 million for base rates, offset by an annual revenue requirement decrease of approximately ($133.5) million of incremental production costs, for a net annual revenue requirement increase of approximately $164.0 million. The allocation of the combined amounts to the Arkansas jurisdiction results in an increase in net annual revenue requirement of approximateIy $17.9 million, which is a 6.4% increase in total rates. (D. Moncrief Direct Testimony, p. 10). (6) The Facilifi, Financino Method Rewresenfs an Acceptable Economic Impact, Considerinq Economic Conditions and The Need for and Cost qf Additional Public Utilitw Services: SWEPCO investigated several alternative methods of financing the proposed construction, including project financing, sale-leaseback financing and operating leases, However, the costs of such alternative methods of financing are likely to be more expensive than traditional utility financing. (R. Hawldns Direct Testimony, pp. 10-12). The issuance of tax-exempt bonds is available to finance a portion of the construction of the proposed facilily, because certain solid waste disposal facility and water treatment faciliv costs qualify for tax-exempt status. Solid waste disposal 21 SWEPCO's rate impact estimates are not binding on this Commission. Actual rate impacts will depend upon the outcome of the company's next rate case. Docket No. 06-154-U OrderNo. 11 Page 68 of 76 facilities that include any property or por ion thereof used for the collection, storage, treatment, utilization, processing, or final disposal of solid waste will qua1iQ for tax- exempt financing. Environmental control costs are approximately $157 million, a portion of which will qualify for tax-exempt bonds. (R.Hawkins Direct Testimony, p. 13). SWEPCO should continue to pursue the use of tax-exempt bonds to the extent available. Otherwise, the evidence reflects that there are no alternative methods of financing the facilities which are as feasible as, or more economical than, those proposed by SWEPCO, The Commission therefore finds that the facility financing method as proposed represents an acceptable economic impact, considering economic conditions and the need for and cost of the additional public utility senices. (7) The Eneryu Eft?cienczi of the Power Production Fmiliiw Has Been Given Sic7 ni fican t We io h t in t11e Decision -Ma kin u Process: The full load heat rate for the proposed facility at average annual conditions (at 72OF) is approximately goo0 BTU/kWh. Heat rate is a measure of energy efficiency. The Tower the heat rate, the more energy is produced for a given amount of fuel consumed. The heat rate value for the Turk plant is comparable with the most efficient coal-fired units available today. The heat rate for the Turk Plant will be among the lowest of all PBR coal-fired generators in the nation, bringing fuel cost savings as well as reduced emissions. (J. Kobyra Direct Testimony, pp. 27,29-30). Based on the evidence presented, the Commission therefore finds that the energy efficiency of the proposed Turk plant has been give significant weight in the decision- making process. Docket NO.06-154-U OrdcrNo. II Page 69 of 76 (8) The Location ofthe Facilifir as Proposed Conforms to State, Renional and Local Laws: The proposed plant will be located in an unincorporated area and where no zoning restrictions exist. The EaciTiQ, as proposed, complies with applicabIe state, regional and local laws and regulations. In addition, pursuant to Ark. Code Ann. 5 23- 18-513, SWEPCO served copies of the Application in this docket on numerous state and local officials and agencies charged with enforcing applicable laws and regulations. The Company also provided Proof of Publication that public notice was published on two separate dates in the Arkansas Democrat-Gazette, a newspaper having substantial circulation in the area where the faciliv will be constructed. None of these officials or agencies has brought to the Commission’s attention any laws or regulations that will be contravened by the proposed plant. Based on the evidence presented, the Commission finds that the proposed faciliv conforms as closely as practical to applicable state, regional and local laws and regulations. In summary, the Commission finds that the proposed Turk plant is a reasonable solution to the baseload electricity needs of SWEPCO‘s customers and, for the reasons stated herein, the granting of a CECPN authorizing the construction of such facility is in the public interest, convenience and necessity. Stuff Recommendations: Staff made the following recommendations should the Commission find that the Turk Power Plant is in the public interest: Docket No. 06-154-U OrdcrNo. 11 Page 70 of 76 a. That SWEPCO should be granted a CECPN to construct and operate the 6ooMW facility; b. That SWEPCO’s ownership share of the Turk Power Plant is 40MW; c. That no additional Turk Power Plant costs be reallocated to Arkansas resulting f-rom Texas restructuring or wholesale load loss without approval of this Commission; d. That SWEPCO be directed to comply with Rule 7.01 @) and Rule 7.01 (c) of the Commission’s Rules ofPractice and Procedure by filing the required completion or delay of construction reports in Docket No. 06- 154-u; e. That SWEPCO employ an independent monitor to evaluate and explain any differences that may arise between the current budgeted costs and the actual costs incurred related to the following: (I) additions or changes in contract/project scope; (2) delays and/or suspensions of work; (3) labor rates; (4) labor productivi’cy; (5) commodity material costs; (6) the performance of the contractors; (7) changes related to permitting requirements; (8) changes in contracts/facilitiies related to supporting infrastructure including water, gas, cod delivery, transmission, interconnection, and substation costs; and (9) any other changes that impact the cost or timing of the operation of the plant; and, f. That SMPCO file the independent monitor’s construction report and analysis with the Commission in this Docket every six months during the construction period. Docket NO.06-154-U OrderNo. 11 Page 71of 76 9. That SWEPCO notify the Commission, on a monthly basis, of (1) the status of all federal and state permitting required for the facility; (2) all activities the Company has engaged in comply with the requirements of a11 state and federal agencies, that could have a material impact on construction, timing, or cost of the Turk plant; and (3) the estimated impact on construction, timing or cost of the Turk plant resulting from the action by any enti@, including but not limited to state and federal agencies. In addition, Staff recommended that the Commission make no finding of value for ratemalring purposes in this proceeding. (C. Cotten Direct Testimony, pp. 42-43; Surrebuttal Testimony, p. 3). The Commission finds that Staff’s recommendations are reasonable and appropriate. The Commission’s Ruling and Conditions ImDosed on the Requested CECPN Based upon the above findings, the Commission reaches the following conclusions with regard to the proposed project: The Commission has jurisdiction of the subject matter and the parties in this proceeding pursuant to Act 164 of 1973, as amended, codified as Ark. Code Ann. 9 23- 18-501,et seq, The proposed Turk plant is needed to meet the Toad and energy demands of the SWEPCO’s customers in 2011. The faciliv will serve the public interest, convenience and necessiw. Docket: NO.06-154-U OrderNo. 11 Page 72 of 76 Considering the nature of the environmental impact as found herein, the faciliq represents an acceptable adverse environmental impact, considering the state of available technology, requirements of the customers of SWEPCO for utiIity service, the nature and economics of the proposal and the various alternatives, if any, and other pertinent considerations. Based upon the nature and extent of the probable economic impact as found herein, the facility financing method as proposed represents an acceptable economic impact, considering economic conditions and the need for and cost of additional pubIic utility seMces. The energy efficiency of the power production facility has been given significant weight in the decision making process, and Powder River Basin lowsulfur coal is the optimal fuel choice for the proposed plant based upon current laws and baseload technologies and the sound public policy behind diversiiy of generation resources. The location of the facility as proposed conforms to all applicable state, regional and local laws. Ark. Code Ann. §23-18-503(5) defines major utility faciliw and differentiates between an electric generating plant and associated transportation and storage facilities for he1 and other facilities designed for or capable of operation of 50 megawatts or more and an electric transmission line and associated facilities, including substations, of a design voltage of 100 kV or more extending a distance of more than io miles, or of a design voltage of 170 kV or more, extending a distance of more than I mile. Docket NO. 06-154-U OrderNo. 11 Page 73 of76 Arkansas law provides that statutes should be read as a whole, with each section considered in “the light of every other section, and the objects and purposes of the Act are to be considered.” Shaw v. Shaw, 337 Ark. 530, 532,989 S.W.zd 919,geo (1999); Thomas v. Cornell, 316 Ark. 366, 370,872 S.W.2d 370,372 (1994). The Utili5 Facility Environmental and Economic Protection Act does not require that a generating plant and transmission lines should have a single combined environmental impact statement, nor does it require a single proceeding with a single EIS. This Commission has not interpreted the CECPN statute to require a single proceeding with a single EIS. Indeed, since the enactment of the CECPN law in 1973, there has not been a single combined application for a CECPN that included both an electric generation facilily and associated transmission lines. It is a well accepted and recognized principle of administrative law that great deference is given to an agency’s interpretation of the laws that it enforces and that statutory construction favors the agency’s interpretation. See Arkansas Power & Light Co, v. Arkansas Public Service Commission, 14 P.U.R. 3d 38, 226 Ark. 225, 289 S.W.2d 668 (1956). Therefore, the CECPN as requested by SWEPCO in this Docket is hereby granted subject to SWEPCO‘s acceptance of and compliance with the following conditions: 1. The CECPN is conditioned such that no transmission lines shall be constructed across the Nacatoch Ravines National Area, the Lide River and Bois‘d Arc Wildlife Management Area, recorded archeohgical sites, property owned by the Nature Conservancy, the high ecological value Grassy Lake Area, or along the Kiamichi Railroad. This condition is designed to minimize environmental impacts. Docket NO.06-154-U OrderNo. 11 Page 74 of 76 2. Subsequent Commission docket matkers relating to the Turk plants transmission Iine corridor shall be filed with the Commission only after independent review and input is provided by the SPP in order to assure that the transmission lines not only move the power from Turk but improve congestion in the area. SPP shall participate in subsequent transmission line docket matters related to the Turk plant. 3. The CECPN is conditioned upon SWEPCO obtaining and complying with all necessary permits required by the U.S. Department of Environmental Protection, Arkansas Department of Environmental Quality, and the U.S. Army Corp of Engineers at the times during construction when such permits are required. In particular, but not limited to a National Pollutant Discharge Elimination System (NPDES) storm water construction permit, a NPDES discharge permit, a solid waste landfill permit, an air permit, a Section 401 water quality certification and a Section 404 permit. 4. With regard to the construction of the Turk plant, SWEPCO is directed to cooperate with the Department of Arkansas Heritage pursuant to Section 106 of the National Historic Preservation Act of 1966, as amended and implemented by the Advisoiy Council on Historic Preservation set forth in 36 CFR Part 800. 5. The CECPN is conditioned upon the requirement that the Kiamichi Railroad shaIl not be used for coal shipments absent further application to and approvd of this Commission. If SWEPCO should so apply, the Intervenors shall be notified as required by the CECPN statute. 6. The CECPN is conditioned upon the requirement that an independent monitor be hired by SWEPCO during construction to provide the Commission and staff Docket NO. Ob-154-U OrderNo. 11 Pagc 75 of76 with construction progress reports every six months as recommended by the Staff. The independent monitor shall be approved by the Commission with the input of Staff* 7. The CECPN is conditioned upon the requirement that Arkansas ratepayers shall be held financially harmless from any adverse impact related to the disapproval of this plant by the Texas and/or Louisiana public utility commissions. 8. The CECPN is conditioned upon the requirement that Arkansas ratepayers shall be held financially harmless from any adverse impact related to the Turk plant not being fully subscribed to by other utilities or wholesale customers. 9. The CECPN is conditioned upon this Commission’s right of first refusal to acquire for the use and benefit of SWEPCO‘s Arkansas customers any portion of the Turk plant capacity not accepted by or which may in the future be released by any other jurisdiction or wholesale customer. IO. The CECPN is further conditioned upon and subject to the jurisdiction of this Commission to conduct htwe prudence reviews and to make any appropriate prudence adjustments regarding any cost overruns associated with the construction and operation of the Turk plant: beyond the costs as estimated in this proceeding by SWEPCO or AEP. 11. The CECPN is further conditioned on SWEPCO conducting a baseline mercuiy study and periodic update studies thereafter over the life of the plant in order to properly monitor mercury levels. These mercury studies shall be performed in cooperation with the Staff and 14th ADEQ. Further, although there are presently no regulatory requirements to sequestrate C02 emissions, SWEPCO shall annually perform an updated analysis of the technical and economic feasibilit-y of Con recapture and Docket No. 06-154-U OrderNo. 11 Page 76 of 76 sequestration at the plant. If sequestration is determined to be technically and economically feasible by SWEPCO and this Commission, SWEPCO shall be prepared to install such technology. 12. The CECPN is further conditioned upon SWEPCO's compliance with each of Staffs recommendations set forth hereinabove, BY ORDER OF THE COMMISSION. This 21d day of November, 2007. Pkil Suskie, Chairman Daryl E. Bassett, Commissioner Diana K. Wilson Secretary of the Commission ARKANSAS PUBLIC SERVICE COMMISSION IN THE MATTER OF THE APPLICATION OF 1 SOUTHWESTERN ELECTRIC POWER COMPANY ) FORA CERTIFICATE OF ENVIRONMENTAL 1 COMPATIBILITY AND PUBLIC NEED FOR THE ) DOCJCET NO. 06-154-U CONSTRUCTION, OWNERSHIP, OPERATION AND ) Concurring Opinion MAINTENANCE OF A COAL-FIRED BASELOAD ) GENERATING FACILITY IN HEMPSTEAD COU",) ARKANSAS 1 CONCURRING OPINION Paul Suskie, Chairman, concurring. My decision to grant Southwestern Electric Power Company (SWEPCO] a CECPN to construct, own, operate and maintain the 600-MW Turk Plant in Hernptead Counw, Arkansas was not an easy one. The balancing of the competing interests and the complex issues involved in this Docket made a decision very difficult. There are three main reasons for my decision. First, I am confident that the conditions placed upon SWEPCO's certificate provide reasonable restrictions upon the Turk Plant that will minimize legitimate concerns raised by the Intervenors regarding potential adverse environmental impact upon their properties.' Second, these conditions provide SWEPCO's Arkansas ratepayers sufficient protections against imprudent costs and costs relating to regulatory uncertainty. Third, the use of ultra-supercritical pulverized coal technology to generate baseload electricity is a reasonable choice considering the state of ' The tntervenars' raised a number of concerns relating to the impact on their properties. The issues that raise the most compelling concerns have been addressed with conditions set in the Commission's order. Docket NO.06-154-U Concurring Opinion of Chairman Suskie Page 2 of io available technology, the comparative cost of coal-fired and natural-gas fired generation, and SWEPCQ's stated intent to diversify its new generation portfolio. I offer this Concurring Opinion to provide additional explanation of the third point above and to provide thoughts on the approach the United States and the world should take in adopting a reasonable, economy-wide, policy to address greenhouse gas (GHG} emissions and global warming concerns. THE CHOICE OF COAL SWPCO's selection of coal as the fuel for the Turk Plant was a topic of great debate throughout this Docket. This debate centered upon the fact that coal-fired generating plants emit more pollution -- including COz -- than natural gas-fired plants and upon concerns regarding potential increases in coal-fired generation costs due to possibTe US. Government restrictions of C02 emissions. The use of coal at the Turk Plant essentially boils down to the economics of coal and coal's environmental impact. In Docket No, 06-024-U,this Commission found that SWEPCO was in need of up to 1600-MW of new generation -- 500-MW of peaking generation, 500-MW of intermediate generation, and 600-MW of baseload generation. The 600-MW of baseload generation is needed by 2011. The Turk Plant is proposed to meet the 600-MW baseload need. Because the Turk Plant will be used for baseload generation, the evidence in this Docket is very dear that SWEPCO had only two options to meet its Docket NO.06-154-U Concurring Opinion of Chairman Suskie Page 3 of IO baseload needs -- coal or natural gas.” Nuclear power was not an option due to the regulatory time delays and financing uncertainties. A nuclear plant cannot be built in time to meet SWEPCO’s 2011 baseload needs, Renewable generation such as wind, solar, and hydro were not options. Because renewable generation options have limited potential, are intermittent in nature and current technology does not make electric power storage viable, these technologies cannot be used for baseload purposes. Unfornnately, energy efficiency and demand response initiatives cannot meet this 600-MW need by 2011. In response to this Commission’s order for each investor-owned utility to file a Quick Start Program to begin energy eficiency programs in Arlansas,3 SWEPCO filed a Quick Start proposal that projects to save only a small fraction of its generation needs.4 SWEPCO has stated a policy and a continued intent to maintain long-term wholesale contracts. It has not been demonstrated in this record that this policy is economically unsound or contrary to public policy. Requiring SWEPCO to end long-standing contractual relationships with its wholesale customers could have negative repercussions and create uncertainty for SWEPCO’s wholesak customers, including Arkansas’s municipally owned electric u’cilities.5 * It is well established in the electricity industFy that the only viable fuel options for basetoad electric generation are coal, natural gas, and nuclear. In Docket No. 06-00443,this Commission ordered all investor owned utilities to submit Quick Start programs to swiftly implement energy efficiency programs in Arkansas. 4 SWEPCO’s Quick Start energy efficiency programs that have been approved by this Cornmission are expected to save just 12-MW of peak demand over the 27 months ending in December 2009, including 5 MW of Demand Response with its Emergency Load Management Standard Offer Program (ELMSOP). See Exhibits BGB-1 through BG8-6 to the testimony of SWEPCO’s Billy G. Berny in Docket No. 07-082-TF. A number of Arkansas cities have municipally owned electric utilities. Of these, SWEPCO currently sells power at wholesale to Bentonville and Siloam Springs. Docket NO.06-154-U Concurring Opinion of Chairman Suskie Page 4 of io In sum, owing to SWEPCO’s limited options in meeting its baseload needs, the choice of an ultra-supercritical pulverized coal generating plant is reasonable and acceptable because of its cost comparison with natural gas, because it provides diversity to SWEPCO’s portfolio of new generation, and because of the current state of technology. Coal vs. Natural Gas Generation Costs It is unclear whether SWEPCO’s selection of coal instead of natural gas for the Turk Plant will be the better economic decision due to unknown costs associated with possible CO2 regulation in the future. I agree with SWEPCO and the Commission’s General Staff that no clear winner emerges when comparing the cost of natural gas-fired vs. cod-fired generation. However, due to the unknown cost of possible C02 regulation and the dose future costs differences between coal and natural gas, I cannot find fault in SWEPCO’s decision to choose coal for economic reasons. Therefore, the use of coal is found to be economidy reasonable. Generation Diversity The economic reasonableness of coal for the Turk Plant is more apparent when considering that the approval of a cod plant will diversiQ SWEPCO’s new generation portfolio. This Commission has already found that SWEPCO was in need of new peaking, intermediate, and baseload generation. Because SWEPCO proposes natural gas-fired facilities for its peaking6 and intermediate plants7 and ‘This Cornmission approved a 332-MW peaking facitity in Docket No. 06-100-U. The peaking plant is currently online in Washington County, Arkansas. Docket NO.06-154-U Concurring Opinion of Chairman Suslcie Page 5 of io pulverized coal for its baseload Turk Plant, SWEPCO’s fuel diversiw will help to protect Arkansas ratepayers from swings in natural gas and coal prices. Consequently, I find that fuel diversity is sound public policy and that SWEPCO’s plan to diversify will contribute to price stability for ratepayers. Current State of Generation Technology Today’s state of electric generation technology provides limited options for reducing GHG and COP emissions. This is particularly true for baseload generation. Unfortunately, no commercially viable technology exists today that allows for carbon emissions from coal-fired and natural gas-fired facilities to be captured and sequestered by 2011. The research on carbon capture and storage (CCSrS) is in its infancy. Although the potential for CC&S is good, it will not likely be available for the Turk Plant by 2011. While the lack of viable CC&S technology makes today’s decision environmentally difficult, it makes the technology selected by SWEPCO for the Turk Plant more reasonable and acceptable. With regard to the local environmental impact, the evidence shows that the proposed emission control technology and the ultra-supercritical pulverized cod design are state of the art. Additionally, the record demonstrates that the local environmental impact wiIl be minimal. Particularly enlightening is the testimony before the Commission regarding the indistinguishable local environmental impact associated with Arkansas’s existing coal generating plants 7 SWEPCO is proposing a 500-MW natural gas-fired intermediate facility in Louisiana. The approval of the intermediate facility is pending before the Louisiana Pubtic Service Commission and before this Commission in Docket No. 06-120-U. Docket NO. 06-154-U Concurring Opinion of Chairman Suskie Page 6 of io that use much older technoTogy.8 In sum, the fact that the proposed Turk Plant will use state of the art technology and that the Turk Plant‘s C02 emissions will only increase the United States’ C02 emission by 6/100th of one percent (i%)9 make SWEPCO’s decision to use ultra-supercritical pulverized cod electric generation both reasonable and environmentally acceptable. AFUTURlC1 APPROACH FOR GLOBAL WARMING In his closing arguments, Counsel for Intervenors, Mr. Rick Addison, did an excellent job of advocating his clients’ position and summarizing a growing view of pulverized coal when he stated . . . “[tJhe day of pulverized coal has to end.10 ... The greenhouse gas issue is too complicated, too serious, too dangerous to deal with any further.” It‘s time to cross the bridge. We’re leaving the world of pulverized coal. ... We have to run away fiom pulverized coal. We have to reject pulverized coaL”13 I share Mr, Addison’s concerns regarding the GHG issue, However, my immediate concern as a utility regulator is what we do in the interim to meet the State of Arkansas’s and the United States’s grorj See; G. Tucker‘s answers to Commission question regarding environmental impacts at SWEPCO’s Flint Creek coal plant and Entergy Arkansas’s White Bluff and Independence County coal plants (Tr. 26782680: 2684-2687). In his closing argument, Mr. Steve Cuffman, attorne for SWEPCO articulated how the Turk Plant will only increase US. C02 emissions by 61100x of one percent (1%). He also compared the 611 0Othof a percent to a gas facility that woutd be 311 00” of one percent (I%) (Tr. 3974- 3975). ” Tr. 3904. 11 ’h.3921. 12 Id. Docket NO.06-154-U Concurring Opinion of Chairman Suslcie Page 7 of io Today’s difficult decision will be a driving force in how 1 perceive my role with this Commission in the future. The difficult task of reducing GHG emissions and addressing global warming is too complex to simply say “no” to a single pulverized coal plant or to abandon this nation’s most affordable and abundant fuel source for electricity. Considering that half of the electricity in this country is generated from coal, an expansive economy-wide approach to carbon reduction is required as opposed to a limited “just say no to coal” approach. The approach necessary to effectively address GHG emissions and global warming concerns requires national and international policies that must be economy-wide, practical, economical, reasonable, and most imporkantly, achievable. Mer today’s difficult decision, I realize more than ever, that this nation - and the world - needs comprehensive policies to transform societies to slow and reduce our GHG emissions. Reaching a solution will not be easy because no silver bullet exists. To achieve this goal effective leadership, innovation, change, intellect, and significant capital investment will be required. To be effective, a policy must address GHG emissions from all segments of our socie’cy, including both the electric and automobile industries.13 Because approximately seveniy percent of the electricilp in this nation is generated from fossil fuels, the electric industry must be a significant part of an economy-wide plan to address global warming. Combining the United States’ 13 Approximately 44% of the US.energy sectors COz emissions come from petroleum, 36% from coal, and 20% from natural gas. Source: Energy Information Administration, Department of Energy, preliminary estimates for Carbon Dioxide Emissions, May 2007. Approximately 70% of electricity in the United States is produced from fossil fuels which emit GHGs: 49% from coat, 20% from natural gas, 1.6% from Oil (Petroleum). Source, http:llwww.eia.doe.qov/neiclauickfactslquickelectric. html. Docket No. 06-154-U Concurring Opinion of Chairman Suskie Page 8 of io significant reliance on fossil fuel for its electric generation and with our ever- growing need for more electricit-y, it is clear that the electric industry must play a key role in reducing our GHG footprint. More than ever, I view my role as one to work to promote and implement policies that will provide solutions to the GHG emission challenges of the electric industry. These policies must include the recognition of conservation and energy efficiency as an energy source, significant investments in research, development, and deployment (RD&D) for new technologies, and new paradigms on both the environmental and utility sides of regdation. Consewation must be a primary part of our efforts to reduce GHG emissions. Fortunately, the marketplace today gives retai1 customers an increasing array of cost-effective options to reduce their consumption of eIectriciQ by purchasing energ efficiency products.15 Federal, state and local government must play an assertive role in implementing conservation. Stricter building codes, reductions in electric consumption by government buildings, and requiring substantial technological improvemen& in the efficiency of our electrical system will be critical to successfully implement conservation and energy efficiency. Updates to our electric system need to range from the accelerated installation of hightemperature superconductors on our transmission grid to replacing old, inefficient transformers with newer more l5 A number of new initiatives give individuals options to conserve with energy efficient product. These include efforts by Home Depot, Wal-Mart, and other retailers to promote wide-scale adoption of energy efficient technologies such as compact fluorescent lamps as replacements for incandescent light bulbs. The joint US. Dept of Energy and U.S. Environmental Protection Agency Energy Star program provides individuals and business with information about energy efficient products. Docket NO.06-154-U Concurring Opinion of Chairman Suslcie Page g of io efficient transformers. As Chairman of this Commission, I will continue to promote energy efficiency and demand response through various regulatory efforks in furtherance of the goals stated in Arkansas’s Energy Conservation Endorsement Act of ign.1G Possibly the most critical part of solving the electric industry‘s GHG emission challenge is through significant expenditure in RD&D of new technologies. Our abundance of cod has led some to call the United States the Saudi Arabia of coal. Due to this abundance, it is only logical for the United States to develop technology that will allow us to continue to use coal €or electric generation in a more environmentally-friendly manner. Whether this is achieved through CC&S or with new clean coal technologies, the continued use of coal with new technology is critical for our economy, our environment, and our nation’s energy independence. Significant RD&D in renewable energy technology is required before this nation can fully utilize our often untapped renewable resources. The technologid challenges posed by renewable generation due to its limited potential and intermittent nature can only be overcome with significant RD&D. Incentives for RD&D must become a national prioriw. Finally, a crucial piece of the solution is the implementation of new regulatory paradigms for environmental and utility regulators on both the federal and state levels. On the environmental side, this Docket has helped me recognize ’’ See; Ark. Code Ann. 5 23-3-401 et seg. Pursuant to the Act, this Commission has approved several programs designed to promote energy efficiency in Arkansas. See; APSC Dockets No. 06-004-R, 07-075-TF, 07-076-TF, 07-077-TF, 07-078-TF, 07-079-TF, 07-081-TF, 07-082-TF, 07- 083-TF, 07-084-TF and 07-085-TF. Docket NO.06-154-U Concurring Opinion of Chairman Suskie Page io of io the need for Congress to adopt C02 emission regulations sooner rather than later in a reasonable and practical manner. The continued delay in regulating carbon creates price uncertainty for ratepayers, poses serious planning challenges for utilities, raises concerns for shareholders, investors and Wall Street, forces utility regulators to make difficult decisions based upon imprecise facts, and increases risks to our environment. As for utili5 regulators, we must accept the chaIlenge to explore new ways to encourage the deployment of green technology, while promoting cost effective energy efficiency and demand response. Just as today's decision was personally difficult, the State of Arkansas, the United States and the world face a number of very difficult decisions in addressing GHG emissions and global warming. Because no silver bullet exists, reducing GHG emissions will not be easy. I am optimistic that .With the right leadership, innovation, change, and intellect brought to bear across all sectors of our economy -- accompanied by significant and prudent capital investments -- we can meet this enormous challenge by building the bridge necessary to Tower GHG emissions in a way that is economy-wide, practical, economical, reasonable, and achievable. Commissioner Bassett agrees with this Opinion. ARKANSAS PUBLIC SERVICE COMMISSION IN THE MATTER OF THE APPLICATION OF SOUTHWESTERN ELECTRIC POWER COMPANY FOR A CERTIFICATE OF ENVIRONMENTAL COMPATIBILITY AND PUBLIC NEED FOR THE CONSTRUCTION, DOCKET NO. 06-154-U OPERATION AND MAINTENANCE OF A Dissenting Opinion COAL-FIRED GENERATING FACILITY IN HEMPSTEAD COUNTY, ARKANSAS David Newbern, Special Commissioner, dissenting. Southwestern Electric Power Company (“SWEPCO”) has applied for a Certificate of Environmental Compatibility and Public Need from the Arkansas Public Service Commission (“PSC”or ccCommission’’)to build a 600-megawatt coal-fired eIectricity-generating plant in Hempstead County, Arkansas, The pIant is to be used as a “baseload’’ facility. That means that it would be a SWEPCO fundamental unit supplying power to the power grid and thus run constantIy, when available, and be supplemented by power from other, natura1 gas-powered, plants, which are also SWEPCO units, in times of peak usage, To grant the appIication the Commission must find that the construction and operation of the plant meet a number of criteria, including the foIlowing: That the faciIity represents an acceptable adverse environmental impact, considering the state of avaiIable technology, the requirements of the customers of the applicant for utility service, the nature and economics of the proposal, and the various akernatives, if any and other pertinent considerations. Ark. Code Ann. 8 23-1 8-5 19 (b) (4). During hearings which lasted eighteen days, the PSC received evidence largely devoted to determining whether the S WEPCO proposal meets that requirement. The two Commissioners who comprise the majoriv of the Commission have determined that all of the requisite criteria have been met by the application, I cannot agree. The adverse environmental impact proposed in SWEPCU’s application, accompanying documents, and oral testimony is unacceptable. It has not been shown that the requirements of its customers for utility service come close to overriding the faults in the nature and economics of the proposaI. Nor has it been shown that various akernatives - including the “no build” option -- have been given suffdent, if any, consideration. One aIternative, in particdar, that received scant attention was the potentia1 development of demand response resources such as the contrd of air conditioning loads in the residentiaI and commercial sectors in the fast- growing areas of northwest Arkansas served by SWEPCO. That resource should be pursued expeditiously, even after the certificate is granted in this case, as it can reduce the need to purchase expensive on-peak power and improve system reliabiIity and thereby delay or diminish the need for transmission upgrades, The following discussion considers the nature of the proposed plant, the economic impacts upon SWEPCO and its retail (ratepayer) customers, ecoIogica1 considerations pertinent to the site selected for the plant, and the Commission’s jurisdiction, practices, and procedures Ieading to the decision in this case I. Nutiwe of the Proposal The technology proposed in this application for burning pulverized coaI to produce the steam used to generate electricity is called CcuItra- supercritical,” as opposed to “supercritical” and “subcritical,” which are said to be Iess efficient and less clean than the “ultra-supercritical ahernative. The plant is to burn 3,285,000 tons of coal per year, or an average of 9,000 tons of coal per day. In the initial environmental impact statement ((‘EEXS’’) accompanying its application to the PSC, SWEPCO included a chart entitled “Table 2-1 -- Expected Emission Rates of the Proposed Hempstead Power Plant.” The table comprised three columns, one of which was unlabeled. The two labeled columns were “Pollutant” and “TonsrYear,” and they showed the following: 3 P 01 lut ant Ton s/Ye ar Sul fir Dioxide 2,628 Nitrogen Oxides 1,840 Carbon Monoxide 3,942 Carbon Dioxide 5.23 x lo6 Mercury 0.173 Particulates 920 VoIatile Organic Compounds 94.6 The text surrounding the table indicates that the figures were based upon “supercritica1” technology -- no figures were produced for the “UItra- supercritical” technology. In a revised EIS, the table was repeated with the same label, but the tabIe omitted the reference to carbon dioxide. One can onIy assume that the differences in amounts of pollutants to be emitted by the proposed ultra-supercritical plant wiII be little, if any, from those reveaIed in the initiaI EIS. Thus, we begin with the knowledge that, in addition to the toxic substances, including annual deposition of some 346 pounds of mercury, the 4 proposed Hempstead County plant wiIl emit 5,280,000 tons of carbon dioxide during each year of its life span, which may be thirty to fifty years, David SchlisseI, a Senior Consultant with Synapse Energy Economics, testified on behalf of the PSC Staff that there is a “genera1 consensus” among scientists that human-produced carbon dioxide is a primary cause of globaI warming. The largest source of carbon dioxide in our atmosphere is coal-fired generating plants. The statutory term “adverse environmental impact,” thus takes on a very important new meaning in this time of awakening to the fragility of the planet owing to the accelerating addition of carbon dioxide to the atmosphere, especially by the construction and continued operation of coal-fired plants, worldwide. The proposed release into the atmosphere of significant amounts of carbon dioxide is unacceptable, and that is especially so when those emissions are combined with the proposed mercury deposition and the other toxic matter to be emitted. 2. Econol7lics The PSC Staff is independent of the PSC proper. It is a party to this proceeding, and its role is to inform and advise the Commissioners with respect to SWEPCO’s application. The position taken by the Staff is that the 5 proposed application presents a “reasonable” means of satisfying SwEPCO’s need for additional baseload generating capacity by 20 11.. In reaching its recommendation that the certificate be granted, the Staff delved into the cost of the plant and the effect of the cost upon ekctricity rates to be paid by SWEPCO’s customers. SWEPCO proposes to use coal which is to be mined in Wyoming’s Powder River Basin and shipped by rail to the Hempstead site. SWPCO’S justification for the use of coal, as opposed to natural gas, for the Hempstead plant is based primariIy upon its assertion that coal is cheaper than gas and that it is preferable to use coal for the baseload and gas only for periods of high power usage beyond the capacity of the baseload generator as proposed in SWEPCO’s “integrated resource plan.” Much of the controversy, hence much of the testimony, in this proceeding involved the prospect that the United States Congress wouId act to curb carbon emissions by plants such as the one proposed here. The witnesses who testified in this case seemed to agree that any such act by the Congress would be “reasonable,” in the sense that there wouId obviously be no move to shut down the currently massive use of coal to generate electricity in the United States. Witnesses suggested, rather, that some sort of “cap and trade” system would be enacted to reduce those emissions. That 6 means that a “cap” would be pIaced upon allowable carbon emissions by power producers and that they could “trade” with each other with respect to emissions allowed i.e., if one company has a need to produce more than its aIlowance, it could purchase the privilege from another company having less need than its allowance. Legislation currently before the Congress presents a number of variations on that theme. There is also the possibiIity that Congress will simply impose a tax on carbon emissions. To the extent that there may be concern that the Congress will fail to act on this matter or that there wilI be a lengthy delay before it acts, the duty of state commissions at Ieast to maintain the status quo and not allow additional, preventable pollution is clear. In fulfilling its duty to advise the PSC, the Staff gave appropriate, special consideration to the carbon-regulatory cost likely to be added to the production of dectricity by a coal-fired baseload plant, as opposed to one using natural gas. The Staff required SWEPCO to produce comparison information. In response, SWEPCO produced a chart of system-expansion model runs based on assumptions provided by David Schlissel of Synapse Energy Economics, Inc.(L‘Synapse’’). Senior Engineer Clark D. Cotton testified on behalf of the Staff that, “[tJhe new runs compared combined cycle units, combustion turbines, coal ([the Hempstead] Power Plant) and, in 7 the DSM [“demand-side management”] cases, energy efficiency to produce an optimized system expansion pIan,” (See the pre-filed “Confidential Direct Testimony of Clark D. Cotton,” p. 26,) It is sufficient to report here that the Hempstead Plan was projected to be more costly than a gas-fired plan in each instance modeled by Synapse except one. It must also be pointed out, however, that the differences among the totals for each type model were small, ranging from -.6 1% to 2.87 %. Mr. Cotton testified that there was, therefore, “no dear winner.” Presumably, it is on the basis of that finding that the Staff condudes that the Hempstead Plan is “reasonable” despite the prospect of heavy additional costs to SWEPCO and its ratepayers of the anticipated carbon emission regulations The difficdty with approving that conclusion Iies in the undisputed testimony of James I, Mangi ofthe Mangi Environmental Group for the intervenor hunting clubs to the effect that a gas-fired plant emits only 60 percent of the carbon dioxide emitted fiom similar-sized coal-fired plant. Mr. Mangi also pointed out that SWEPCO’s EIS failed to deaI with alternative technoIogies despite the statutory requirement for comparison. See Ark. Code Ann. 0 23-1 8-5 11 (8) (b) which requires “[a] description of each alternative Iocation or for generating plants, the energy process considered and a statement of the reasons why the location and production process were selected.’’ Evidence was presented to the Commission that the price of natura1 gas is historically more ‘cvolatile”than that of coal and that the use of natural gas to fire a baseload plant involves a speculative risk caused by that volatility. But the nature of the action to be taken by the Congress, in the area of carbon dioxide regulation, as we11 as the timing of it, is also subject to speculation at this point. Even if the rate of carbon dioxide emissions projected to occur in this instance were acceptable, however, the timing of this application is unfortunate in view of the uncertainty of the cost increase that seems likely to be imposed as the resuXt of federa1 regulations. From the evidence before the Commission, it can be concluded that, aIthough coaI may be a cheaper resource than natural gas at this time, the cost of using coal may become equaI to, if not higher than, the use of natura1 gas to fire a generating plant. And Erom testimony in the case it appears virtually certain that the Hempstead plant and other coal plants on the drawing board wiIl not be “grandfathered” by Congress, so they will be required to meet any new emissions standard for carbon dioxide. The Commissioners comprising the majority in this case conclude that “the margin of error in the Synapse C02allowance price assumptions (particularly when combined with assumptions regarding long-term commodity prices and capital costs) is likely greater than the differences in the modeling runs which are based on those assumptions.”Accordingly, they find, the evidence presented by the Staff “does not offer a sound basis for decision in this case.” They cite no competing models or other evidence in support of their conclusion, nor do they offer any other “sound basis” for their decision on this linchpin issue. Regardless of the federa1 legislative timing issue, however, the difference between gas-fired and coaI-fired-plant carbon emissions is sufficient for this Commission to require that coal be rejected as the fie1 to be used in the construction of any new generating plant unless and until the technology exists, and will be used, to capture and sequester all of the carbon dioxide emissions, and those of mercury any other “greenhouse gasses,” from the atmosphere. It should be noted that the Arkansas General Assembly, in enacting the UtiIity Facility Environmental and Economic Protection Act in 1973 made a specific finding “that present laws and practices relating to the location, financing, construction, and operation of the utility faciIities should be strengthened to protect environmental values, to encourage the development of ahernative renewable and nonrenewable energy 10 technologies which are energy-efficient, and to take into account the total cost to society of such facilities.” Ark. Code Ann. 0 23-7 8-502(c) (Emphasis added), Protecting environmental values through the controI of carbon dioxide is a looining cost to society that must be acknowledged, planned for, and dealt with. It is time we got on with it rather than fail to take account of it. 3. Site Selectioi? SWEPCO is a subsidiary of American Electric Power Corporation (“‘AEP”). The proposed Hempstead plant is to be constructed and managed by an AEP subsidiary corporation, American Electric Power Service Corporation (“AEPSC”).James Kobyra is the AEP Director of New Generation Projects who will be in charge of constructing the pIant if this Commission grants S WEPCO’s appIication. John Hendricks is the AEPSC Environmental Services Manager. Early in its preparations for this application, AEPSC hired consultants Sargent & Lundy to perform a study of ten proposed sites for its new GOO MW generating plant. Some of the sites were in Oklahoma, one in Louisiana, and some in Texas and Arkansas. In discussions with the consultants, fwenq-seven seIection criteria were identified, Some of the 11 criteria were listed as C‘mu~t~’’and the remainder as “wants.” One of the “musts” was that the plant not be located within 100 kiIometers of a (federal) Class I area due to federal land-management requirements with respect to haze Ievels. The Caney Creek Wilderness, a Class I area, is within 90 kilometers of the proposed site of the plant, so Sargent & Lundy at first declined to consider it as a possible site for the plant. AEPSC persome1 insisted, however, that the Hempstead site be considered, and so it was. In its initial desirability rankings of the sites suggested by AEPSC, the Hempstead site was ranked seventh of ten by Sargent & Lundy, presumably applying the agreed criteria. Two sites were added to the list, and in the subsequent ranking the Hempstead site was ninth of twelve. Mr. Kobyra testified that the criteria and the Sargent & Lundy study were meant to be used only as a “guide” in the selection process, and that the main bases for choosing Hempstead County were (a) the availability of a sufficiently Iarge tract of land, which was for sale by a singIe owner, to permit the construction of the 600 MW plant with room for an additional GOO MW unit in the hture and (b) a location near a sufficient supply of water for the boiIer(s). 72 While the 2875-acre Hempstead tract purchased by SWEPCO has some hardwood and pine forested portions, much of the Iand, including the footprint of the proposed construction, has been clear cut and used by Weyerhauser Corporation for pine timber growth. The construction of the plant will entail loss of an additionaI 1600 forested acres, according to Mr, Hendricks. Nearby are protected, ecologically sensitive areas. Mr. Hendricks testified concerning such places as the Nacotosh Ravines National Area which is adjacent to the northwest corner of SWEPCO’s land and about haIf a mile fiom the plant site. The Bois d’Arc WildIife Management Area is three miles east-southeast of the site. The Little River Wildlife Management Area is two miles to the west. Lake MilIwood and Lake Millwood State Park are twelve miles distant. Some five miles away fiom the plant site is Grassy Lake, a very large, pristine cypress-tree swamp boasting many alligators and water bird species. Grassy Lake is part of private properties owned by the severaI hunting clubs which have intervened, along with some of the individual club members, in this proceeding to protest the location of the plant. Mr. Wendricks testified that he was unaware of any other AEP generating facility existing so close to so many wildlife management and other natura1 areas. 13 In addition, part of the wetlands area known as the “Little River Bottoms” Iies on, and the remainder of the wetlands area lies near, SWEPCO’s property. The water proposed for use by the plant is 6000 gallons per minute which will be discharged fiom Millwood Lake north of the site. The water is to be delivered via flow down Little River to an intake faciIity on the plant property which abuts the river. Some 430 gaIlons per minute wilI then be discharged, after use by the pIant, into the Little River or the Red River, into which Little River flows. While it may be that the mercury emitted &om the pIant stack will be dispersed into the atmosphere, evidence before the Commission shows that there can be little doubt that, on rainy days, it wilI faII onto the foIiage and the lake and river water beIow and that the toxin will find its way into the local food chain. Remarkably, the majority Commissioners justify ignoring that fact on the basis that the deposition of mercury from the plant will add very Meto the mercury already present. SWEPCO proposes to develop a raiI spur to its plant from either the Kiamichi Railroad or the Union Pacific Railroad. It anticipates two or three trains per week, each train comprising 150 coal-laden cars that wiII come on the property via one of the proposed spurs. The majority Commissioners have conditioned the granting of the certificate upon SWEPCO’s not using 14 the Eamichi Railroad which runs near to and, to some extent through, the property of the intervenors. It is, however, a somewhat hoIlow condition, as it Ieaves open the door to a subsequent application by the Company to use the Kiamichi rail for transportation of coal to the plant. Other than the “view shed” of a 62O-foot smoke stack (643 feet above the foundation) and a large (27S-foot tall) tower used to cool the discharged boiler water, as well as creation of the rail spur, trafic in and out of the site, creation of two “active coal piIes” of 20,000 tons each and a “reserve coaI piIe” of 60,000 tons of coal, and the permanent and temporary buildings present before and after the construction phase, the construction and operation of the pIant would create little visible or audible impact to the nearby protected areas, There would, however, according to the testimony of Mr. Kobyra, be 25-acre soIid waste IandfilIs constructed on the site, and it is anticipated that ten of them wouId be constructed during the life of the plant. It is proposed that Bridge Creek, which runs through the SWEPCO property and which is an “ephemeral” tributary of Little River, will be filIed and relocated 6000 feet from its present Iocation. At the conclusion of the plant’s Iife, its salvage value will be minimal and exceeded by the cost of removal, so it will remain a permanent scar on the site. The most significant impact, however, remains the toxic and carbon dioxide emissions, both of which could be vastly reduced if the natural gas alternative were pursued. 4. Procedwes and Jztrisdiction SWEPCO’s need for an additional GOO MW in baseload generating capacity was estabIished in an earlier PSC proceeding. The issue of the Xocation of the transmission lines to transport the proposed GOO MW of electricity, and presumably the ultimate 1300 MW, if the second unit envisioned by SWEPCO is approved in the future, is to be decided in a subsequent proceeding. Testimony presented by the Staff suggested that the reason for the separation of those “dockets,” as they are known in regulatory parlance, is that it is the %ormaI’’ practice that has been followed without exception by the Commission over the years. In addition, the Staff contends that because the jurisdiction of the Arkansas Department of Environmental Quality (“ADEQ”)over the permitting of specific emissions, see Ark. Code Ann. 8 23-18-506, is not affected by the authority of the Commission to assess the acceptability of the overall environmental impact of a proposed generating facility, the environmental issue falls within the “primary” authority of ADEQ, To the contrary, as discussed above, and as the majority 16 Commissioners agree, the “primary” authority lies with this Commission in the firsst instance to determine the acceptability of the environmenta1 impact of the proposed generating plant. This Commission shouId not hesitate to consider, in the exercise of its overall authority, even the specific emissions of the proposed Hempstead plant which are the subjects of the ADEQ draft permit or those which may become of interest to ADEQ. It is apparent that ADEQ does not currently regulate carbon dioxide emissions. If ADEQ assumes that specific responsibility in the future, the responsibility of this Commission will no doubt continue as the arbiter of the overall acceptabiIity of the total costs to society of proposed toxic emissions and carbon dioxide as well, in performing its duty under the statute to strengthen present “practices” to protect environmenta1 vaIues. A. Transmission Lines The majority Commissioners point out that th definition of “m jor utility facility” found in Ark. Code Ann. $23-18-503 (5) inchdes, separately, generating plants and high-power transmission faciIities. They reason that, therefore, they may be considered in separate proceedings. They go further, however, and say that the statute does not require that an application for transmission lines be considered along with an application for an associated generating facility and that no such combination has been 17 required in any proceeding since the statute’s enactment in 1973. The implication is that, because such a combination has not happened in the past, and that the statute can be read as not requiring it, it should not happen today or in the future. Undoubtedly, it would be appropriate for the Commission to entertain an appIication for a certificate approving a transmission facility in isoIation if, for example, it were to be built to serve a preexisting generating facility. It defies common sense, however, to say in a case such as this that a separate “docket” is required to consider transmission lines which are to be integraIIy associated with the proposed plant, simply because a proceeding to consider a proposed plant and its transmission facilities together has not previously occurred. The proceeding before this Commission envisioned by the General AssembIy is to ‘‘+ .provide a forum with exclusive and final jurisdiction, except as provided in §§ 23-1 8-505 and 23-1 8-506,for the expeditious resohtion of a11 matters concerning the location, financing, construction, and operation of electric wxrating plants and electric and gas transmission lines and associated facilities in a sinde proceeding .. . . 5* (Emphasis added,) Nor is it convincing to contend, as do the majority Commissioners, that decisions about transmission-line corridors must await a decision by the 18 Southwestern Power Pool (“SPP”) authorities concerning the type and size of lines to be constructed. The most and the least intrusive locations for the corridors can be shown and decisions made, just as is being done here through conditioning of the approvaI of this application upon prohibiting the Iocation of transmission lines locations in one instance. This case is thus IeR open with respect to the diffmlt issues of transmission Iine locations. A subsequent proceeding will thus deal with those issues at a depth which might well have had a bearing upon whether the certificate sought here shouId be granted. If, for example, there were simply no way to site transmission lines from the proposed pIant without unduIy intruding upon important natural areas or private properties, that undoubtedIy would be a basis for denying the certificate. SureIy, the need to reopen in a subsequent proceeding the evidence produced in this proceeding about the areas to be protected from power heconstruction and presence should be obviated if possible, If a later SPP ruling requires additional action, it should be brought before the Commission as part of this “docket,” without having to recreate any part of the record. 19 b. Jzirisdiction and ADEQ Two exceptions to the “all matters” requirement of the statute concern the exclusive jurisdiction of the Arkansas Department of Environmental Quality (“ADEQ”) over water and air permits and the requirement that such permits be obtained from that Department in addition to the PSC certificate. After the certificate at issue here is granted by the Commission, ADEQ will conduct tests as the facility is constructed and as operation begins, and as it continues, to determine whether the emissions meet the ADEQ-required standards. ADEQ has issued a ‘Ldraft”permit to SWEPCO for the Hempstead plant. As ADEQ does not purport to regulate carbon dioxide emissions, that subject is not mentioned in the draft permit. WhiIe the Staff correctIy suggests that ADEQ has exclusive jurisdiction of its own permitting authority, there is no conflict between that and the requirement found in Ark, Code Ann. 9 23-18-519 (b) (4) that the Commission not grant a certificate unless it determines “[tlhat the faciIity represents an acceptable adverse environmental impact.. .*’’ The Commission is thus concerned with the broader issue of environmental compatibility of the proposed fuel source and the emissions it wiIl cause. It is also concerned with the likelihood of carbon control mandates from Congress as an element of the potential cost to 20 SWEPCO customers and the total cost to society of the proposed faciIity. The draft ADEQ permit is just that, and it is of no consequence to the uItimate issue in this proceeding. It is polite and appropriate to condition the issuance of the certificate upon SWEPCO meeting ADEQ’s emission requirements. However, it is improper, unnecessary, short-sighted, and it leaves the public interest unprotected, for the Commission to abdicate, to any degree, its responsibility to assess the acceptability of the environmenta1 impact of the plant on the ground that the pIant may meet current ADEQ requirements. c. Need The statutory scheme enacted by the General Assembly can easily be read to require that the issue of the need for additional generating capacity and the issue of the location of the necessary transmission corridors are to be decided in a single proceeding with respect to the basic “Certificate of Environmental Compatibility and Public Need,” (emphasis added.) which is the chapter found at Ark. Code Ann. § 23-7 8-50 1 et seq. .Venita McCellon- AlIen, Chief Operating Offmr of SWEPCO testified that approximately 2 I per cent of SWEPCO’s overall power generation is sold to whoIesale purchasers who then resell the power to their customers. The testimony is 21 somewhat confhsing, but it is clear that those contracts, and the amounts of power sold to each of the wholesale purchasers, include at least the following: City of Minden, LA, 40 MW;North East Texas Co-op, two contracts, 53 1 MW; City of Hope, AR, 63 MW, City of BentonuiIle, AR, 120 MW. While some of the contractual arrangements are very complicated, it is clear that these contracts are purely voluntary on the part of SWEPCO and that the return on its equity earned by SWEPCO from those contracts is not shared with its ratepayers, Le., retai1 customers. ." The contract with Minden, Louisiana, expires in December, 2008, and a portion of the North East Texas Electric Co-op contract will expire in 2009, or at least prior to 201 1 which is the date projected by SWEPCO when the need for the additional 600 MW will arise.' I The suggestion hcre is not that SWPCO abandon every municipal utility to which it seIIs at wholesale. But even if that were the point, there is no evidence bcfore the Commission in this case that municipalities which are parties to such contracts couId not purchase power from gas-fired sources that might be somewhat more expensive but would produce far less poIIution than that which wiII be produced by the Hcmpstead plant. (The municipal utilities must also grapple with greenhouse gas and carbon control issues.) After all, to the extent they do not own their own generation, the municipdities are served under long-term wholesale contracts, which they have negotiated both freely and at mslength. As I understand federal law, the utilities have no "obligation to serve" wholesale customers. As these contracts expire by their own terms, and as the municipalities search for dtematives (including renewal of service under new contracts with SWEPCO), I do not find it inappropriate for state regulatory agencies to require the utilities (which do have an obligation to serve retail customers under state Iaw) to consider non-renewal of these wholesale contracts in order to make available the power and energy that is needed by their retail customers. It shouId also be noted that several of the wholesale contracts that are set to espire in the near-term are with municipalities outside of Arkansas and that at least one of the larger ones has notified SWEPCO that it 22 It becomes apparent that SWEPCO could satisfy its retail customers' need for power without expansion of its generating capacity by declining to renew some of its expiring whoIesale contracts for a period of time during which the costs of regulation, or the developing technoIogy for the capture and sequestration of, coal plant emissions could better be ascertained. Instead, Ms+McCellon-Allen testified, SWEPCO is engaged in negotiating at least one new wholesaIe contract and will pursue others, but it does not do so "aggressively" because that is not its primary business. ObviousIy, the issue of the need for increased capaciw in light of these facts should have been a part of this proceeding in addition to that of the transmission lines. Ifthe need for power to be soId through the retail rates subject to this Commission's jurisdiction could be satisfied by the non- renewal of one or more of the wholesah contracts, we wouId not be faced with the issue of the environmental damage in prospect upon approval of the appIication before us. 2 will be shopping for other suppliers in the interest of serving its own retail customers. This has certainly proven to be the case with Entergy, which I understand re- committed to its retail customer base capacity and energy formerly sold under wholesale contracts to the cities of North Little Rock and Benton when those municipalities gave notice some years ago that they would be purchasing their requirements from other suppliers, using Entergy's transmission system to deliver the power. ' One of the "transmission tragedies" that came to light in this proceeding is that there is a huge, highly-efficient combined cycle gas-fired plant, know as the Union Power 23 During and subsequent to the hearing, the Commission received many comments from members of the pubIic concerning S WEPCO’s application. Much of the commentary in favor of it has concerned the economic benefits to Hempstead County and vicinity from new job opportunities and tax revenue that will result if the pImt is buiIt. Those in opposition have focused upon environmental and health concerns about the location of the plant SO near to ecologically important protected areas and about the dangers of the proposed plant’s emissions. While sensitivity to the economic benefits of the proposal and the outpouring of support from civic offwials, chambers of commerce, school district officials, and individual business interests is important, it must be pointed out that if the proposed plant were a gas-fired facility located at the same site, there would be similar benefits to the community with up to sixty Station at El Dorado, which could produce far more power than that “needed” by SWEPCO. The facility, owned by Entegra Power Group, LLC, is just over IO0 miles by road from the the Hempstead site, which is within the SWEPCO Control Area. The Entegra plant (which at 2200 MW is almost four times the size of the proposed Hempstead facility) is mostly idle because of its inability to transmit its product outside of the Entergy Control Area in which it is sited. It has apparently fallen upon hard financial times because of that problem and thus found itself unable to bid on the SWEPCO request for proposals that wound up, not surprisingly, with responding AEPISWEPCO self-providing proposals only for coal-fired generation, which is the utility’s strong suit. Local and regional transmission fiefdoms must come to an end. A national scheme for transmission is essential so as to terminate the “roach-moteI“ phenomenon where, as in the case of Entegra, power can be gotten in, but not out of a control area. 24 percent fewer harmhl emissions and the avoidance of the need to rebuiId or add raiI lines and bring in between 468,000 and 702,000 rail cars of coal over the next 30 years. In addition, the reasons given for the choice of the site, Le., readiIy available Iand and water, do not justify placing it in such close proximity to protected natural areas, Similar water sources are available ekewhere in Arkansas, and while the task of purchasing the land was made easier by its avdability f-rom a singIe owner, neither qualification justifies the site chosen which is so near to so many protected natura1 areas. From the proceedings before us, it is clear that the large majority of the power to be produced by the new plant will be used by SWEPCO customers in Texas, Oklahoma, and Louisiana. AIthough the carbon dioxide emissions problem may indeed pose a “gIobal” issue, to the extent that the ecologicaI consequences of the construction and operation of the plant can be said to have a focused effect, it wiII obvioudy be in Hempstead County, Arkansas, The sacrifices that may become necessary to reduce the demand for electric power or to move toward renewable sources of energy in the effort to achieve a cleaner environment can be minimized if not entirdy avoided by shifting utility regulation and management practices. To minimize the problems inherent in our current power-production scheme, priority must be 25 pIaced upon demand reduction and energy efficiency efforts as well as the technology necessary to capture and sequester a11 of the harmful emissions from power producers. Planning for future energy production must emphasize renewable energy sources. Aggressive pursuit of energy efficiency along with demand reduction can make a huge difference in the way we meet future energy needs. That is particularly so in Arkansas, where this Commission has found that Arkansas is ranked in the lowest tier of the states in terms of spending on energy eficiency, whether measured on a per capita basis (46th state), on the basis of our total retai1 energy sales (43rd), or on the basis of percentage of totaI utility revenues (47th). A change in this respect can come about through utiJities and regulators working together to change the economic signaIs to companies - rewarding them for heIping their customers use less energy, have lower bilk, and increase the amount of work they accomplish with a given amount of energy, The momentum of “business as usuaI” will make the necessary changes difficult for both the public and the power industry, but we must turn the inevitable corner and begin now to refbe to countenance the further degradation of our atmosphere without taking every reasonable step to nurture and promote cleaner, more efficient alternatives. To aIIow an 26 increase in atmospheric polIution in this instance is shortsighted. This Commission and the regulatory agencies of other states, as well, should lead the effort to reduce atmospheric pollution by example. Even if the emissions to be allowed in this case, including the annual production of 5,280,OOO tons each year of carbon dioxide, wil1 constitute only a smalI addition to the pollution being emitted in Arkansas and elsewhere in the United States and in the world, the example we set by our approval presents an example for the people of our state, region, and nation that is unconscionable. The application in this case should be denied, therefore, I respectfully dissent. r, This 21'- day ofNovember, 2007. David Newbern, SpeciaI Commissioner 27