Alliant Lays Out Five-Year, $2.7 Billion Compliance and Resource Spending Plan

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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--Alliant Energy Corporation (NYSE:LNT) (Madison, Wisconsin) dropped the other shoe recently when it released its strategic plan to comply with environmental regulations and meet the future electric needs of its 1 million electric customers.

Over the next five years, Alliant's utility units will spend at least $2.7 billion to comply with environmental regulations and meet the future electric needs of its customers, Alliant spokesman Steve Schultz told Industrial Info. "This is a large investment, but it's the most cost-effective approach to meeting our customers' needs and meeting the requirements of environmental regulations."

Alliant has been installing environmental compliance equipment at some of its largest generators. It also issued a request for proposal (RFP) for new gas-fired generation earlier this year. But until recently, the company had not released a system-wide plan to comply with tougher environmental regulations and meet the future electric needs of its customers.

Earlier this year, Alliant began installing a dry scrubber and a baghouse at its two-unit, 1,023-megawatt (MW) Columbia Power Station, located in Pardeeville, Wisconsin. That project will cost an estimated $627 million. The 1970s-vintage plant is expected to be back in service in 2014. For more on that project, see March 18, 2012, article -Columbia Energy Center Embarks on $627 Million Pollution-Control Project.

Alliant also began building a dry scrubber and baghouse at its 675-MW Ottumwa Power Station earlier this year. That $345 million project is also scheduled to be completed in 2014. A third environmental control project, closer to completion than the Columbia and Ottumwa projects, is a $150 million project to install selective catalytic reduction (SCR) equipment at Unit 5 of its Edgewater Generating Station. That project is scheduled to wrap up by year-end 2012.

While it was pursuing these separate projects, Alliant also was developing a system-wide environmental compliance program for its other coal-fired generators. At the end of July, Alliant went public with its overall compliance plan for its two utility subsidiaries, Interstate Power and Light Company (IPL) (Cedar Rapids, Iowa) and Wisconsin Power and Light Company (WPL) (Madison, Wisconsin).

Alliant put its coal-fired generators into one of three categories that reflected the relative costs and benefits of installing environmental equipment:

• Tier 1 included the newer, larger, more efficient plants, where it made sense to install environmental upgrades.
• Tier 3 was for older, smaller, less-efficient plants that would definitely be closed.
• Tier 2 plants were said to be "on the bubble." These plants might be upgraded at a relatively low cost, depending on the final wording and timing of compliance regulations. If not, they would be closed.

Alliant's Tier 3 plants that are slated for closure include:

• Unit 3 of the Edgewater plant, a 60-MW unit that came online in 1951. That unit will be closed by the end of 2015.
• Units 3 and 4 at the Dubuque Power Station will be retired in the 2015-16 timeframe. The two units have a total of 82 MW of generation capacity. Unit 3 began operating in 1952, while Unit 4 came online in 1959. Units 1 and 2 have already been retired. In a project completed last year, Alliant converted this coal-burning plant to burn natural gas.
• Units 1 and 2 of the Sutherland Power Station, which total 61 MW, also will be closed in the 2015-16 timeframe. Both units came online in 1955.
• Units 1 and 2 of the Nelson Dewey Power Station, totaling 200 MW. Unit 1 began operating in 1959, while Unit 2 came online three years later. The plant will be closed by the end of 2015.

In addition to environmental upgrade projects at its Columbia, Ottumwa and Edgewater Unit 5 plants, Alliant's other Tier 1 plant is Unit 4 of the Lansing Power Station, where the company plans to install a dry scrubber. Work on this two-year, $60 million project is expected to begin next year. The 270-MW Unit 4 began operating in 1977.

In addition, Alliant wants to install a dry scrubber and baghouse at Edgewater Unit 5, complementing the SCR project under way there. Edgewater 5 qualifies as a Tier 1 unit in Alliant's eyes, but it needs the project to be approved by the Wisconsin Public Service Commission (Madison, Wisconsin). The regulators are expected to reach a decision by mid-2013. If approval is granted, the $390 million project could begin in 2014 and be completed in 2016.

In between Alliant's Tier 1 and Tier 3 plants are the Tier 2 plants, which could be efficient enough to continue running if the cost to comply with new regulations is not too expensive, according to spokesman Steve Schultz. He said a lot of that determination will turn on precise language and compliance timelines in state and federal regulations. Keeping any of these Tier 2 plants running would have to cost "well under $100 million each," he added.

Alliant's Tier 2 generators include:

• Unit 3 of the Southerland Power Station, a 96-MW generator that began operating in 1961.
• Unit 4 of the Edgewater Generating Station, a 330-MW unit that started generating electricity in 1969. Alliant is considering repowering this unit with natural gas. If it is not economic to repower, the unit will be retired by year-end 2018. A "repower or close" decision is expected next year.
• The Burlington Generating Station, located in Burlington, Iowa. This 212-MW plant, which began commercial operations in 1968, will either install a modest amount of environmental controls or be closed.
• Units 3 and 4 of the Prairie Creek Power Station, located in Cedar Rapids, Iowa. Unit 3, a 50-MW generator, came online in 1958, while the 149-MW Unit 4 began operating in 1968. Like the Burlington station, Alliant will keep the plant open if inexpensive compliance options are available. Otherwise, this plant will be closed.
• Unit 2 of the Milton L. Kapp Power Station, located in Clinton, Iowa. This 235-MW generator came online in 1967. It faced the same "inexpensive compliance or close" options as the Burlington and Prairie Creek units.

In addition to installing environmental equipment on certain generators and closing others, Alliant's IPL subsidiary wants to build a 600-MW natural gas, combined-cycle generator in Marshalltown, Iowa. It is seeking permission from Iowa utility regulators to build this plant. If the regulators grant approval, construction could begin in 2015 and the unit could be online by mid-2017.

Alliant's other utility unit, WPL, will purchase a 600-MW natural gas combined-cycle (NGCC) generator from a subsidiary of Calpine Corporation (NYSE:CPN) (Houston, Texas). Located in Beloit, Wisconsin, the Riverside Energy Center began operating in 2004. IPL had been receiving 490 MW of generation from Riverside under contract, but by year-end 2012, it will own the entire unit, adding a new 110 MW of new generation. IPL also extended its 431-MW power-purchase agreement with the Duane Arnold Nuclear Generator through 2025.

Schultz said that WPL will spend an estimated $1.4 billion on these compliance and resource initiatives over the next five years. Alliant's other utility unit, IPL, will invest about $1.3 billion in its own initiatives.

"As we look to the future, we will continue to examine our current generating fleet, as well as explore new generating options and sources in order to remain flexible for complying with emerging regulations in the most cost-effective ways to meet our customers' energy needs," said John Larsen, WPL's president, in a statement announcing the initiatives. Separately, Larsen's counterpart at IPL, Tom Aller, said that utility's investment "will provide flexibility for the next decade and beyond to meet current and anticipated generating needs."

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