NIPSCO May Close Four Coal Units to Slash Environmental Compliance Tab

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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--Northern Indiana Public Service Company (NIPSCO) (Merrillville, Indiana), an electric utility unit of NiSource Incorporated (NYSE:NI) (Merrillville, Indiana), is considering closing four of its seven coal-fired generating units as part of its Integrated Resource Plan (IRP), the company said late last month. NIPSCO officials emphasized that no final decision has been made yet, but a recommendation on those units will be part of the IRP the utility files with Indiana utility regulators November 1.

The utility said it could face environmental compliance costs of about $1 billion over the next seven years if it continued operating all seven of its coal-fired units. Environmental regulations, coupled with low-cost natural gas and declining costs for wind power, are driving NIPSCO and other utilities to reshape, sometimes dramatically, their resource portfolios. The utility said the Coal Combustion Residuals (CCR) rules and Effluent Limit Guidelines (ELG) were the main drivers of its potential environmental compliance spending. The CCR rules have an effective date of 2018 while the ELG has a compliance date of 2023.

The four coal-burning units that may be closed include both units at the Bailly Generating Station in Chesterton, Indiana, and two of the four units at the Rollin M. Schahfer Power Station in Wheatfield, Indiana. The Bailly station has total generating capacity of 480 megawatts (MW). The utility has not identified which of the Schahfer units may be shuttered. That power plant has four units totaling 2,202 MW of generating capacity. NIPSCO is reportedly considering closing 722 MW of the Schahfer plant's capacity.

If the utility decided to close those four units, it said the Bailly units would be closed by mid-2018 and the Schahfer units would close by yearend 2023. Separately, the utility has begun the demolition process at its Dean H. Mitchell Generating Station, located in Gary, Indiana. That 500-MW, coal-fired plant, which began operating in the 1950s, was mothballed over a decade ago.

Closure of those four coal-fired units would leave NIPSCO with three coal-fired units: the 680-MW Michigan City Generating Station and two units at Schahfer totaling 903 MW.

Like many other utilities, NIPSCO is reducing its reliance on coal to produce electricity: Today, about 72% of the utility's electricity is generated from coal, down from 90% in 2010. If the four units being considered for closure are, in fact, closed, NIPSCO's reliance on coal likely would fall even further, though the company has not said what generating sources it might use to replace lost electricity from the Bailly and Schahfer plants. That information is expected to be in the IPR the utility is scheduled to file by November 1.

Right now, NIPSCO's generating portfolio includes three coal-fired stations, one natural gas-fired station, two hydroelectric generators and purchased wind power. The utility's portfolio also includes several customer programs, including a voluntary industrial interruptible program, a feed-in tariff, net metering programs and various energy efficiency programs.

"The landscape for electric generation is shifting dramatically, not just for NIPSCO but for our nation as a whole," Violet Sistovaris, NIPSCO executive vice president, said in an August 23 statement. "In particular, companies with aging coal-fired units are facing intense economic and environmental regulatory pressures that are driving important decisions today about how to meet the customer needs of tomorrow."

"Given these factors, we believe it may be in our customers' best interests to retire some of NIPSCO's coal-fired generation units," she continued. "We will continue working closely with stakeholders via the IRP process to seek input and further evaluate these assumptions while considering the interests of customers, employees and local communities."

The utility has been meeting with stakeholder groups to discuss its resource portfolio options.

Britt Burt, Industrial Info Resources' vice president of research for the global Power Industry, said NIPSCO, like all electric utilities, is required to provide cost-effective and reliable electric service. "Environmental regulations have stymied new-build coal-fired generation, and made a lot of existing coal-fired generation so expensive as to be uneconomic. Faced with a potential compliance tab of $1 billion over the next seven years, NIPSCO needed to find more cost-effective generation alternatives that will reduce the amount of money it spends on environmental compliance."

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