Colorado Springs News, Sports & Business

Gazette Premium Content Drake power plant debate fires up again

By Monica Mendoza Updated: February 17, 2014 at 8:52 am

Public debate is about to heat up again over the fate of Martin Drake Power Plant as the City Council begins deliberating the financial and environmental costs of keeping the plant open.

The council, sitting as the board of directors for Colorado Springs Utilities, will consider such things as the cost to bring Drake up to federal emission standards against the cost of closing the plant and building an alternative power source.

It also will consider more difficult-to-quantify costs such as environmental and social, which a consultant's report refers to a sustainable return on investment. It will hear from national coal energy experts on upcoming federal regulations and it will consider the Utilities' Energy Vision plan, which sets goals on the use of renewable energy and electric consumption.

By summer's end, the board could make a decision on whether to keep Drake open for the next 30 years, decommission it within six years or some version in between, said Val Snider, member of council and the Drake Task Force.

The Utilities board will hear 12 options for Drake's future Wednesday at its monthly meeting. Anticipating community interest, the meeting will be at City Hall instead of in the utilities board room at Plaza of the Rockies.

"The consultant will walk us through the Drake study and talk about the trade-offs," Snider said.

HDR engineering and consulting firm was asked by the task force to attach financial and environmental costs to each option, but not to make a recommendation on how the board should proceed, Snider said.

"It was the conscious intention of the Drake Task Force for the consultant not to come forward with a recommendation," Snider said. "We didn't want a local contractor to get bogged down in politics, and we wanted the community to weigh in."

Drake became a focal point of contentious debate in spring 2012 when questions surfaced about whether the city should get out of the utilities business. It became a key campaign issue during the 2013 City Council elections.

Along the way, the community debate turned to Drake and whether the coal-fired plant should be decommissioned, said Steve Durham, a member of the Drake Task Force. That came on the heels of a Utilities' approved contract to spend $121 million on Neumann Systems Group's NeuStream scrubber technology for emission control at the 50-year-old plant. The installation of the scrubber system has risen to an estimated $131 million due to higher than expected construction costs, a spokesman for Utilities said.

Communities across the country are debating the cost of upgrading aging coal-fired plants. They are weighing aging plants with the cost of renewable energy, construction costs and natural gas costs, according to the Energy Information Administration's December report. Coal-fired electricity fell from nearly 50 percent of U.S. generation in 2008 to 37 percent in 2012, the report says.

While Colorado Springs Utilities has a second coal-fired plant, Ray Nixon near Fountain, Drake drew the most conversation and criticism because of its age and its downtown location, Snider said.

Drake was built in three phases in 1964, 1968 and 1974 and supplies about a third of electricity used by the community. If it were decommissioned, Utilities would need to build some other power plant or buy power from other power companies. The 12 options the board will consider were compared and contrasted to the base case, which is to keep Drake open for the next 20 years. The report details each option with a financial return on investment and sustainable return on investment compared to the 20-year plan.

Meanwhile, the upgrade work at Drake has begun. Utilities expects to spend $251 million on Drake and Nixon to meet the 2017 deadline for the federal emission control guidelines. In November, the City Council approved a 3.4 percent electricity rate increase, which is expected to generate $12 million in 2014 to help pay for the emissions control project.

The HDR study factors in the $131 million being spent to upgrade Drake, even in the scenario that says Drake could be decommissioned by 2019.

If Drake is decommissioned, one of the Utilities board considerations will be timing and whether Utilities could take on more debt to build a new power source. Utilities has $2.4 billion in debt now, mostly due to the Southern Delivery System project, a 53-mile pipeline from Pueblo Reservoir to Colorado Springs. About 16 percent of ratepayers' monthly bill goes to paying off debt.

Snider said the Utilities board will consider the Utilities Energy Vision plan, which sets a goal of using 20 percent renewable energy by 2020. It also has a goal to reduce the average electric consumption by 10 percent by 2020 and it wants to maintain rates 20 percent below three Front Range energy competitors.

"One thing I hope we reach Wednesday is how to go forward with a town hall," Snider said. "I hope we can boil it down enough to get things that people can talk about."

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UTILITIES BOARD MEETS

Colorado Springs City Council, sitting as the Colorado Springs Utilities Board, will meet at 1 p.m. Wednesday in City Hall, 107 N. Nevada Ave. A consultant will outline 12 options on the possible decommissioning of Martin Drake Power Plant.

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DRAKE OPTIONS

Here are the options that consider financial return on investment and compared to sustainable return on investment, starting with the base scenario.

- Base case - 20-year Drake operation with Neumann Systems Group's scrubber technology and considering potential new requirements on nitrogen oxides. It would cost about $5.2 billion in capital costs, fixed operating costs, operations and maintenance costs and fuel costs to operate Drake until 2033.

- Early Drake retirement, by 2019, with new gas generation replacement would cost $242 million more than the base case. However, under sustainable considerations, Utilities would avoid spending $753 million, which is the monetized value of the repurcutions of greenhouse gas emissions and other environmental and social costs.

- 15-year Drake operation with Neumann scrubber and potential new requirements on nitrogen oxides and no site remediation would cost $133 million more than base case. Under sustainableconsiderations, Utilities would avoid spending $148 million.

- 15-year Drake operation with Neumann scrubber technology and potential new requirements on nitrogen oxides with moderate site remediation would cost $135 million more than base case. Under sustainable considerations, Utilities avoids spending $149 million.

- 15-year Drake operation with Neumann scrubber technology and potential new requirements on nitrogen oxides with high site remediation would cost $138 million more than base case. Under sustainable considerations, Utilities avoids spending $151 million.

- 9-year Drake operation with Neumann scrubber would cost $190 million more than base case. Under sustainableconsiderations, Utilities avoids spending $483 million.

- 30-year Drake operation with Neumann scrubber technology and potential new requirements on nitrogen oxides has the best financial return on investment of $216 million, compared to the base case. Under sustainable considerations, it would cost $151 million more than base case.

- 3-year Drake operation - shutdown upon emissions compliance date, would cost $224 million more than base case. Under sustainable considerations, Utilities would avoid spending $434 million.

- 9-year Drake operation with 150 megawatts of wind generation added upon retirement would cost $272 million more than base case. Under sustainableconsiderations, Utilities avoids spending $562 million.

- 20 year Drake operation and work to reduce electricity consumption by 4 percent would cost $324 million more than base case. Under sustainable considerations, it would cost $618 million more than base case.

- Drake operating on coal until 2022 and on natural gas from 2023 through 2033 would cost $208 million more than base case. Under sustainable consideraitons, Utilities avoids spending $362 million.

- 9-year Drake operation and then replace with 200 megawatts of engine generators on Drake site would cost $230 million more than base case. Under sustainableconsiderations, Utilities avoids spending $449 million.

SOURCE: HDR. To read the full report go to draketaskforce.net/hdr_study

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