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Obama's EPA proposal likely will factor into Drake's fate in Colorado Springs

By: monica mendoza
June 2, 2014 Updated: June 3, 2014 at 7:47 am
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A sweeping proposal by the Obama administration to reduce carbon dioxide emissions at power plants likely will be considered in discussions over whether to decommission the Martin Drake Power Plant, and one Colorado Springs Utilites board member says the rules will translate into higher rates regardless if the coal-fired plant continues to operate.

The draft of the Clean Power Plan, released Monday, by the Environmental Protection Agency, would require the country's power plants to reduce carbon emission 30 percent by 2030 from 2005 levels and is believed by environmentalists to be a major step by the White House to fight climate change.

The proposed EPA rules could require upgrades to the downtown Drake plant or force Colorado Springs Utilities to build some other power source to replace the plant. Either way, the new emission standards would mean higher rates to cover the costs of construction, said Andy Pico, Colorado Springs city council member and vice chairman of the Colorado Springs Utilities Board.

"It's not just a war on coal," Pico said. "This is a war on low-income people - that is who this hurts the most."

The proposed rules target the country's 983 aging coal-fired plants. Martin Drake Power Plant currently uses three turbines built in 1962, 1968 and 1974. It will cost an estimated $5.2 billion in capital costs, fixed operating costs and ongoing maintenance to keep Drake running until 2033.

Those costs, however, do not consider what it would take to make changes to the system required under the proposed Clean Power Plan.

Utilities currently is installing $131 million in scrubber technology at Drake that aims to help the power plant meet pollution standards. Utilities officials have projected that electric base rates could go up each year for the next five years to pay for the scrubber project at Drake and at the Nixon coal-fired plant.

"If we could get the EPA to leave us alone, there would be zero rate increases," Pico said. "All the rate increases in the last few years are tied to comply with increasing mandates. The fact is when they add the requirements, it costs for upgrading existing plants or building new plants."

The EPA proposal comes as the Colorado Springs City Council, sitting as the Colorado Springs Utilities Board, is discussing a decommissioning timeline of Drake. The council is mulling 12 scenarios outlined in a half-million-dollar consultant's report that provides the financial return on investment for each of the 12 scenarios, which range from closing Drake immediately to keeping it open for the next 30 years. The consultant also considered the social and environmental costs associated with each of the 12 scenarios.

At the same time, Utilities is working to re-open Drake, which has been shut down since a May 5 fire. Utilities has been relying on its natural gas-fired plant to produce electricity and has been purchasing natural gas on the market - which is about double the cost to produce energy at Drake. As a result, the City Council recently approved a 7.4 percent residential electricity rate increase to cover the added expense.

EPA Administrator Gina McCarthy, in a statement released with the proposed nationwide plan, said climate change, fueled by carbon pollution, super charges risks to health, the economy and a way of life. The plan sets differing targets for each state.

"EPA is delivering on a vital piece of President Obama's Climate Action Plan by proposing a Clean Power Plan that will cut harmful carbon pollution from our largest source - power plants," she said.

Power plants account for roughly one-third of all domestic greenhouse gas emissions in the United States, according to the EPA. While there are limits in place for the levels of arsenic, mercury, sulfur dioxide, nitrogen oxides and particle pollution that power plants can emit, there are currently no national limits on carbon pollution levels, according to the EPA.

The EPA proposal on carbon emissions likely will be factored in talks about Drake's future.

"As a CSU board member, it is my job to consider all risks toward developing a strategic vision for energy in Colorado Springs that ensures we have inexpensive and secure energy from diverse sources," said Council member Jill Gaebler. "Coal power is cheap today but will become more and more expensive and the health-related risks associated with coal power should not be ignored."

The EPA will take comment on the proposed rules and host public meetings across the country, including one in Denver. The agency hopes to have finalized rules by next summer.

States, in developing plans, can choose a mix of using diverse fuels, energy efficiency and demand-side management to meet the goals and their own needs.

Colorado Springs Utilities officials still are making their way through the 645-page plan, said Steve Berry, Utilities spokesman.

"What we can gather is that this does give the state some flexibility," he said. "Reading it so far, we think the state has flexibility in how it's enforced."

If Drake were decommissioned by 2019 and replaced with a natural gas plant it would cost an estimated $242 million more than keeping the plant open for 20 years. But an early closure could save $753 million, which is the estimated environmental and social costs, according to the consultant's report that the City Council is considering.

The Western Clean Energy Campaign applauded the proposed EPA rules and said Colorado is well positioned to meet the standards. An early analysis of Colorado's power plants shows that by 2020, carbon emissions would be reduced by 23 percent of the 2005 levels, said Justin Wilson of the Western Clean Energy Campaign, which is based in Denver.

The new rules give Colorado Springs Utilities a chance to plan for Drake's ultimate decommissioning, Wilson said.

"This is not 'the sky is falling' for Utilities," Wilson said. "The need to reduce carbon emissions from the power sector is not a new idea. The key here is, we've got time - Colorado Springs has the opportunity to look 10 years down the road and see what safeguard will be in place to protect the community from carbon pollution."

The EPA's proposed rules have been highly anticipated and hotly discussed in political circles. U.S. Sen. Mark Udall, D-Colo., said in a statement that climate change is threatening Colorado's "special way of life." He called the draft rules a good start. Congressman Scott Tipton, R-Colo., said the proposed regulations could cost 224,000 jobs each year through 2030 and cost Utilities customers as much as $200 more a year for electricity.

Pico said he is concerned that the EPA's proposed plan also would affect natural gas-fired plants.

"I'm not at all happy to see that," Pico said. "It's very damaging to all power plants in every utility across the county. It will go well beyond Drake."

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