On Tuesday (March 20, 2012), the Georgia Public Service Commission (PSC) issued a decision approving Georgia Power Company’s request to retire two uneconomic coal units, Harllee Branch Units 1 and 2.
We commend both the PSC and Georgia Power on this small but important step. However, we cannot ignore the fact that additional coal retirements are necessary to protect ratepayers and the environment, particularly in light of the roughly 1,000 MW of natural gas capacity the Company has secured to replace much of its coal capacity. We hope that the Commission’s order concludes only the first in a series of proceedings to retire additional coal capacity for which continued operation is not economic.
As interveners in this retirement proceeding, SACE, represented by the Southern Environmental Law Center, presented expert testimony explaining that new natural gas capacity (in the form of power purchase agreements or PPAs) without additional coal retirements represents an excess of power on the GPC system and would subsequently force ratepayers to shoulder an undue economic burden.
In its order, the PSC approved Georgia Power’s request to retire around 600 MW of coal and to purchase approximately 1,000 MW of new power in the form of PPAs. The Company could remedy this imbalance of excess capacity by asking the PSC to approve additional retirements in the very near future. Based on the Company’s application in this proceeding, it makes full economic sense for Georgia Power to move forward with additional retirements.
According to Georgia Power’s “unit retirement study”, which evaluates the economics of specific units under various scenarios, it would be a better economic choice for ratepayers if Georgia Power retires certain additional coal plants rather than keeping them online. As we asserted in our expert testimony, this study is particularly significant given that it contained flaws that biased the outcome in favor of coal power. For example, we found that the study did not sufficiently account for increasing coal prices, nor did it address the uncertainty surrounding the operation and maintenance costs of aging coal plants. Likewise, we found that the study compared the cost of maintaining coal plants with the cost of building new replacement plants rather than the cost of entering into PPAs, which is Georgia Power’s actual proposal.
The flaws that our expert identified in the unit retirement study mean that Georgia Power was looking at what we believe to be inaccurate economics. Despite this incongruity, Georgia Power still determined that retirement is the most affordable option for ratepayers in many circumstances. Thus, in light of the PSC’s decision, we urge Georgia Power to act quickly to further evaluate and finalize more retirements. Both uncertainty and excessive delay will put ratepayers at risk, and we hope Georgia Power will act fast to avoid this risk.