TVA to close 8 coal-fired power units

THE POLITICS AND BUSINESS OF CLIMATE CHANGE

8. BUSINESS:
   TVA to close 8 coal-fired power units
   Daniel Cusick, E&E reporter
   Published: Friday, November 15, 2013

In one of the largest coal plant closures announced to date, the Tennessee Valley Authority yesterday voted to shutter eight
coal-fired units in north Alabama and Kentucky, accounting for roughly 3,300 megawatts of generation capacity.

TVA's board of directors, meeting in Oxford, Miss., voted to close six coal units at its Colbert and Widows Creek fossil plants
in north Alabama and two of three coal units at the Paradise Fossil Plant in Kentucky as part of an effort to reconfigure its
generation mix to rely more on nuclear and natural gas plants and less on coal.

Ultimately, officials said, TVA will seek a generation portfolio consisting of roughly 40 percent nuclear generation and 20
percent each of coal, natural gas and hydropower combined with renewables and energy efficiency. TVA will also build a $1
billion gas-fired generation unit at its Paradise plant in Central City, Ky., to replace the two coal units being retired.

Coal currently accounts for nearly 40 percent of TVA's total power generation, followed by nuclear, hydro, natural gas and
renewables.

TVA President and CEO Bill Johnson noted that some of the coal units included on the retirement list were already idled and
were on track for closure under a consent decree with U.S. EPA and environmental groups. Even so, he added, the utility's
shift away from coal "will support our focus on cleaner energy and bring additional, necessary balance into our portfolio for
managing our current and projected load profile."

It will also help TVA overcome some significant economic and regulatory hurdles that brought one of the nation's largest coal
fleets under tough scrutiny from environmental regulators, nonprofit groups and the utility itself.

TVA has seen nearly flat demand for electricity across its seven-state service territory since the 2009 recession. It has also
wrestled with decisions over key generation assets as it tries to meet a 2011 settlement agreement with EPA over air pollution
emissions. All the while, it has been hedging its bets over the long-term price trend for fuels such as coal and natural gas.

Lastly, the utility continues to face criticism over its handling of coal ash, a byproduct of coal combustion that is stored in large
open-air pits on power plant sites. In 2008, a major ash spill caused by a dike failure at TVA's Kingston Fossil Plant in
Tennessee contaminated neighboring property and area waterways. A smaller ash spill occurred only weeks later at Widows
Creek, contaminating portions of the Tennessee River watershed.

A shift to natural gas, nuclear power

The utility ultimately determined that shrinking its coal fleet in favor of gas and nuclear generation was the best path forward.
TVA is already one of the largest hydropower producers in the country, and it has gradually added renewable resources such
as wind and solar power to its suite of generation fuels.

"These were difficult recommendations to make as they directly impact our employees and communities," Johnson said. "But
the plan is what's best in terms of its positive impact on TVA's rates, debt and the environment; and it will bring the greatest
benefit to the people of the Valley."

Environmental groups that have pressed TVA to take greater steps to reduce its dependence on coal welcomed yesterday's
decision.

"TVA was founded during the Great Depression to bring low-cost power and innovation to the [Tennessee] Valley; the fact that
the utility is opting out of coal makes it abundantly clear that this is an outdated fuel source that no longer belongs in our
energy mix," Verena Owen, a lead volunteer with the Sierra Club's Beyond Coal campaign, said in a statement.

Proponents of coal-fired electricity characterized TVA's decision as one forced by shifting government policies aimed at
making coal plants uneconomical and obsolete. "Decisions like this bear significant consequences that all of us stand to feel
through lost jobs and higher energy costs for American consumers and businesses," Laura Sheehan, a spokeswoman with
the American Coalition for Clean Coal Electricity, said in an emailed statement.

But Stephen Smith, executive director of the Knoxville, Tenn.-based Southern Alliance for Clean Energy, said TVA's board made "the right decision economically, environmentally, and for the health and well-being" of the Tennessee Valley.

"While retirements will have local impacts, we understand the broader implications are more significant," Smith added. "These actions set TVA on a more sustainable and economically viable course." At the same time, Smith and others stressed that the utility must continue to carefully manage and mitigate the effects of coal ash pollution at its plant sites and continue to take steps toward curbing pollution from its remaining coal units.

Environmental groups noted that the coal plant retirements will result in a 15.6-million-ton reduction in annual carbon emissions once the plants are fully offline.

They also praised the utility for its ongoing efforts to improve energy efficiency as a part of its broader strategy to meet future electricity demand without raising rates or compromising reliability. "The cheapest and cleanest energy is the energy you don't use," noted Jimmy Green, the Southern Alliance for Clean Energy's energy policy manager.