AEP's program to install emissions-reduction controls on existing power plants was
the largest within the electric utility industry in 2007 in terms of capital investment
and construction. Through this program we installed and brought online pollution
controls to reduce sulfur dioxide (SO2) emissions on 3,500 MW of generation. Controls
to reduce nitrogen oxide (NOx) emissions began operating on 1,600 MW of generation.
We have completed more than two-thirds of our $5.4 billion investment program to
reduce airborne emissions from our coal-fired power plants to comply with the federal
Clean Air Interstate Rule (CAIR) and the recently-vacated Clean Air Mercury Rule.
This program significantly reduces emissions and provides compliance with more stringent
environmental requirements while allowing these low-cost facilities to continue
to meet our customers' needs for energy.
In 2007, AEP's CO2 emissions increased 2.8 percent while electricity demand grew
3.6 percent. The decline in SO2 emissions reflects the success of our environmental
programs.
SO2 and NOx in kilotons, CO2 in million metric tons
AEP's court-approved settlement of the New Source Review (NSR) litigation provides
us with additional opportunities to reduce our power plant emissions. The complaint
by the U.S. EPA and others alleged that AEP had made major modifications at some
of its coal-fueled generating units without obtaining the necessary permits and
without installing controls required by the Clean Air Act to reduce emissions of
SO2, NOx and particulate matter.
The settlement encompasses all of the environmental retrofits we have already completed
as well as those we have planned, while providing for additional controls at our
Rockport Plant in Indiana. We also agreed to annual SO2 and NOx emissions caps on
our 16 coal-fueled power plants in Indiana, Kentucky, Ohio, Virginia and West Virginia.
As part of the NOx reductions, AEP will operate its selective catalytic reduction
systems (SCRs) year-round on generating units at three of our eastern coal plants
starting in 2008. SCR equipment is currently operated to reduce NOx emissions only
during the May through September ozone season. Additional environmental controls
will be added to several other plants by 2019 as part of the CAIR compliance program.
Our efforts will eventually reduce SO2 emissions from our eastern coal-fired power
plants by more than 650,000 tons per year and NOx emissions by 159,000 tons per
year. The agreement includes $36 million for environmental projects coordinated
with the federal government and $24 million to the states that were parties to the
agreement. AEP also paid a civil penalty of $15 million. AEP did not admit to wrongdoing
by agreeing to this settlement.
Environmental controls installed to improve air quality can create other environmental
challenges and managing these trade-offs can be difficult. In some cases, the controls
we use to reduce air emissions can adversely affect the quality of our water discharges.
AEP uses the mineral trona to control sulfur trioxide (SO3) levels in the flue gas
on certain units, including our Mitchell Plant in West Virginia. Unfortunately,
when we used trona there, the pH of the fly ash pond increased and heavy metal concentrations
rose to levels above the permit limits. We are exploring solutions at Mitchell Plant
and will apply the lessons learned to other plants as well.
Another challenge is compliance with fly ash pond discharge limits when SCRs operate
year-round. Some of the ammonia used in the pollution control systems ends up in
the fly ash ponds. In the summer, bacteria and algae in the ponds absorb or chemically
alter ammonia, making it less toxic. But when the SCRs run in the winter, when the
water is much colder, biological reactions occur very slowly. In these conditions,
ammonia levels can remain high. Fortunately, ammonia is less toxic in cold water,
so AEP has worked with state regulators to increase permit limits during the winter.
Without these increases, operating SCRs year-round to comply with the NSR settlement
and Clean Air Interstate Rule could create compliance problems with our state water
permits.
