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ENVIRONMENTAL PERFORMANCE

For decades, one of the lowest-cost resources to produce electricity in the United States has been coal. In addition to providing customers with reliable, affordable power, coal has enabled economic growth in those areas where it is plentiful. Because of this, most coal-fired generating stations are located in coal-producing regions, usually in rural areas, and are an important source of jobs, prosperity and economic stability.

However, the economics of coal-fired generation have changed the equation. Compliance with new environmental regulations will be costly and will be difficult for many communities in our service territory. Changes in our generation fleet will require thoughtful planning, careful implementation and sufficient time to avoid adverse impacts on reliability and customers.  

A wisely planned transition of our generation plants will take longer than the regulations permit, but it will also mitigate grid reliability concerns; provide for cost-effective, achievable compliance; be more affordable for customers; and get us to the same point. Along the way, we can help our communities prepare for the change, do more to mitigate the cost to customers, and promote a more stable work force for the long term. We think the slightly longer path is the best, most appropriate route for our customers and our shareholders.

New and pending U.S. Environmental Protection Agency (EPA) regulations are mostly focused on air emissions, but we are also preparing for changes in other rules that govern cooling water intake structures and wastewater effluent guidelines, and the disposal of coal combustion residuals. The EPA has not coordinated these rules, making compliance extremely difficult for regulated utilities to plan when it’s unclear how the rules will fit together. We maintain that there is a more efficient and effective way to achieve the same environmental results, and we are advocating for an alternative approach with legislators and regulators.

Even so, we will continue to comply with all applicable environmental laws and regulations as we have consistently done in the past. But as the bar gets higher, compliance gets increasingly expensive and challenging. This became clear with the scope and stringency of regulations to reduce emissions proposed or enacted by the EPA in 2011. Even as the debate continues about the efficacy of these regulations, their cost and their effect on grid reliability, our regulators, our stakeholders and our customers expect nothing less than full compliance. 

We frequently are asked why we need more time to comply with these regulations when they have been under development since 1990. We also are asked why we need more time when other electric utilities say they can comply by the deadlines imposed by the rules.

The notion that these regulations have been known since 1990 is incorrect. In 1990, when Congress passed the Clean Air Act amendments, it directed the EPA to study power plant hazardous air pollutants (HAPs) separately from other industrial sources to determine if regulation was appropriate and necessary. The EPA conducted that study and reported at the end of the Clinton administration that the only power plant HAPs emission that merited regulation was mercury.

The EPA formulated the Clean Air Mercury Rule (CAMR) in 2005 to address that finding. CAMR was challenged in court and vacated in 2008. In developing a replacement for CAMR, under the Obama administration, the EPA expanded the number of HAPs it would regulate and in 2011 proposed the Utility Hazardous Air Pollutants Rule, which later became the Mercury and Air Toxics Standards (MATS) rule. Therefore, we did not know the specific emissions that would be regulated or the level of control required until a final rule was issued at the end of 2011.

In many cases, other companies were required to reduce emissions because of state-imposed mandates, which put them on the path to compliance earlier. None of AEP’s states required these emissions controls. While many people would argue that AEP should have installed controls at all of its plants, we generally cannot receive rate recovery for these very expensive investments unless there is a state or federal mandate. We simply cannot afford to put billions of dollars at risk without the promise of recovery. However, we have been preparing for compliance with preliminary engineering work and by preparing regulatory filings.

Cardinal Plant Cardinal Plant’s Unit 3 is the first unit in the country to vent flue gases through a natural-draft cooling tower. The design was the safest option compared with building a new stack.

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