Additional
Background
for
AMP­
Ohio
Meeting
with
the
Office
of
Management
and
Budget
Regarding
Proposed
MACT
Standards
for
Industrial,
Commercial
and
Institutional
Boilers
and
Process
Heaters
BACKGROUND
The
ICI
Boiler
MACT
affects
a
broad
spectrum
of
industrial
boilers.
Electric
utility
boilers
driving
25
MW
or
smaller
generating
units
are
included,
even
though
their
competitors
are
included
in
the
larger
utility
MACT
with
compliance
dates
at
least
one
year
later.

Proposed
standards
for
greater
than
10
million
BTU
per
hour
coal­
fired
boilers
are:

Particulate
Matter
(
PM)
Mercury
(
Hg)
Acid
Gases
(
HCl)
0.07
lbs/
million
BTU
7
lbs/
trillion
BTU
0.09
lbs/
million
BTU
Approximately
33
municipal
electric
systems
across
the
country
own
or
operate
63
small
utility
boilers.
Below
is
a
partial
listing
of
the
communities
affected.
The
ICI
Boiler
MACT
affects
100%
of
the
available
generation
resources
in
several
of
these
communities.

Community
State
Population
Residential
Commercial
Industrial
Electricity
Electricity
Customers
Customers
Customers
Generated
(
MWh)
Sold
(
MWh)
Dover
OH
13,000
5,579
856
106
63,548
202,661
Hamilton
OH
60,690
24,944
2,987
49
577,384
636,127
Orrville
OH
8,600
5,800
740
14
301,765
256,306
Painesville
OH
17,503
9,072
1,915
6
157,972
219,643
St.
Marys
OH
8,342
3,489
478
17
43,029
195,961
Shelby
OH
9,821
4,979
177
17
102,843
103,015
Crisp
County
GA
22,000
9,398
2,421
79
67,200
439,261
Pella
IA
9,832
3,865
545
35
86,597
198,776
Independence
MO
113,000
49,500
4,930
12
269,000
1,106,000
Menasha
WI
16,500
7,000
700
12
Hibbing
MN
18,000
6,173
749
9
25,000
120,000
Crawfordsville
IN
15,243
7,850
1,500
91
18,207
Marshall
MO
13,000
4,900
875
7
IMPORTANT
ROLE
OF
MUNICIPAL
UTILITY
BOILERS
Municipal
utility
boilers
play
a
unique
and
critical
role
that
benefits
the
local
community
and
the
regional
electric
transmission
system,
including:


Reducing
power
grid
congestion
and
boosting
reactive
power;


Increasing
the
reliability
of
the
electric
system;


Increasing
the
ability
of
the
electric
system
to
meet
peak
demand;


Providing
valuable
protection
against
wholesale
electricity
price
spikes;


Mitigating
the
impact
of
regional
power
failures;

Meeting
demand
in
transmission­
constrained
"
load
pocket"
areas;


Reducing
the
vulnerability
of
the
electric
grid;


Supplying
power
to
important
municipal
functions;


Providing
high
quality
jobs
to
local
residents;


Keeping
funding
in
local
communities
which,
in
turn,
enhances
the
local
economy;


Supplying
ideal
test
sites
for
the
implementation
of
new
energy
production
technologies;


Increasing
energy
efficiency
through
reduction
of
line
losses;
and

Enhancing
"
yardstick
competition,"
thus
allowing
better
assessments
of
the
performance
of
others
in
the
industry.

RESTRICTIONS
AND
CHALLENGES
FACED
BY
MUNICIPAL
UTILITY
BOILERS

Legal
restrictions
prohibiting
Ohio
municipal
generators
from
selling
more
than
33%
of
their
sales
outside
municipal
limits;


Practical
requirements
that
municipal
generators
dedicate
a
portion
of
their
capacity
to
municipal
functions;


The
inability
of
municipal
power
generators
to
spread
capital
and
operating
costs
over
broad
customer
bases;


Constraints
on
the
ability
of
local
communities
to
finance
major
capital
projects;


Major
diseconomies
of
scale
with
respect
to
pollution
control
equipment
on
these
small
electric
units,
vis­
à­
vis
larger
utility
units;


Many
small
municipal
electric
utility
boilers
are
operated
on
a
"
peaking"
basis,
far
less
than
their
operating
capacity,
forcing
these
municipalities
to
spread
major
capital
compliance
costs
over
an
even
smaller
amount
of
sales;


Unique
political
pressures
as
municipally
owned
entities;
and

The
fact
that
the
national
electric
grid
as
envisioned
by
the
EPA
in
the
rule
exists
in
theory
only
today.

LOCAL
AND
REGIONAL
ECONOMIC
IMPACTS
AMP­
Ohio's
preliminary
analysis
indicates
that
compliance
with
the
proposed
ICI
Boiler
MACT
will
increase
the
cost
of
power
to
local
municipal
electric
consumers
in
our
generating
communities
by
7
percent
or
more
 
at
least
a
hundred­
fold
more
than
estimated
by
EPA.

In
order
to
obtain
external
financing
for
the
costs
of
installing
controls,
municipal
utilities
like
AMP­
Ohio's
members
would
need
to
increase
rates.
Alternatively,
they
could
exact
these
costs
from
the
general
funds
of
local
governments,
further
exacerbating
current
governmental
budget
deficits.
On
a
national
basis,
public
power
utilities
contribute
5.7
percent
of
total
electric
operating
revenue
($
1.4
billion
annually)
to
state
and
local
governments.

If
the
cost
to
produce
local
electricity
becomes
too
expensive
to
justify
continued
operation
of
these
plants,
some
communities
will
be
left
with
substantial
stranded
debt
and
less
negotiating
strength
in
the
wholesale
electricity
marketplace.

In
its
economic
analysis,
EPA
assumed
the
presence
of
a
vibrant
national
electric
market
with
easy
access
for
suppliers
and
buyers.
Due
to
the
contrained
nature
of
the
transmission
grid,
this
assumption
is
far
from
the
reality,
resulting
in
underestimated
benefits
(
especially
wholesale
cost
and
reliability)
of
local
generation.
Municipal
electric
systems
provide
low
cost
street
lighting
and
power
for
municipal
government
functions
(
commonly
referred
to
as
payments
in
lieu
of
taxes
or
PILOTs).
Powering
these
activities
with
wholesale
power
purchased
off
the
grid
will
result
in
increased
cost
to
local
governments,
whose
budgets
are
already
stressed
from
the
economic
downturn.

For
instance 


The
electric
fund
in
Dover,
Ohio
represents
36%
of
total
city
revenues.
Estimates
to
replace
payments
in
lieu
of
taxes
range
from
$
850,000
to
$
1
million
per
year.
The
Dover
Power
Plant
has
21
employees
with
an
average
salary
of
$
36,608.


In
Orrville,
Ohio,
utility
revenue
is
80%
of
the
city
budget.
City
expenses
could
increase
by
15%
if
PILOTs
are
eliminated.
Stranded
debt
would
be
$
8
million
in
2008.
The
Orrville
Power
Plant
employs
63
people
with
an
average
salary
of
$
39,520
(
all
union
employees).


For
Painesville,
Ohio,
the
electric
fund
is
32%
of
city
revenue.
PILOTs
amount
to
$
700,000
per
year.
Stranded
debt
would
be
$
5,733,000.
The
Painesville
Power
Plant
employs
63
people.


In
St.
Marys,
Ohio,
the
electric
fund
is
31%
of
total
city
revenues.
Stranded
debt
would
amount
to
$
142,000
in
annual
debt
service.
The
St.
Marys
Electric
Power
Plant
employs
25
people
with
an
average
salary
of
$
40,061.


For
Shelby,
Ohio,
PILOTs
amount
to
$
50,000
per
year.
Stranded
debt
would
be
$
4
million.
The
Shelby
Power
Plant
employs
37
people
with
wages
at
or
above
local
labor
rates.


For
Menasha,
Wisconsin,
PILOTs
amount
to
about
$
250,000
per
year.
Stranded
debt
would
be
$
2
million.
The
Menasha
Power
Plant
employs
13
people
at
an
average
salary
of
$
43,680.

Additional
examples
of
employment
market
statistics
include:

Crisp
County,
GA
Pella,
IA
Independence,
MO
Hibbing,
MN
Crawfordsville,
IN
Marshall,
MO
No.
of
Employees
65
21*
220
84
20*
90
Average
Salary
Well
Above
Local
rate
$
38,66
7
Above
Local
Average
$
42,390
$
43,680
25­
40%
higher
than
local
rates
*
Power
Plant
Operations
Only
ESTIMATED
COMPLIANCE
COSTS
DOVER,
OHIO
Boiler
No.
4
does
not
meet
the
proposed
standard
for
PM.
Although
it
has
not
been
stack
tested
for
acid
gases
and
Hg,
mass
balance
and
engineering
judgment
suggest
that
it
will
probably
comply
with
the
proposed
standards.

The
following
options
are
possible
1.
Install
a
polishing
electrostatic
precipitator
(
ESP)
downstream
of
the
existing
ESP
for
PM
control
at
a
cost
of
$
2.15
million.
This
assumes
nothing
has
to
be
done
to
comply
with
HCI
and
Hg
standards.

2.
If
HCI
and
Hg
need
polishing
in
addition
to
the
PM
control,
then
Dover
could
replace
the
ESP
with
a
dry
ambient
injection
system
followed
by
a
baghouse
and
induced
draft
(
ID)
fan
at
a
cost
of
$
3.3
million.
Dover
would
inject
hydrated
lime
and
activated
carbon
to
neutralize
and
bind
the
HCI
and
Hg,
respectively,
and
then
filter
the
treated
flue
gas
with
a
baghouse.

ST.
MARYS,
OHIO
Boiler
No.
6
does
not
meet
the
proposed
standard
for
PM.
Although
it
has
not
been
stack
tested
for
acid
gases
and
Hg,
mass
balance
and
engineering
judgment
suggest
that
it
may
comply
with
the
proposed
standards.
Boiler
No.
5
qualifies
as
a
"
limited
use"
boiler
and
would
have
no
MACT
Standard
requirements
as
the
MACT
rule
is
currently
proposed.

The
following
options
are
possible:

1.
Replace
the
internals
of
the
existing
electrostatic
precipitator
(
ESP)
for
PM
control
at
a
cost
of
$
0.375
million.

2.
Exactly
the
same
as
Dover
Option
No.
2,
except
the
cost
is
$
2.5
million.

ORRVILLE,
OHIO
Boiler
No.
10
is
considered
a
"
limited
use"
boiler,
however,
it
shares
a
common
ESP
with
Boiler
No.
11
to
control
PM.
When
No.
10
and
No.
11
operate
separately,
each
one
complies
with
the
proposed
PM
standards.
No.
12
and
No.
13
also
comply.

Chlorine
and
Hg
sampling
data
indicate
wide
variability.
It
appears
that
a
dry
injection
system,
baghouse
and
ID
fan
will
be
required.
The
capital
costs
are
summarized
in
the
following
table:

No.
10
&
No.
11
No.
12
No.
13
Fabric
Filter
$
3,350,000
$
2,950,000
$
3,300,000
Lime
Storage
&
Delivery
$
250,000
$
250,000
$
250,000
ACI
$
100,000
$
100,000
$
100,000
Total
Cost
$
3,700,000
$
3,300,000
$
3,650,000
This
option
will
remove
20­
50%
of
the
HCI.
If
higher
efficiencies
are
required,
the
incremental
cost
of
installing
a
dry
scrubber
in
lieu
of
a
dry
injection
system/
baghouse
is
$
2.2
million.

Vendor
quotes
for
dry
injection
system
and
baghouse
are
as
follows:

No.
10
&
No.
11
No.
12
and
No.
13
Pulse
Clear
Baghouse
$
2,583,013
$
3,236,706
Rapid
Absorption
Process
$
2,241,733
$
2,659,062
Total
$
4,824,746
$
5,895,768
Total
Plant
capital
cost
=
$
10,720,514
Notes
and
Assumptions:
1.
Co­
firing
or
a
total
switch
to
pipeline
natural
gas
(
PNG)
is
an
option,
but
has
not
been
evaluated.
2.
Compliance
with
the
proposed
ICI
Boiler
MACT
standards
only.
3.
No
fuel
switch
to
a
different
coal
affecting
performance
of
the
ESP.
4.
These
are
planning
level
engineering
capital
cost
estimates
only.
For
example,
these
costs
do
not
take
into
account
space
constraints,
etc.

TRANSMISSION
CONSTRAINTS
In
the
upper
Midwest
there
are
a
handful
of
municipal
generators
(
Marquette,
Escanaba,
and
Holland,
Michigan;
Menasha,
Wisconsin;
and
Rochester,
Minnesota)
that
are
transmission
blocked.
Effectively,
these
systems
have
no
other
means
of
electric
supply
for
their
residents.

In
addition,
Pella,
Iowa,
has
limited
transmission
into
the
city.
If
their
power
plant
were
to
shut
down,
$
7
million
would
have
to
be
invested
to
build
additional
transmission
capacity.
Annual
debt
service
is
estimated
to
be
$
710,000.

REQUESTED
SOLUTIONS
1.
Municipal
electric
generators
and
their
trade
associations
have
discussed
with
the
EPA
the
use
of
a
separate
subcategory
in
selecting
a
MACT
"
floor"
for
municipal
electric
utilities.
The
EPA
has
this
authority
to
create
separate
categories
or
subcategories
and
is
not
required
to
set
the
level
of
control
for
municipal
utilities
based
upon
the
thousands
of
industrial/
commercial/
institutional
boilers
and
process
heaters
that
also
are
subject
to
the
rule.
We
strongly
believe
that
the
EPA
should
use
this
authority
as
outlined
in
Sections
112(
c)(
5)
and
112(
d)(
1)
of
the
CAA.

2.
If
the
EPA
is
determined
to
regulate
these
municipal
electric
generators
without
designating
a
separate
subcategory
for
municipal
electric
utilities
in
the
industrial
boiler
MACT,
we
would
encourage
the
EPA
to
establish
a
separate
source
category
for
small
municipal
generators
under
Section
112(
c)(
5).
This
process
would
require
that
the
EPA
promulgate
the
MACT
for
municipal
electric
utilities
within
two
years
(
with
implementation
three
years
afterward).
Thus,
the
municipal
electric
utilities
would
not
be
covered
in
this
rulemaking
and
would
be
covered
in
their
own
rulemaking.
