POWER January 2020 - 16

FOCUS ON O&M
Ash pond and landfill closure is not
cheap, due to current state and federal
requirements for closure. Assuming your
decommissioning project has a budget
of $36 million (typical for an average twounit
coal facility), ash pond remediation
can range from 70% to 75% of this total.
Asbestos and other hazardous material
remediation can account for an additional
5% to 7% of costs, with structural demolition
accounting for the rest.
Managing the Regulatory Process
Once you have decided decommissioning
and dismantlement is the best
option, it's time to launch the studies
needed to support conversations with
your state public utility commissions
(PUCs) and regional transmission organizations
(RTOs). Though both regulatory
organizations have different mandates,
each needs to be well-informed. Don't
wait for formal hearings before beginning
your conversations. Working up
front with regulatory authorities to involve
them in the process and get buy-in
on planning, studies, and solutions can
pay big dividends later.
Preparation can be particularly important
in states that provide statutory support
for annual dismantlement accruals.
These accruals cover contingency costs
along with dismantlement costs. Accounting
treatments may vary by state,
but in general, decommissioning costs
are rolled into the depreciation rate and
the accruals go to accumulated depreciation.
In some states, accumulated
dismantlement reserves and accruals
can be maintained in a special account,
separate from other accumulated depreciation
reserves and expenses.
More and more states are recognizing
these expenses are real and providing a
mechanism for cost recovery is fair, because
of the public benefits that result
from a well-managed decommissioning
process.
It is important to have well-documented
cost estimates during these meetings.
You should focus on the big stuff,
with steel and concrete (Figure 2) understood
as the main structural demolition
drivers. Obtain good estimates of
the volume of materials and cross-check
with similar facilities to verify estimates.
If possible, have a demolition contractor
review your estimate.
In planning for both formal and informal
interactions with state PUCs or
RTOs, anticipate tough questions. Expect
critiques from commission staff
along these lines:
■ No net cost or positive value demolition
has been allowed in other cases.
■ Contingency estimates are too high.
■ Estimated scrap values are too low.
■ Productivity factors are too low.
■ Proposed levels of decommissioning
and remediation are excessive.
Question one essentially can be expected
to follow the line of reasoning in
other decommissioning cases in which
certain demolition costs were disallowed.
Expect to be asked to respond
to evidence presented elsewhere justifying
Key
Takeaways-How
a Little Planning Can
Pay Off Big
■ Many plants occupy highly desirable
real estate with access to
water and railways. With proper remediation,
properties can be sold
for re-use.
■ The rising number of retiring plants
has contributed to an increase in
the scrap metal market. Predicted
global revenue from coal plant decommissioning
could total $5.3 billion
this year.
■ Repowering a plant with gas-fired
units can make sense because
critical infrastructure is already in
place, including transmission lines,
substations, and water.
lower decommissioning costs.
Sometimes these costs were based on
bids from demolition contractors that
did not include the additional costs of
environmental remediation and other
factors. Be ready to show your cost projections
are accurate for your particular
site.
For question two, research the contingencies
approved in prior regulatory
proceedings. Contingencies are typically
higher on decommissioning than construction
because of the higher level of
uncertainty. Judgments and insights
from outside professional groups will
be invaluable.
The question of scrap values can be
2. The value of materials that can be reused
after demolition of a coal-fired power plant is
an important consideration in the decommissioning
process. Plant owners should obtain
good estimates of the amount of material
that can be salvaged, and its potential market
value. Courtesy: Burns & McDonnell
16
tricky because of the volatile nature of
the markets for steel, copper, and other
metals. Expect to hear arguments from
intervenors that utilities should assume
higher scrap values because of high demand
in growing markets like China and
India. These arguments can be refuted
by demonstrating the actual historical
averages of market prices.
Questions about productivity factors
can be countered by looking at the
factors approved in prior studies. Also
www.powermag.com
look at published resources and public
records of demolition contractor estimates.
The
question of excessive levels of
decommissioning and remediation can
be vexing. A good strategy when preparing
for pushback is to start with the
literal regulatory requirements, and
then outline each step required to meet
the requirements of the regulation for
complete physical removal and disposal
of site materials, plus restoration of the
site. Prepare for arguments that other
options are available, such as selling the
facility, even if market economics do not
support it. Be prepared with evidence
of actual market conditions for " as is "
sales of similar facilities.
Plant owners are finding remediation
costs are much higher than anticipated
even a few years ago. Though the cost
of removing hazardous material can be
accurately estimated, new regulations
can be a wild card, particularly those affecting
ash ponds and landfills.
Planning studies that begin with the
end in mind will be a solid basis for any
regulatory effort. Many PUCs are recognizing
it is reasonable and prudent
to allow some cost recovery, given the
scale of decommissioning and dismantlement
costs faced by the power industry-but
don't assume commissioners
will support requests without solid rationale.
With proper planning, analysis,
and preparation, coal plant retirements,
like personal retirements, can definitely
lead to brighter days ahead. ■
-Jeff Kopp is managing director of 1898
& Co., part of Burns & McDonnell.
POWER | January 2020
http://www.powermag.com
POWER January 2020

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