POWER September 2016 - 62

COAL FLEET
Finally, the government may step in with
economic development incentives to decommission
and redevelop sites and create jobs.
As a Genco, if you are in a Regional Greenhouse
Gas Initiative state (see sidebar " Carbon
Pricing " ) where you can recover the cost of
closing plants through the rate base, it is often
wise to do so. In deregulated states, conversely,
shareholders have to pay for those costs upfront,
and more case-making must typically
be done to secure board approval for the $10
million to $20 million price tag.
More progressive companies take some action
with the properties-from tearing them
down or selling them, to treating them as a
group to clear underperforming assets from
their balance sheets. Other companies simply
accumulate the old sites without action, quickly
leading to 10- to 15-year-old power plants
on the books, costing money, presenting risk,
and placing a drag on earnings.
Preparing for Retirement
Decisions affecting power plants are made at
Carbon Pricing
The Regional Greenhouse Gas Initiative
states (Connecticut, Delaware, Maine,
Maryland, Massachusetts, New Hampshire,
New York, Rhode Island, and Vermont)
participate in a cap-and-trade
market for carbon dioxide (CO2
) emissions.
In the most recent auction, more
than 15,000,000 CO2
allowances were
sold for $4.53 each, for a total of $68.3
million. Proceeds were used for energy
efficiency, renewable energy, and greenhouse
gas abatement programs.
Carbon pricing has not been factored
into power pricing in many of the coal
states. Because coal-fired power plants
produce CO2
emissions at twice the rate
September 19 - 20, 2016
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of combined cycle gas turbine plants,
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stayed federal Clean Power Plan, most
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Experience a conference
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the highest levels of Genco organizations, and
planning takes time. There are multiple stakeholders-including
executives, operations, asset
management, engineering, environmental,
security, IT, legal, and real estate-so it's important
to know who is in charge. Often, asset
managers are called on to manage the process
and pull together the various stakeholders.
Corporate boards and public utility commissions
also may play a role.
Assets are complicated and may affect a
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62
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diversified power system. To date, there have
been no significant reports of unplanned outages
as a result of retirements. Nevertheless,
once a decision has been made to retire a
plant, the owner must notify contractual counterparties,
the independent system operator or
regional transmission operator, and the North
American Electric Reliability Corp. (NERC).
NERC will determine whether reliability issues
exist and may determine " Reliability
Must Run " status, which may include payment
provisions to the generating company.
Before deciding what to do with a unit headed
for retirement, it is important to understand the
value of the site and the costs to carry and decommission
it (see sidebar " The Costs of Closure " ).
It's also important to be proactive, rather
than reactive. A clear plan is essential-either
you run the project or the project runs you.
Gencos, engineering firms, real estate experts,
developers, investors, and contractors
POWER | September 2016
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POWER September 2016

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