Coming soon to a Pepco bill near you: the consequences of the Clean Air Act.
Here, far from the withering forests and lakes where fish float belly up, far from the smoky Midwest skies, Potomac Electric Power Co. customers will experience some of the economic fallout of the landmark environmental legislation.
Four of the 25 plants Pepco uses to generate electricity emit more sulfur dioxide into the air than would be allowed under the proposed amendments to the Clean Air Act. Versions of the bill approved by the Senate and House of Representatives would halve the amount of sulfur dioxide that could be emitted by utilities nationwide and set emission ceilings for individual plants -- the "thousand points of smoke," as the Natural Resource Defense Council's senior attorney David Hawkins refers to them.
Ultimately, the ambitious act is designed to remove 10 million tons of sulfur dioxide, the main culprit in acid rain, from the air by the year 2000. The act also would reduce nitrogen oxide emissions.
To meet these limits, utilities in the next 10 years will be shopping for sources of cleaner-burning low sulfur fuel, installing scrubbers to improve the quality of gases coming out of their smokestacks and investing in new technology that removes sulfur and cleans up coal before it is burned.
None of these changes will come cheaply.
Pepco estimates that doing the job could add another $100 to the average customer's annual utility bill over the next 10 years, which for most customers now runs about $700 a year. That would come on top of any other increases that occur.
Most of the economic consequences for utilities will come from the portions of the Clean Air Act that deal with acid rain. Some power companies estimate that cleanup measures aimed at reducing acid rain may add as much as 25 percent to consumer electric bills, compared with an estimated increase of 14 percent for Pepco customers.
The consequences not only will ripple through the pocketbooks of the utilities' customers, but also through the coal and natural gas industries and through the companies that build power plants and supply the tools for the cleanup.
Some utility executives protest that the price is too high, the benefits too uncertain and the potential damage to international competitiveness too great to warrant the costs.
In all, the utility industry estimates that the act could add $4 billion to $5 billion a year to electric bills by the year 2010.
"It's going to be very expensive -- we think too expensive," said Edward L. Addison, president and chief executive of the Southern Company. "We cannot afford the burden of billions of dollars if it's not necessary."
Indeed, although the ultimate costs of reducing emissions to the levels required by the law are hard to measure, the benefits of doing so are equally incalculable. But they include reducing damage to forests and streams, reducing the damage to Washington monuments and other buildings by acid rain, removing some of the pollutants that create the thick haze that hangs over Washington on a hot summer day and probably improving health, according to environmentalists.
"Nobody pays for clean air or hazy air, so no one has assigned a value to it," said the National Resource Defense Council's Hawkins.
"How much money do you want to pay to protect a natural ecosystem?" said James Galloway, a professor of environmental science at the University of Virginia. Galloway and his colleagues have found acidification in streams in the Shenandoah National Park, just two hours distant from Washington.
"We are clearly moving into a new era" of environmental concern, said John M. Derrick Jr., Pepco's executive vice president. "That's going to be a mighty expensive era relative to now, especially in the early decades, but if that's public policy -- that's public policy. Because the public pays for it."
What the public will pay for in the case of Pepco is $120 million in costs that the utility estimates it will incur -- and probably pass on -- to comply with Phase I of the bill, which calls for reducing sulfur dioxide emissions to 2.5 pounds per million BTUs of power. By the end of Phase II, the emissions are supposed to be reduced to 1.2 pounds per MBTUs.
Of that $120 million price tag, about half will cover capital costs for new equipment. The rest will go for operating and maintenance expenses, as well as for cleaning up emissions at an Ohio power plant.
In 1987, Pepco signed a contract to buy approximately 15 percent of its daily electric needs from Ohio Edison Co., agreeing that Pepco customers would help pay the bill if federal law in the future required the Midwestern utility company to clean up emissions. With the Clean Air Act at hand, that bill may soon be due.
Ohio Edison already has reduced emissions substantially, according to Edison spokesman Ralph DiNicola. "The investments already made in nuclear power and environmental controls position us better than some Midwestern electric companies to meet the requirements of the legislation now under consideration," he said. "Approximately 42 percent of our generating capacity is nuclear, oil or already-scrubbed coal-fired units, and those would need no additional equipment under the pending legislation."
DiNicola said that the power company has spent more than $2 billion since 1975 on environmental protection.
As a result, about 17 cents of every dollar the utility's customers pay goes for environmental protection, he said.
Although Pepco customers will shoulder some of the additional costs of Ohio Edison's cleanup efforts, buying power rather than building additional capacity during the years of the contract represents a net savings to Pepco customers, said Pepco's Derrick.
At its own facilities, Pepco expects to reduce emissions at two power units at its Chalk Point, Md., facility and at two others in Morgantown, Md., initially to cleaner burning oil. All four units are coal-fired. Oil costs substantially more -- $2.78 per MBTU compared with $1.69 for coal in 1989.
Pepco, which will have to modify its burners, also will bear a portion of the expense for installing scrubbers at the Conemaugh Generating Station near Johnstown, Pa., which it owns along with other utilities.
Pepco buys coal from the Eastern Appalachia region, an area expected to be hard hit as utilities reduce their dependence on high-sulfur coal.
Sen. Robert Byrd (D-W.Va.), one of the few members of the Senate to vote against the act, said 3,000 to 5,000 jobs may be lost by 1995 in regions that produce high-sulfur coal. In many of the communities where job losses will occur, other jobs are hard to find and pay substantially less than coal mining.
Pepco expects to reduce its coal purchases by about a million tons, or 25 percent of what it now buys. Instead it will use more oil to generate power at the four facilities that are targeted by the Clean Air Act.
Fuel switching is likely to be a widely used strategy in the initial phase of the cleanup. But some utilities also will switch to lower sulfur coal rather than alternative fuels.
The bill as passed in both the Senate and the House of Representatives leaves it up to utilities to decide how to meet the ceilings the law would establish.
In addition to fuel switching, electric utilities are likely to turn to scrubbers, which clean up gas coming out of the power plants, and to new technologies that clean up coal going in.
"It appears to us that we could be in compliance for the first phase by just going to lower sulfur coal," said John A. Ahladas, a senior vice president for Virginia Power, which began the process of switching to lower sulfur coal several years ago.
"It's conceivable that because of additional generation growth in the company we might have to install one scrubber by 1995 if low-sulfur coal is not available at reasonable prices. But our hope right now is that we can comply by switching," Ahladas said.
The company also would like to defer a decision on scrubbers until new, clean coal technologies have an opportunity to be developed further.
Scrubbers essentially work like chemical processing plants that treat the chimney gas from plants and reduce the amount of pollutants they produce. There are already 150 installed on power plant stacks in the United States, more than in any other country in the world, according to the Edison Electric Institute.
Although the Clean Air Act probably will spur increased sales of scrubbers, many companies probably will pursue the same strategy as Virginia Power Co., waiting to see if another approach becomes economically viable.
Installing scrubbers on existing plants is expensive and also reduces the efficiency of a plant, said Kurt Yeager, vice president of the Electric Power Research Institute.
For plants that burn coal, there are several methods that can be used to make it burn cleaner. One of the simplest techniques, said Yeager, is simply to crush the coal and separate the sulfur when it occurs as pyrite rock. Pyrite sinks, while coal floats. While the technique is relatively simple, it also has a drawback -- it doesn't work for all types of coal.
Another technique is to convert the coal to gas, a clean burning fuel. Unfortunately for coal producers, the cost of doing so is still about double what it would cost to use natural gas in the first place. Pepco for several years has planned to build a power plant at Dickerson, Md., that will use natural gas or other fuel initially to generate power but ultimately could use coal gasification if fuel prices eventually dictate that choice.
Pepco is planning on installing scrubbers at its Chalk Point and Morgantown facilities when Phase II of the Clean Air act rolls around. The downside is that these scrubbers will produce either fly ash or a sludge that will have to be disposed of by the utility.
"When it comes time to dispose of that sludge, it's not going to be -- 'Okay, that's great. It helped clean the air. Come and landfill it next to my farm,' " said Derrick. The debate on the environment will continue, he said.
Does he see a benefit from the cleanup proposed by the Clean Air Act?
"I have no personal reaction to acid rain," he said. "Whether sulfur dioxide going into the streams and lakes has an effect on the streams and lakes is not completely agreed to yet. ... I don't have any personal experience with it. I don't notice the paint on my house or car peeling."
"But what I think is not important," said Derrick. "It's what society thinks. My responsibility is making sure the debate is whole by making sure they understand the costs."
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