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PSEG Coal Risk 2011


Electric utility companies that rely on coal face numerous challenges and uncertainty regarding environmental compliance costs, coal price-volatility, and the cost of carbon capture and storage for coal plants. This unprecedented combination of forces has led utility companies such as Progress, Duke, and Xcel to announce coal plant retirements.

Coal combustion for electricity is a major contributor to air pollution, accounting for one third of the nitrous oxide (NOx), 50% of the mercury, a hazardous air pollutant, and over 36% of the carbon dioxide (CO2) emitted in the U.S. Older coal plants emit substantially more of these pollutants per Megawatt hour (MWh) than newer plants.

PSEG operates five coal generation facilities in Mercer and Hudson, NJ, Conemaugh and Keystone, PA, and Bridgeport Harbour, CT. The coal fleet was built between 1960-1971, making the oldest plant fifty years old. While coal accounted for only 15% of our company's electricity production in 2009, it is responsible for several of our company's acknowledged environmental risks:
  • NJ's environmental agency ruled in October 2008 that the Hudson plant's outdoor coal storage presented a hazard to groundwater.
  • Stricter limits on NOx emissions in NJ will lead to the retirement of 5 units (800MW) in Hudson and Mercer by 2015.
  • If CT does not reisssue NOx emission reduction credits in sufficient volumes then the costs of reducing emissions may be prohibitive.
  • If PA caps mercury permits to align with the most stringent standards, Keytone and Conemaugh may not be able to achieve necessary reductions.
The U.S. Environmental Protection Agency (EPA) is moving, in some cases pursuant to court order, to tighten regulation of the air, water and waste impacts of coal plants. Industry analysts (Bernstein Research, Jeffris & Company, Standard & Poor's, Wood MacKenzie) have concluded that the cost of additional environmental control equipment for NOx, particulates and mercury may make it uneconomic to retrofit small, older coal plants. Pending EPA regulations governing storage and disposal of coal combustion wastes will likely increase operating costs for coal plants.

EPA is also developing regulations for CO2 and other greenhouse gas emissions. However, the lack of national climte polcy to reduce CO2 emissions further adds to economic uncertainty for coal plants. Commercial deployment of carbon capture and storage technology for coal plants is 10 to 15 years away and "would increase electricity costs by about 30 to 80 percent," the U.S. Government Accountability Office reports.

Declining reserves of high quality central Appalachian coal, unprecedented price increases and coal price-volatility, versus abundant supplies and record low-pricecs for cleaner burning natural gas, and declining costs for wind and solar energy, make continued reliance on coal increasingly problematic.

Shareowners request that the PSEG Board, at reasonable cost and omittinig proprietary iniformation, issue a report by November 2001 on the financial risks of continued reliance on coal contrasted with increased investments in efficiency and cleaner energy. Such report should assess the cumulative costs of environmental compliance for coal plants compared  to alternative generating sources.