While federally mandated pollution controls have reduced chemical emissions at power plants, they came at a cost.

Power companies will bear more costs for federally mandated pollution controls in the future, which will eventually be passed along to their customers. Owensboro Municipal Utilities installed sulfur dioxide "scrubbers" in the early 1990s and nitrogen oxide controls in 2004 at a cost of about $150 million for the scrubbers and about $50 million for nitrogen oxide controls at the Elmer Smith Station. M-I file photo

Power companies will bear more costs in the future as new federal regulations take effect to reduce other power plant emissions. Those new costs eventually will be passed along to customers.

Coal-fired power plants were required to reduce sulfur dioxide emissions as part of the federal Clean Air Act. Bob Hunzinger, general manager for Owensboro Municipal Utilities, said the company installed sulfur dioxide "scrubbers" in the early 1990s and nitrogen oxide controls in 2004.

Hunzinger said OMU spent about $150 million on sulfur dioxide scrubbers and about $50 million on nitrogen oxide controls at its Elmer Smith Station. The bonds raised to pay for the emissions controls make up the bulk of the company's $208 million debt load. The company has only $12 million in bonds to pay on the Smith station, while the rest of the debt is for pollution control bonds.

"Effectively all of our outstanding debt, 90 percent of it, is environmental compliance related," Hunzinger said last week. Pollution control projects have affected customers financially, with rates rising 25 to 30 percent, Hunzinger said.

When OMU built its sulfur dioxide scrubbers, there were other options. At the time, sulfur dioxide emissions caps were placed on power plants -- but plants were allowed to purchase credits from other companies, which allowed them to emit more than permitted under the caps.

The decision to build the scrubbers in the early 1990s seems to have been the correct move, said Hunzinger, who was not working at OMU at the time.

"It was done at a time when the projects, compared to doing those projects now, were less expensive," he said.

"Scrubbers and (nitrogen oxide) equipment are very big projects ... to undertake and maintain," said Sonya Dixon, spokeswoman for OMU. The company's decision to install the scrubbers "was a real commitment to the environment," Dixon said.

Gil Francis, spokesman for the Tennessee Valley Authority, said since 1976 the company has spent $4.4 billion on emissions controls at its power plants, and has $1.3 billion in additional pollution control projects under way.

"TVA is committed to improving air quality," Francis said. Because the company's 11 fossil fuel power plants were built with different configurations, emissions controls vary at the plants.

"You look for the best technology, based on what the plant structure is," Francis said. Through sulfur dioxide controls, emissions of the chemical from TVA plants has been reduced by 80 percent, Francis said.

Hunzinger said OMU's nitrogen oxide controls are operating "pretty much as expected." More federal regulations are expected, as the government moves to reduce emissions of chemicals it already monitors and begins addressing mercury emissions.

"Mercury is coming," Francis said. "We haven't seen the regulations yet, but they are in the development stage."

"Mercury is still somewhat of an unknown at this point," Hunzinger said. Initially, the government will likely place mercury caps on emissions and allow companies to sell "credits" to one another, as was done with sulfur dioxide, Hunzinger said.

"Right now, we're doing testing on mercury emissions at the Smith plant," Hunzinger said. The first phase of the federal mercury reduction plan will be implemented in 2010.

"Nationally, the mercury removal technologies are in their infancy," Hunzinger said. "All coal has mercury in it. ... It's too early to tell how that is going to affect us, or what we would do to comply with mercury rules."

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Unfunded Mandates

This is the final day of a four-part series looking at how unfunded state and federal mandates are affecting the ability of local governments and other agencies to provide and pay for services. Today's articles will examine how federally mandated pollution controls have caused OMU rates to rise 25 to 30 percent; how local sewer customers would likely bear the financial burden for a mandate to separate sanitary sewer and stormwater systems in Owensboro; and how a state-run version of the federal water permitting program could cost more than $1.2 million in its first year.