March 20, 2012 / 10:48 PM / 5 years ago

State OKs Georgia Power plan to shut coal plants

* Commission voted 4-1 to retire plants

* Georgia Power approved to buy replacement power

March 20 (Reuters) - Georgia utility regulators on Tuesday approved a request from Southern Co's Georgia Power unit to retire about 600 megawatts of oil and coal-fired generation in the state and to buy replacement power from other Southern-owned power plants beginning in 2015.

The Georgia Public Service Commission voted 4-1 to allow Georgia Power to shut two coal units, totaling 569 megawatts (MW), at the Branch in Putnam County by the end of 2013 and a small oil-fired unit at Plant Mitchell this year due to more stringent air pollution regulations from the U.S. Environmental Protection Agency, the PSC said in a statement.

Georgia Power and other utilities are working to reduce their reliance on coal-fired generation.

U.S. companies have announced plans to shut or retire more than 30,000 MW of coal units rather than invest in costly pollution control equipment. Weak power demand and low natural gas prices also hurt the economics of older coal plants that may not meet new EPA standards.

Southern Co, which operates utilities in four states, said coal's share of its energy mix fell to 49 percent last year, from about 67 percent five years ago. Natural gas use jumped to 28 percent from 13 percent.

Regulators also approved Georgia Power's plan to replace the lost oil and coal generation with 15-year power purchase contracts totaling 998 MW from three natural gas-fired power plants operated by Southern Power Co, an unregulated Southern Co unit, in 2015.

The PSC rejected a fourth power contract sought by Georgia Power for another 564 MW from an Alabama power plant operated by an independent company.

In addition to the cost of the purchased power, Georgia Power will be able to recover an additional $2.30 per kilowatt-hour per year from customers beginning in 2019 under a state law.

"The purpose of the additional sum is to encourage the company to seek long-term power purchases in lieu of self-build projects," the PSC said in a statement.

Commissioner Tim Echols, the lone vote against the proposal, said the Georgia Power request "provides too much reserve margin at too high a price."

"It is a policy decision," Echols said on Twitter. "With a large reserve margin, it eliminates the need to purchase power from independent power producers."

The Georgia PSC also approved the utility's request to add pollution controls at four coal-fired units at Plant Bowen totaling about 3,100 MW; two coal units at Plant Wansley, totaling 926 MW; and four coal units at Plant Hammond, totaling 800 MW.

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