PPL to Spend Over Half-Billion Dollars to Clean 3 Power Plants

Environmental legislation passed a decade and half ago and the threat of stricter rules to come are prompting PPL Corp. to spend more than a half-billion dollars to clean up three coal-fired power plants.

ALLENTOWN, Pa. — Environmental legislation passed a decade and half ago and the threat of stricter rules to come are prompting PPL Corp. to spend more than a half-billion dollars to clean up three coal-fired power plants.

The Allentown electric company announced Wednesday that it will install "scrubbers" on the two plants at its Montour facility north of Danville and the largest of its Brunner Island plants south of Harrisburg.

The additions will remove acid rain-causing sulfur dioxide.

"We are making this investment because it makes good business sense, and because it's the right thing to do," PPL Chief Executive William Hecht said at a news conference at a nature preserve next to the Montour plants.

Hecht stressed that PPL's initiative is voluntary. But the main reason doing the right thing makes goods business sense today is the Clean Air Act, signed into law by President George H. W. Bush in 1990.

That legislation, the model for the current Bush Administration's proposed Clear Skies Act, instituted a market-based approach to pollution control.

Utilities could reduce their emissions by using cleaner coal or installing scrubbers. Otherwise they would have to buy from better-performing utilities a limited number of allowances to pollute the air.

Under that emissions-trading system, the price of allowances to emit sulfur dioxide has tripled over the last year, reaching an all-time high of $740 a ton, according to Evolution Markets, a broker in White Plains, New York.

As result, installing scrubbers at coal-fired plants, which generate half of U.S. electric power, has suddenly become cheaper than the long-term cost of buying allowances.

"Scrubbers are actually lower cost to us than consuming $700-a-ton emission allowances," William Hecht, PPL chairman, said on a Feb. 2 conference call with analysts and investors. "So our objective now is to get scrubbers in as soon as we practically can so that we can actually sell surplus allowances we have."

The expectation of new environmental restrictions has been blamed for contributing to the rise in the price of sulfur dioxide allowances.

President Bush has touted cap-and-trade markets such as the sulfur dioxide allowance program as the cheapest way to regulate air pollution. The Clear Skies Act, first proposed in 2002 and still under consideration by Congress, would double the number of allowances a utility must buy for each ton of sulfur dioxide it emits starting as early as 2010. Other utilities, including Southern Co. and Allegheny Energy, are taking steps to limit emissions.

More than $12 billion in planned plant upgrades have been announced in the past year.

"The scrubber wave is beginning," said James Stone, a vice president at closely held Foster Wheeler in Clinton, N.J., one of the three biggest suppliers of pollution control equipment.

PPL's scrubber construction will begin early next year and is expected to be completed in 2008 for Montour and 2010 for Brunner Island.

Those sites are PPL's largest coal-fired generating units in Pennsylvania, and they account for the vast majority of the company's sulfur dioxide emissions.

Together, they spew about 180,000 tons of sulfur dioxide into the air every year.

The scrubbers are capable of capturing nearly all through a chemical process that uses pulverized limestone.

PPL said it has plans to re-use the by-products from the scrubbers in an as-yet unannounced money-making venture. "This scrubber installation is much more than an environmental project," said Hecht. "It demonstrates that what's good for the environment also can be beneficial for a company and its shareowners."

The projects will create 15 to 20 permanent positions and hundreds of construction jobs over a five-year period, according to PPL.

"What we have here with this project is a triple win, one for the power industry, one for the local economy and a very big one for the environment," State Environmental Protection Secretary Kathleen McGinty said during her visit to the site.

Environmental groups, too, lauded PPL's initiative.

"It doesn't get better than this," said John Stanton, senior council with Clear the Air in Washington, D.C. "It will save lives and will even help with fly fishing -- and it will create jobs."

PPL is not planning similar upgrades at its two Lehigh Valley coal-fired power plants. Rather, the company intends to permanently shut down the two units at its Martins Creek facility in 2007.

The site's two other power plants, which use natural gas and oil, will continue to generate electricity.

PPL controls about 12,000 megawatts of power production in the United States, serves 1.3 million electric and gas customers in Pennsylvania, and has more than 2,300 workers in Lehigh and Northampton counties. It also owns major electric companies in the United Kingdom, Chile and Bolivia.

It earned $698 million in 2004.

PPL stock rose 67 cents per share, or 1 percent, to close at $53.90 in trading on the New York Stock Exchange on Wednesday.

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