Wisconsin Electric supports mercury rules that balance environmental, electric reliability, cost impact concerns

Public Service Commission studying Dept. of Natural Resources proposal

MILWAUKEE, Wis., Aug. 24, 2001 – Wisconsin Electric-Wisconsin Gas today filed comments with the Public Service Commission of Wisconsin (PSCW) about the possible cost and reliability impacts of mercury emissions rules being proposed by the Wisconsin Department of Natural Resources (WDNR).

The PSCW is investigating the potential impact rules proposed by the WDNR will have on Wisconsin’s electric generation, specifically in the areas of reliability, fuel mix and cost of the state’s existing and planned electric generation portfolio.

While supporting the need for additional efforts in the area of mercury removal, WE-WG finds that the proposed state mercury rules would have a significant impact on the cost that consumers pay for electricity. The majority of these costs would occur because the rule package would change the type of fuel that WE-WG uses to create electricity, shifting from lower cost coal to natural gas. This is largely due to the rule requiring 90% mercury reductions, plus “offsets,” or additional reductions, for any new coal-based generation.

Instead, the company re-stated its support for reducing mercury in the environment, and advocated in favor of the WDNR developing workable mercury reduction regulations that include a multi-emission option. A multi-emissions option would include more reasonable reductions in mercury, in addition to reductions in NOx, SO2, and greenhouse gases, and would achieve more environmental improvement at less cost without jeopardizing state fuel mix or reliability of electric supply.

WE-WG also points out that mercury controls are still under development. WE-WG is participating as one of four national testing sites in a $6.8 million U.S. Department of Energy (DOE) and U.S. Environmental Protection Agency (EPA) mercury control test occurring at its Pleasant Prairie Power Plant.

“We believe we can balance environmental, energy supply and affordable electricity objectives,” said Richard R. Grigg, president and chief operating officer of WE-WG. “The real risks that the proposed new rules have on electric system reliability and the cost impact on customers deserve a balanced and complete assessment.

“Obviously, we agree that there are environmental benefits to reducing the amount of mercury emissions released in the atmosphere,” said Grigg. “But, as drafted, the proposed rule package taps electric customers for financing a program that goes far beyond a reasonable state-only program. We would like to turn this rule proposal around and focus on what can be done to address the mercury issue in Wisconsin, rather than what cannot be done.”

A summary of WE-WG’s comments includes:

– The company estimates that the proposed rule package would add more than $1.4 to $3.3 billion to the cost of energy delivered to its customers over the next three decades.

– The company discusses the potential impact on the Power the Future program to build additional electric generation capability in the state, stating that in order to allow the new PTF advanced coal units, WE-WG’s existing coal-based generating capacity (over 2,600 MW) would have to be scrapped and replaced by natural gas.

– WE-WG discusses the importance of fuel diversity for producing electricity. The proposed rules would result in the state heavily depending on natural gas for its electric supply and subject to the instability and volatile pricing that would result with over-reliance on a single fuel source.

– WE-WG identifies four main areas of reliability risk: construction and availability of new capacity, lack of fuel diversity, development of a significantly expanded statewide natural gas infrastructure, and mercury controls performance and balance of plant impacts.

– The company states that controlling mercury emissions is complicated and significant variations occur due to differences in types of coal burned as well as site specific factors. WE-WG is very involved in mercury controls research, and its Pleasant Prairie Power Plant is the location of one of four national testing sites for a new sorbent injection control technology. DOE and EPA are co-sponsors of this research, and results will be of nationwide significance as EPA develops federal mercury rules for utility power plants (due out in 2003).

– The company encourages a multi-emissions approach to environmental performance, discussing the comprehensive plan it submitted last year along with WDNR to the EPA through EPA’s “Project XL” program. The Project XL proposal featured reductions in four emissions, including mercury by 40 percent, in exchange for a degree of regulatory certainty for a period of ten years.

These concerns, as well as others, are detailed in the WE-WG filing.

Wisconsin Electric-Wisconsin Gas, the principal utility subsidiary of Wisconsin Energy Corp. (NYSE: WEC – news), serves more than one million electric customers and more than 960,000 natural gas customers throughout Wisconsin and Michigan’s Upper Peninsula. Visit our company’s Web site at www.WE-WG.com. Learn about Wisconsin Energy Corp. by visiting www.WisconsinEnergy.com

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