Southern Company Files Comments on Proposed EPA Rule

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Aug 04, 2011, 04:30 ET

ATLANTA, Aug. 4, 2011 /PRNewswire/ -- Southern Company (NYSE: SO) today announced that it has completed a preliminary assessment of proposed federal regulations for coal-fired power plants and determined that the proposed rules would significantly impact customers and the overall U.S. economy as a result of higher costs for electricity and reduced reliability.

Southern Company's evaluation of how the various federal regulations would impact the company is included in formal comments being filed today with the U.S. Environmental Protection Agency (EPA) on the proposed Utility MACT (Maximum Achievable Control Technology) rule, which targets air emissions.

Based on its current assessment of EPA's proposed rules, Southern Company's operating subsidiaries would expect to:

install new emissions reduction equipment on approximately 12,000 megawatts (MW) of coal-fired generation, accounting for approximately 60 percent of the coal fleet,
retire approximately 4,000 MW of coal-fired generation,
change fuel for 3,200 MW or more of coal- and oil-fired generation to other fuels such as natural gas and
replace more than 1,500 MW of coal- and oil-fired generation with natural gas-fired generation.

These actions would result in approximately 40 percent of the coal fleet being either retired or transitioned to natural gas.

Southern Company's analysis indicates that through 2020, the estimated capital cost for the company's operating subsidiaries to comply with the full range of proposed rules for coal-fired generation -- including air emissions, water and coal ash -- would be between $13 billion and $18 billion.

The capital spending and fuel switching required for compliance with EPA's proposed rules could increase electricity prices an additional 10 percent to 20 percent over the next 10 years for customers of Southern Company's subsidiaries. Similarly, Southern Company's analysis of other studies by NERA Economic Consulting, Management Information Services and others indicates that electricity prices in the Southeast could increase 10 percent to 25 percent over the same 10-year period with job losses between 250,000 to 500,000.

"EPA has an important and valuable role in America," said Thomas A. Fanning, Southern Company chairman, president and CEO. "In the past, our industry has had a constructive relationship with the agency. However, these proposals are misguided in their content and timing.

"We all want to maintain a clean environment, and we also want a healthy economy, which relies on reliable electricity at costs that people and businesses can afford," Fanning added. "The proposed Utility MACT rule along with the other proposed EPA rules will threaten reliability and drive up costs. We must work toward a more sensible solution."

Fanning stressed that "customers and communities in the Southeast have been struggling with the economic recession and unacceptably high unemployment rates. This unprecedented and ill-timed transformation of the nation's electricity infrastructure will only impede the U.S. economic recovery, reduce our ability to create jobs and add to the economic burdens of our customers."

Fanning said the company is "providing EPA with the information they need to fully understand the reliability risks, economic impact and significant social consequences the proposed rules will have."

For example, Fanning said the three-year compliance timeframe of the proposed Utility MACT is much too short. Based on Southern Company's experience, the installation of technologies for reducing sulfur dioxide emissions have ranged between 40 and 69 months, and projects to replace generation have averaged four to six years.

Refueling coal-fired generation to natural gas may also take four or more years, since at most locations interstate natural gas pipelines will need to be expanded. Significant changes in generation also will require substantial transmission upgrades requiring long-lead time transmission projects to maintain reliability. "The extremely compressed construction and outage schedules will needlessly drive up costs and threaten reliability," said Fanning. "The consequences of EPA's unreasonable timetable are significant to our customers and our nation."

Decreased property tax revenues and job losses also would have negative consequences for state and local governments. Specifically, counties where coal-fired generation is retired will experience severe reductions in tax revenues and property tax receipts.

"While some may argue that jobs lost at coal-fired generating plants will be replaced by jobs at natural-gas fired plants or by jobs installing the retrofits, the reality is that there will be a substantial net loss of jobs, payroll and taxes," said Fanning.

As a potential solution, Fanning said an extension of the Utility MACT compliance timeframe to at least six years, for example, would achieve the same environmental results, ease inflationary pressures, protect reliability and reduce the loss of jobs.

As rules become final, Fanning said Southern Company's operating subsidiaries will work with their state public service commissions and their environmental regulatory agencies to assure compliance.

Since 1990, the Southern Company system has already invested more than $8 billion in emissions reduction equipment. The system's emissions of sulfur dioxide (SO2) and nitrogen oxides (NOx) have been reduced by 70 percent while energy consumption has risen 40 percent.

With 4.4 million customers and more than 42,000 megawatts of generating capacity, Atlanta-based Southern Company (NYSE: SO) is the premier energy company serving the Southeast. A leading U.S. producer of electricity, Southern Company is the parent firm of electric utilities in four states and a growing competitive generation company, as well as fiber optics and wireless communications companies. Southern Company brands are known for excellent customer service, high reliability and retail electric prices that are below the national average. Southern Company was named the World's Most Admired Electric and Gas Utility by Fortune magazine in 2011, and is consistently listed among the top U.S. electric service providers in customer satisfaction by the American Customer Satisfaction Index. Visit our website at www.southerncompany.com.

Cautionary Note Regarding Forward-Looking Statements

Certain information contained in this release is forward-looking information based on current expectations and plans that involve risks and uncertainties. Forward-looking information includes, among other things, statements concerning economic recovery, economic growth, environmental regulations and estimated expenditures, environmental compliance plans, estimated construction and other expenditures, plans and estimated costs for new generation, timing and completion of construction and other projects and sources of fuel. Southern Company cautions that there are certain factors that can cause actual results to differ materially from the forward-looking information that has been provided. The reader is cautioned not to put undue reliance on this forward-looking information, which is not a guarantee of future performance and is subject to a number of uncertainties and other factors, many of which are outside the control of Southern Company; accordingly, there can be no assurance that such suggested results will be realized. The following factors, in addition to those discussed in Southern Company's Annual Report on Form 10-K for the year ended December 31, 2010, and subsequent securities filings, could cause actual results to differ materially from management expectations as suggested by such forward-looking information: the impact of recent and future federal and state regulatory change, including legislative and regulatory initiatives regarding deregulation and restructuring of the electric utility industry, implementation of the Energy Policy Act of 2005, environmental laws including regulation of water quality, coal combustion byproducts, and emissions of sulfur, nitrogen, carbon, soot, particulate matter, hazardous air pollutants, including mercury, and other substances, financial reform legislation, and also changes in tax and other laws and regulations to which Southern Company and its subsidiaries are subject, as well as changes in application of existing laws and regulations; current and future litigation, regulatory investigations, proceedings, or inquiries; variations in demand for electricity, including those relating to weather, the general economy and recovery from the recent recession, population and business growth (and declines), and the effects of energy conservation measures; available sources and costs of fuels; effects of inflation; ability to control costs and cost overruns during the development and construction of facilities; advances in technology; state and federal rate regulations and the impact of pending and future rate cases and negotiations, including rate actions relating to fuel and other cost recovery mechanisms; regulatory approvals and actions related to the construction projects; the direct or indirect effect on Southern Company's business resulting from terrorist incidents and the threat of terrorist incidents; the ability to obtain new short- and long-term contracts with wholesale customers; interest rate fluctuations and financial market conditions and the results of financing efforts, including Southern Company's and its subsidiaries' credit ratings; the impacts of any potential U.S. credit rating downgrade or other sovereign financial issues, including the impacts on interest rates, access to capital markets, impacts on currency exchange rates, counterparty performance and the economy in general; the ability of Southern Company and its subsidiaries to obtain additional generating capacity at competitive prices; catastrophic events such as fires, earthquakes, explosions, floods, hurricanes, droughts, pandemic health events such as influenzas, or other similar occurrences; and the direct or indirect effects on Southern Company's business resulting from incidents affecting the U.S. electric grid or operation of generating resources. Southern Company expressly disclaims any obligation to update any forward-looking information.

SOURCE Southern Company