The Columbia municipal power plant began negotiations Thursday that would bring it more than $1.2 million in revenue, all from selling pollution rights. The City Council gave permission for the sale at its meeting Monday.
Plant supervisor Tad Johnsen formalized negotiations with the AmerenEnergy division of fuels and services to sell the right to generate 6,071 tons of sulfur dioxide allowances. The money from the sale will finance the first stage of a four-part, eight-year plan to improve one of the power plant's two coal-fueled boilers. The boiler has most of the same parts it had when it was installed in 1965.
The allowances are part of a program initiated by the Environmental Protection Agency in 1988 to control total sulfur dioxide pollution, which is a major cause of acid rain. The EPA allotted each power plant in the country a certain annual amount of sulfur dioxide it could emit, Public Works director Richard Malon said.
The program only allowed Columbia to start buying and selling the allowances in 2000, Johnsen said.
Under the program, a market was created in which plants could buy and sell allowances. The program encourages plants to produce electricity more efficiently and with less pollution so they can sell their excess allowances for profit.
The Ameren division buys and sells allowances from and to power plants that do not trade in the market daily, Senior Emissions Trader Jim Moore said.
Under the terms of Columbia's deal, each ton will sell on the market for $201, with $1 of every ton going to Ameren, the broker. The allowances will bring the power plant $1,214,200 for the first project. It's estimated to cost around $5 million to update the boiler, according to a report Johnsen wrote.
Columbia was allotted 4,659 tons of sulfur dioxide annually but only generates 1,051 tons after switching from high-sulfur Missouri to low-sulfur West Virginian coal.
Moore said Johnsen had been consulting him about the sale since last spring.
"Back in the spring the city approached us about selling some of its excess," Moore said. "I told them at the time the prices were about $165 a ton," and that, in Moore's opinion, "the prices would continue to rise in the spring and fall."
The allowances have tended to sell at between $120 and $200 per ton since 1995, Moore said. "Columbia's getting a good deal, it's a good time to sell," he said.
Johnsen said the sale was in the plant's ballpark estimate and better than estimates it presented to City Council at its Oct. 20 meeting.
The plant decided to sell to Ameren because of Columbia's relationship with the gas and electric provider. The company has an electrical supply contact with the power plant and provides gas to the city, Johnsen said.
Johnsen said he didn't know how long the deal will take to finalize because the plant has never sold allowances to a broker before. In 2000, the power plant traded a large amount of excess sulfur dioxide allowances to remove cinders, a by-product of coal.
The power plant occasionally sells allowances to the Fulton and Sikeston power plants when it generates more energy than it is allowed. Johnsen said these deals average about 10 tons each.
The power plant wants to complete another large allowance sale in two years, when it will begin the next stage of the project, Johnsen said.
City Council approval is required any time the plant wants to sell a large amount of pollution rights.