Columbia stands to gain from clean power plant

Environmental Protection Agency rules are allowing Columbia to earn extra cash by selling excess sulfur dioxide allowances from its relatively clean coal-burning power plant.

The Columbia City Council on Monday authorized the sale of the excess emissions allowances. The credits could be worth as much as $6.3 million and could help the city cover an anticipated increase in the cost of its next coal contract.

The EPA limits the annual amount of sulfur dioxide, a by-product of burning coal and a major source of acid rain, that power plants can produce. Columbia’s Municipal Power Plant on Business Loop 70 burns a low-sulfur coal and produces sulfur dioxide emissions that are well under the EPA’s annual limit. Plants that don’t produce as much sulfur dioxide are allowed to sell or trade their allowances to other plants or to save them for future use.

From 2001 to 2003, the city sold 9,592 excess sulfur dioxide allowances for $2.98 million.

The value of sulfur dioxide allowances has risen from $310 per ton to $600 per ton with the increased reliance on coal-fired plants because of high gas prices, according to a report to the council from Water and Light Director Dan Dasho. The 10,500 excess allowances from 2004 to 2006 are expected to generate about $6.3 million, the report said.

Dasho also said in the report that he anticipates a large increase in the price of coal as it looks to negotiate a new contract to replace one that expires May 31. The sale of sulfur dioxide allowances would help ease the rising cost of coal.

“The prices we’re seeing right now could mean that all the revenue from allowances could go towards coal costs,” said Jim Windsor, manager of rates and fiscal planning at the Water and Light Department.

Windsor said the Water and Light Advisory Board was pleased with Columbia’s first large-scale sale of allowances in 2003, which paid for repairs at the Municipal Power Plant. The city had previously spot-traded some allowances.

Windsor said the city has yet to decide who will be the broker or how the current deal for allowances will be negotiated. He expects the sale of 2004 and 2005 allowances to be negotiated by the end of September.

The EPA capped individual electricity-generating plants’ sulfur dioxide emissions in 1988. The EPA said emissions have been reduced by more than 6.5 million tons a year from levels during the 1980s , to about 10.6 million tons in 2001. By 2010, the program will lower the cap to 8.95 million tons, representing a 50 percent reduction from 1980 levels. Each allowance authorizes one ton of sulfur dioxide emissions.

The EPA projects emission reductions under the Acid Rain Program will prevent thousands of premature deaths and that annual human health benefits in 2010 will exceed $50 billion.