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The Arizona utility, which serves 935,000 customers in the Phoenix area, must also pay a nearly $1 million fine and spend an additional $4 million on environmental-improvement projects within the state.

SRP, which has been negotiating the deal with the Department of Justice since April 2007, said Tuesday that it had been anticipating the extra expenses and that it won’t result in customer rate hikes.

The federal government’s complaint, filed along with the settlement, alleges that SRP “illegally modified” its Coronado Generating Station from 1996 to 2000.

The utility also failed to obtain required paperwork and install systems to reduce air pollution at the facility, according to the Environmental Protection Agency.

“Power-plant modifications must include required emissions controls to protect public health and the environment,” said Wayne Nastri, administrator for the EPA’s Pacific Southwest region.

In this case, the agency says the modifications allowed the plant to burn more coal, which increased the amount of pollution.

SRP owns or operates six coal-fired power plants in the state; Coronado is a 773-megawatt plant near St. Johns in eastern Arizona.

It can provide enough electricity to power 193,000 homes.

In settling the case, SRP avoids a protracted and potentially costly litigation process. The utility “denies the violations alleged in the complaint” and makes no admission of liability, the agreement says.

None of the suspected violations posed a public-health risk, officials said.

Plant upgrades

SRP admits it made various modifications to the Coronado power plant dating to the 1980s. But the utility says it considered the changes routine maintenance and upgrades.

The EPA, however, said SRP was required, under amendments to the Clean Air Act, to have applied for permits.

Jim Pratt, SRP manager of generation engineering, said the upgrades affected the way the plant crushed coal before burning it and included modifications to the boiler and the turbine.

But he said none of the changes necessarily made the plant dirtier.

However, the changes, coupled with increased customer demand, have prompted the facility to operate at a higher capacity, Pratt said.

And the more coal plants run, the more pollution they create.

In Coronado’s case, operating capacity has jumped to above 90 percent, compared with about 55 percent in the mid-1990s.

As part of the settlement, SRP will now need to install scrubbers at the plant to help control sulfur-dioxide emissions.

The utility will also have to retrofit equipment to further limit nitrogen-oxide emissions and install new systems to continually monitor the coarse-particulate emissions from the generating station.

The EPA says the changes will reduce SO{-2} and NO{-X} emissions by over 21,000 tons each year.

Those reductions are important because the pollutants can cause respiratory problems and contribute to childhood asthma, as well as impair visibility in national parks, EPA spokeswoman Margot Perez-Sullivan said.

Other improvements

SRP will have until June 2014 to complete all technology upgrades at the Coronado plant. But the utility will also have to perform three environmental-improvement projects in Arizona by 2011. They are:
• Spending at least $1.25 million retrofitting Phoenix-area public school-bus diesel engines with pollution-control equipment.
• Spending at least $2 million installing solar panels at Arizona schools. The work will benefit two school districts near the plant and two districts in the Phoenix area.
• Spending at least $750,000 replacing pre-1988 wood stoves with EPA-certified wood stoves or other, more energy-efficient appliances. This project is designed to reduce fine-particle pollution and will be performed in communities near Coronado, including St. Johns, Show Low or Springerville.

Finally, the utility will be required to pay a $950,000 civil penalty to the federal government. The money will go into the Treasury, Perez-Sullivan said.

“Air quality in the St. Johns area is quite good,” SRP spokesman Scott Harelson said.

“If there is a perception that air quality is an issue for Coronado, that’s not the case.”

Federal crackdown

The SRP settlement was the latest obtained by the United States as part of its “Coal-Fired Power Plant Enforcement Initiative.”

The largest to date occurred in October, when American Electric Power agreed to cut 813,000 tons of air pollutants annually at an estimated cost of more than $4.6 billion.

The company, which provides power to nearly a dozen U.S. states, including Texas, Tennessee and Michigan, also paid a $15 million penalty.

SRP’s agreement doesn’t carry the same hefty dollar amount, but it is still a significant expense for SRP.

The utility earned $2.63 billion in revenue in its past fiscal year, but the settlement eclipses the company’s annual profit of $367.8 million.

Still, SRP won’t need another rate increase to cover the costs, Associate General Manager Richard Hayslip said.

“We anticipated this financial settlement,” he said. “This has been in our financial plan for some time.”

The utility’s board voted in March to increase rates this year by 3.9 percent on average.

Hayslip also said that, by settling, SRP was able to negotiate a timeline for the $400 million in upgrades so that the expense didn’t come at once.

Hayslip said that the EPA is not conducting similar audits at any of the five other coal-fired power plants SRP uses and that he does not believe any upgrades undertaken at those facilities could lead to the same sort of costly settlement.

Here’s what I don’t understand – these companies KNOW that their activities are being watched by the EPA, they KNOW that they are going to HAVE TO comply and they certainly know that there will be HEAVY fines for non-compliance.  So why not just get the modifications done to the plant BEFORE the fines?  I don’t understand the math…..