Dominion plans to shutter Chesapeake plant by 2016

CHESAPEAKE

Dominion Virginia Power expects to close its coal plant on the Elizabeth River's Southern Branch by 2016 because the costs to upgrade it to meet proposed new environmental standards is too high, according to a company filing Thursday with state regulators.

The planned closing of the Chesapeake Energy Center was included in the "integrated resource plan" Dominion must update every two years with the State Corporation Commission. The plan projects growth in customer demand over 15 years and outlines how the utility intends to meet it.

The plant closing was listed among "likely actions" related to changes in federal environmental regulations.

Chesapeake Energy Center, at 2701 Vepco St. just off South Military Highway, began operation in 1953 and employs 145 workers. It includes four coal-fired units that produce 638 megawatts of electricity - enough to power 159,500 homes.

In 2010, Dominion paid $7.4 million in taxes to Chesapeake for all of its property, including offices and light poles, though the coal plant accounted for most of that, said Jim Norvelle, a company spokesman.

Dominion officials have met with the center's employees and alerted them of the planned closure, but it won't be definite until the drafts of new federal air- and water-quality rules become final, said J. David Rives, Dominion's senior vice president of fossil and hydro generation.

"Our plan might very well change," he said.

The proposed air-quality standards would require the power company to reduce the production of ozone-harming nitrogen oxide and pollutants such as mercury and sulfur dioxide at the Chesapeake plant. Dominion would need to install equipment such as scrubbers and fabric filters, which are all large and expensive structures.

A new water-quality rule would restrict power companies from tapping nearby rivers and lakes to cool generators and returning that slightly warmer water to those natural sources. Under the federal proposal, Dominion would have to construct cooling towers at the Chesapeake station.

Altogether, these changes would cost about $1 billion to extend the life of the 58-year-old plant, Rives said.

By comparison, the company is seeking permits for a new natural gas-fired plant in Warren County that would generate twice as much electricity at a projected cost of $1.1 billion and have a longer lifespan.

"It just doesn't make economic sense for us to add other controls" in Chesapeake, Norvelle said.

Final approval is expected this year on the federal air-quality proposals and next year on the water standards, Rives said.

Dominion's resource plan also includes the potential shutdown of one of its two coal-fired generators at Yorktown Power Station in Yorktown by 2015. The company would convert the second coal generator there to natural gas and leave the third unit, fired by oil and used at peak demand times, as it is.

Glen Besa, director of the Virginia chapter of the Sierra Club, cheered the potential shutdown of what he called two longtime sources of pollution in Hampton Roads. Although it's a business decision for Dominion, "from our perspective, it's a very positive environmental development," he said.

The Sierra Club would have preferred seeing more "serious investment" in wind and solar energy in Dominion's resource plan, Besa said. The company relies too heavily on natural gas, which has shown wide price swings that make it a risky choice for new power generation, he said.

"They need to shake off their commitment to fossil and nuclear and begin to move in a big way toward renewable energy," he said.

In its state filing, Dominion projected that electricity usage across its system would grow by almost 30 percent by 2026.

To meet demand, its plan includes construction of at least two new large gas-fired power plants, about a dozen smaller gas turbines and a third nuclear generator at North Anna Power Station in Mineral. Although the company hasn't made a determination to expand at North Anna, it is continuing preliminary work to get the proper approvals so it is able to move forward.

Dominion also described a program to lease rooftop space on large commercial buildings where it would install solar panels to add to its renewable-energy sources.

If the Chesapeake plant closes, new transmission projects and upgrades would bring electricity from elsewhere to help meet demand in Hampton Roads, Dominion wrote in its filing.

"We have the obligation to keep the lights on," Norvelle said. "That doesn't change."

Dominion customers began paying more Thursday for investments the company already has made in its transmission system. Those projects translated to an increase of $3.54 in the bills of customers who use 1,000 kilowatt hours of electricity per month.

Dominion's resource plan gives the commission an idea of the direction the company intends to take based on information it has now about energy demand and costs. The company would have to apply to the commission for permission to pursue any specific project, including closing the Chesapeake Energy Center.