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Clean energy group criticizes Alabama Power's proposed gas plant purchase

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Clean energy group criticizes Alabama Power's proposed gas plant purchase

A clean energy advocacy group panned Alabama Power Company's proposal to purchase an 885-MW combined-cycle gas generation facility, saying the utility's plans do not match its actual capacity needs and failed to consider renewables.

Alabama Power is currently petitioning the Alabama Public Service Commission (Alabama PSC Docket 32953) and Federal Energy Regulatory Commission (FERC Docket EC20-4) to approve the utility's deal to buy the Tenaska Central Alabama power plant in Autauga County from Tenaska Energy Inc. and Tenaska Alabama II Partners L.P. The transaction is part of the utility's efforts to obtain over 2,200 MW of natural gas capacity through plant acquisitions and power purchase agreements.

In a Nov. 6 FERC filing, the Southern Renewable Energy Association said the company's request to the Alabama PSC for a certificate of convenience and necessity to procure additional gas generation capacity exaggerates the Southern Co. subsidiary's capacity needs. The utility said its integrated resource planning results demonstrate a need to procure about 2,400 MW of additional resources by 2023 or 2024.

Southern Renewable Energy Association said Alabama Power's data show it only needs 300 MW of capacity by 2023 and another 900 MW of capacity by 2025. In addition, the utility did not factor in renewable energy resources in its resource planning and economic analysis, the organization said.

"Only natural gas combustion turbines and natural gas combined cycle units were available for the expansion planning models," Simon Mahan, the Southern Renewable Energy Association's executive director, said in the filing. "This is an unfair practice that restricts market entry for renewable energy resources, and thus results in market manipulation."

Alabama Power's Tenaska plant acquisition and its agreement with Mitsubishi Hitachi Power Systems Americas Inc. and Black & Veatch Construction, Inc. to build an approximately 720-MW combined cycle facility would cost $1.1 billion. Mizuho Securities USA LLC analyst Paul Fremont said in a Oct. 7 note that the capital spending would help boost Southern's financial performance.

Southern Renewable Energy Association also expressed concerns that approving the acquisition will guarantee a rate increase because the Alabama PSC typically does not hold a formal rate case for utilities, but approves electric rate changes through a mechanism known as Rate Stabilization and Equalization Factor.

"[Alabama Power] does not contend that the [Central Alabama] facility will be the lowest cost option, nor that acquiring this facility will reduce rates," Mahan said.