sAMERICAN"EliCFRICPOWIRMaryPettyjohnArkansasDepartmentofEnvironmentalQuality5301NorthshoreDriveLittleRock,AR72118DayanaMedinaU.S.EnvironmentalProtectionAgency,Region6MultimediaPlanning andPermittingDivisionAirPlanningSection(6PD-L)1445RossAvenueDallas,TX75202Re:ApplicationforBARTDeterminationforS02andNOxAmericanElectricPower1201ElmStreet.SuiteBOODallas,TX75270AEP.comAttheFlintCreekPowerPlant,Gentry,Arkansas(AFIN04-00107)DearMs.PettyjohnandMs.Medina:Belowaretheresponsestoeachofthequestions/requestssenttoSouthwesternElectricPowerCompany(SWEPCO)onFebruary25,2013,regardingthecostevaluationforS02controltechnologiesevaluatedintheBARTfivefactoranalysisfortheFlintCreekPowerPlant.ThisrevisionoftheBARTsubmittalincludesupdatedcostcomponentinformationthatclarifiesthescopeoftheprojectand providesamoredirectcomparisonbetweenthetechnologiesincludedintheevaluation.ForBARTpurposesonly,somecostcomponentswereremovedentirelytosupportthisclarity.Inaddition,wehavereformattedthecostspreadsheettoshowside-by-sidecomparisonsofthecostsforeachcontroloptionasestimatedbyourengineers,andside-by-sidecomparisonsofthecostvaluesforeachcontroloptionasderivedfromEPA'sControlCostManual(CCM).Pleasefindthenewspreadsheetattached,andnotethenewtab,"CostsFGDs,"inwhichcolumnsJandLcontainCCM-basedestimatesforeachcontroloptionandcolumns0andQcontainourengineer'sestimatesforeachcontroloption.Noteshavebeenaddedwheretheestimateshavebeenupdatedorrevisedtorespondtoyourcomments.Wealsoareprovidinganupdatedreportthatincludestheupdatedcostinformation(basedontheattachedspreadsheet)aswellasnewmodelinginformationdevelopedinresponsetothe"ModelingandEmissionEstimates"questionsintheemaildatedFebruary8,2013.TheupdatedmodelingfileswillbeuploadedtothesameFTPsiteasusedpreviously.WearewritingtoexplaininmoredetailhowtheengineeringcostestimatesforthetwoS02controloptionsdiffer,andhoweachprovidesamoredetailedandmoreaccuratevaluethanthecostsobtainedbyusingthedefaultassumptionsinEPA'sCCM.Thenovelintegrateddesulfurizationldryfluegasdesulfurization(NID/DFGD)costestimateisaClass3estimateperAACEInternationalstandards,developedbyAEP'sinternalengineeringteambasedonanearlyyear-long(andongoing)detailedsite-specificevaluation.Thisestimate(orlateriterationsofit)LettertoMs.PettyjohnandMs.MedinaApril1,2013Page2of7willbeusedtomanagethebudgetfortheactualretrofitprojectoncethenecessaryregulatoryapprovalsandpermitshavebeenissued.Itisbasedoncostinformationobtainedfromoriginalequipmentmanufacturers,engineeringcontractors,andAEP'sinternalprojectengineeringteam.Althoughmorerefineddetailwillbeavailableasdetailedengineeringproceeds,thecurrentestimateincludedinthesupportingspreadsheethasanaccuracyrangeof-10%to+20%.Theestimatedcostforthewetfluegasdesulfurization(WFGD)optionwasgeneratedbasedontheactualcostoftheConesville,OHUnit4WFGDproject,asadjustedforknowndifferencesbetweenConesvilleUnit4andtheFlintCreekunit.Exceptwherenoted,noattemptwasmadetomaketheWFGDestimatesite-specific,anditisassumedtobetheequivalentofahighlevel,indicativeAACEClass5estimate.Thisprojectwascompletedin2010,anddidnotusethesameWorkBreakdownStructure(WBS)currentlyusedtodeveloptheNID/DFGDestimate.Therefore,availablecostinformationwasallocatedtothevariousWBSareasasa"bestfit"basedontheknowncomponentsintheactualcostbreakdown.BecauseConesvilleUnit4isalargerunit,eachamountwasfactoredtoreflecttheMWratioofConesvilleUnit4toFlintCreek,andthenescalatedto2016baseyeardollars.Amoredetailedsite-specificWFGDestimateforFlintCreekcannotbeperformedwithoutalargeinvestmentinprojectteamresourcesandconceptual/feasibilityengineeringanddesigntime.WithoutafullWFGDsiteevaluationspecifictotheFlintCreeksite,itislikelythatcertainassociatedprojectorbalance-of-plantcostshavenotbeenincluded,andthereforethecostsarenotasaccurateastheNID/DFGDestimate.Thisestimatethereforehasamuchwiderrangeofaccuracyontheorderof-30%to+50%.WehaveborrowedtheheadingsusedinyourFebruary25,2013emailtosetoffthespecificresponsesthataffectbothcostestimates,and thespecifictechnologyestimates.However,certainofthebulletsincludedintheNIDSsectionappearedtoberelatedtotheWFGDestimate.Ifwehavemisinterpretedyourquestion,pleaseletusknow.Wehavenumberedtheresponsestoeachbulleteditemandsuppliedatopicreferenceatthebeginningofeachresponseforthesakeofclarity.WetScrubberandNIDSCostEstimates1.AFUDCCosts.AllowanceforFundsUsedDuringConstruction(AFUDC)representstherealcostoffinancingthedebtincurredtoundertakeconstructionofthecapital-intensivetypesofcontrolsbeingevaluated.However,consistentwiththeCCMexamples,AFUDChasbeensetequaltozeroinallestimatesintheupdatedspreadsheet.2.CEMS,CEMSBuilding,andWarehouse.CEMS-relatedcostshavebeenexcludedfromalloftheestimatesintheupdatedspreadsheet.Thewarehousecostsremaininallestimatesasthisisabuildingthatisnecessaryforimplementationofeitherofthecontroloptions.ThewarehouseisusedduringconstructionforLettertoMs.PettyjohnandMs.MedinaApril1,2013Page3of7climatecontrolled/weatherprotectedstorageofmaterialsandequipment;thewarehouseisthenusedforstorageofcapitalsparesassociatedwiththecontroloptionsoncetheyareplacedintoservice.3.Items901,970,010,and770.Theexpensesaccountedforunderlineitem901("OutsideProfessionalServices")includeallowancesforestimatedstart-uptechnicalsupport,specialtytesting,andengineeringservices.Theseservicesinclude,butarenotlimitedto,geophysicaltesting,surveying,andothersimilarprofessionalservices.Lineitem970("AEPServices")includesprojectmanagement,engineering,projectcontrols,procurement,constructionandstart-upsupervisionprovidedbyAEPServiceCorporationpersonnel.AEPServiceCorporationisanaffiliatedservicescompanythatprovidesengineering,accounting,legalandothersharedservicestotheAEPoperatingcompaniesonasharedbasisunderagreementsapprovedbytheFederalEnergyRegulatoryCommission.Utilitiesthatdonothaveanaffiliatedservicescompanysecurethesesameservicesfromoutsidecontractors.Theexpensesaccountedforunderlineitem010("ExistingConditions")includessitespecificactivitiesnecessaryfortheconstructionoftheprojectsuchasremovalofexistingfacilitiesandequipment,asbestosabatement,andleadpaintremediationworkattie-inpointsforthenewcontrolequipment.Theexpensesincludedinlineitem770("ControlsModernization")isfortheworkrequiredtoupgradetheunit'sexistingcontrolsystemstointerfacewiththecontrolsforthenewNID/WFGDequipment.ThepreviousestimatefortheNIDincludedseparatecostsonthissamelineitemforthecontrolsthatwillbeinstalledaspartoftheNIDsystem.Forthesakeofclarity,allofthenewcontrolsassociatedwiththeNIDandtheWFGDsystemsarenowincludedinthetotalcapitalcostofthecontroltechnology.Lineitem770("ControlsModernization")includesonlythosecostsassociatedwithupgradingandinterfacingtheexistingunitcontrols.4.Allocations.Allocationcostshavebeenremovedfromallestimatesintheupdatedspreadsheet.5.CostofElectricity.Theestimatedcostofelectricityhasbeenspecifiedintermsof$/kWhandasadollaramount,andisincludedintheupdatedspreadsheet.LettertoMs.PettyjohnandMs.MedinaApril1,2013Page4of76.BoilerModifications.BoilermodificationsnecessaryfortheNIDSoptionincludeinstallationofafurnaceimagingsystemandintelligentsoot-blowingsystem.ItisexpectedthatmoreextensiveboilermodificationswouldbeneededfortheWFGDoptionthantheNIDSoption,butasmoredetailedengineeringhasnotbeenperformedforthisoption,costsareconservativelyassumedtobeequaltotheNIDSoptionestimateintheupdatedspreadsheet.7.BasisforCostEstimates.Allcostsvaluesareestimatedin2016baseyeardollars.8.ProcessIslandBuilding.FortheNIDcontroloption,theprocessislandbuildinghouseslimepreparationanddeliverysystems,andthecostsinclude,butarenotlimitedto,foundations,structuralcomponents,fluidizedairenclosure,stairtowerandelevator,siding,louvers,hopperenclosure,penthouse,andelectricalgrounding.FortheWFGDcontroloption,theprocessislandbuildinghouseslimestonepreparation,delivery,anddewateringsystems,andthecostsinclude,butarenotlimitedto,foundations,structuralcomponents,stairtowerandelevator,siding,louvers,andelectricalgrounding.TheWFGDprocessbuildingissignificantlymorecomplexduetothesizeandweightofthenecessaryequipment,especiallythelimestonepreparationandwaterrequirementsnotnecessaryfortheNID.NIDSCostEstimate1.RailImprovements.AnewrailspurwillberequiredattheFlintCreekfacilityforeithercontroloption.TheNIDequipmentuseslime,whichwillbedeliveredbyrailandrequiresspecialpneumaticoff-loadingequipment.TheWFGDequipmentuseslimestonesoestimatesforheavierrailfacilitiesanddifferentoff-loadingequipmentassociatedwithhandlingthisbulkstonematerialareincludedintheWFGDestimatesummary.2.SiteDevelopmentCosts.ThesitedevelopmentcostsestimatedfortheNIDcontrolsarebasedonsite-specificrequirementsforlargelaydownandfabricationareasandassociatedaccessduetotheuniquenatureofthesiteanddeliveryoptionsavailableatFlintCreek.Forconsistencyinthesummaryestimates,itisassumedthatsimilarlaydownandfabricationareasandassociatedaccesswillbeLetter

to Ms. Pettyjohn

and

Ms. Medina April

1, 2013 Page

5 of7 required

for both

the WFGD

and NID control options.

These

costs

were

not incurred

at Conesville

Unit

4 due

to ample existing

lay down

and fabrication

areas. 3.

CEMS. CEMS-related

costs

have

been excluded

from

all

of the estimates

in the updated spreadsheet. 4.

Fabric

Filter. The WFGD estimate

has been updated

to reflect

an estimated

$40 million

cost

for

the fabric

filter based

on

the latest vendor

quote.

The

NID

is

an integrated

system,

and

the breakout

for

the fabric

filter

cost

was supplied

by

the vendor. 5. DFGD-

NID Controls. As explained

above,

the procurement

cost

of the hardware

and software

specific

to the NID

and WFGD

controls

are now included

in the total direct

cost

of the control technology.

The "Controls Modernization"

cost

in line

770

is the cost

to upgrade

and interface

the existing

unit controls

with

the new NID/WFGD

systems. 6.

Plant Security

and Communications. "Plant Security

and Communications"

includes

the equipment

and installation

associated

with telephone

and other communication

devices necessary

for

the safety

and security

of the employees

and

the plant.

This equipment

is necessary

upon installation

of either

of the

S0

2 control

options

because

of the need

to maintain communications

between personnel

in the existing

plant locations

and

the new process

island building, unloading

areas,

and other remote locations associated

with

the new controls. 7. Contingencies. Line

item

980 ("Contingency")

has been removed

from

both estimates

to improve

the basis

of comparison

between

different

AACE

Class estimates. Contingency

has

not been determined

for the WFGD estimate

and would typically

be developed

at the

end

of

a site-specific

conceptual design

and estimate

effort.LettertoMs.PettyjohnandMs.MedinaApril1,2013Page6of7WetScrubberCostEstimate1.FabricFilter.ThefabricfiltercannotbeexcludedfromtheWFGDcostestimateandcomparedtoanintegratedNIDsystem,becauseinstallationofWFGDalonewouldnotallowFlintCreektoachievecompliancewithboththeRegionalHazeRuleandtheadditionalobligationsimposedonthisunitundertheMATSrule.CurrentlyFlintCreekhasanexistinghot-sideelectrostaticprecipitator(ESP).ThecombinationoftheexistingESPandtheWFGDwillnotenableFlintCreektoachieveboththeS02controlrequiredforRegionalHazecompliance,andthemercuryandparticulatematterlimitsnecessarytosatisfyMATS.Accordingly,planningtoinstallWFGDalonewouldleaveFlintCreekwithnoremainingusefullife,andbeafutilecontrolstrategy.AlthoughACIwillalsoberequiredtoachieveMATScompliance,thisadditionalcostisthesameregardlessofwhichS02controloptionischosen,soithasbeeneliminatedfrombothcostestimates.IntheBARTGuidelines,EPAnotedthattheMACTstandardsdevelopedformanyoftheBART-eligiblesourcecategoriescouldhelpstatesstreamlinetheiranalysis,sinceMACT-levelcontrolsrepresent"thebest-controlled12percentofsourcesintheindustry."70Fed.Reg.39,163(July6,2005).EPAhasencouragedsourcestoinvestigatecomprehensivecontrolstrategiestoaddressthemultiplestandardsthatwilltakeeffectovertheBARTimplementationperiod.See,LetterdatedJuly18,2012,fromGinaMcCarthy,AssistantAdministrator,EPA,toStuartSolomon,President,PublicServiceCompanyofOklahoma.InordertohaveaviablecontrolstrategyandcompareWFGDtotheNIDtechnology(whichincludesanintegratedfabricfilteraspartofitsdesignandwillachievealloftheapplicablestandardsunderbothrules)afabricfilterwasincludedintheWFGDcontroloption.2.BoilerModifications.Asexplainedabove,ofafurnaceimagingsystemandintelligentsoot-blowingsystemhavebeenincludedforbothcontrolstrategies.ItisexpectedthatmoreextensiveboilermodificationswouldbeneededfortheWFGDoptionthantheNIDSoption,butasmoredetailedengineeringhasnotbeenperformedforthisoption,costsareconservativelyassumedtobeequaltotheNIDSoptionestimateintheupdatedspreadsheet.3.JBRRepairCosts.ThislineitemhasbeeneliminatedfromtheWFGDcostestimate.4.Contingencies.Nocontingencieshavebeenincludedintheestimates.LettertoMs.PettyjohnandMs.MedinaApril1,2013Page7of7Wehopethatthisinformation,togetherwiththefilestobeuploadedtotheFfPsite,willsatisfactorilyaddressthequestionsandconcernsoutlinedintheemailsdatedFebruary8and25,2013.Ifyouhaveadditionalquestions,itmaybeproductivetomeetinDallasandprovideanopportunityforSWEPCOandAEPpersonneltoanswerquestionsdirectly.Pleasecontactmeat(214)777-1113tomakearrangementsforsuchameeting,ortoprovideanyadditionalinformationyoumayrequire.Verytrulyyours,KristenP.Gaus