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WisBusiness: Chemical plant angling for PSC's help on mercury plan
10/16/2006

By Brian E. Clark
WisBusiness.com

PORT EDWARDS – The ERCO Worldwide chemical plant here is no small player in the central Wisconsin economy.

The 39-year-old chlor akali factory supports 100 full-time employees, has an annual payroll (including benefits) of $7 million, is one of Alliant Energy's largest industrial power customers and is a major supplier of chemicals for paper and pulp mills in the region.

It also has the dubious distinction of being the state's largest airborne mercury polluter. That could soon change, if the company can convince the Public Service Commission to accept its conversion plan and grant it a break on electricity rates.

If not, ERCO officials say, the plant may close by 2008. Should the PSC grant the exemption, the facility may expand, they said.

Though it complies with current state and federal regulations, ERCO emits about 1,300 pounds of mercury into the air each year. That's a quarter of the state's annual airborne mercury discharge.

Classified as a poison by state and federal agencies, mercury vaporizes and then washes into lakes, rivers and groundwater when it rains. Because it's an element, it doesn't break down and its toxins flow into the water supplies. Pregnant women and children are discouraged from eating the tainted fish.

But in one fell swoop – and at a cost of roughly $70-plus million – ERCO is proposing to convert its plant technology and do away entirely with its mercury emissions. The conversion would also cut its energy use significantly, officials said.

It's a move that has been praised by environmental groups, which laud it as a major step in cutting mercury pollution in the state.

"We think this is an excellent proposal," said George Meyer, executive director of the Wisconsin Wildlife Federation and former head of the state Department of Natural Resources.

"Mercury contamination of fish in this state is a significant problem," he said, noting that the state's 15,000 lakes and streams are under a fish-consumption advisory.

"This would be a major step to cut that pollution and we support it. In addition to the health benefits, it would be a boost to tourism and fishing by showing we are doing something to correct a serious problem."

In order to do the expensive conversion, ERCO has asked the PSC for relief on its power rates from Wisconsin Power & Light -- an Alliant subsidiary -- and guaranteed cost increase limits for the next decade.

As part of the agreement, ERCO also would allow Alliant to cut the plant's power supply during peak-use periods, giving the utility access to its electricity to serve other customers.

Technical hearings on the proposal concluded last week and a PSC spokeswoman said a decision should be made by the commission before Jan. 1.

But here's the rub: ERCO's petition to the PSC would shift the cost of some of its power to consumers -- whom it says should bear part of the cost of the mercury cleanup.

The proposal has garnered the backing of the Wisconsin Industrial Energy Group, but opposition from the Citizens' Utility Board, which represents residential, farm and small business utility consumers.

Todd Stuart, executive director of WIEG, said his group has written a letter of support for ERCO and its proposal.

"It's a home run for the environment and it preserves jobs," he said. "But we also see a good, strategic value in that it would pave the way for innovative, creative rates by the PSC for other industries in the future.

"Some of our members are a little nervous because it shifts costs, but ERCO has been subsidizing virtually all other ratepayers. So all in all, we are supportive.

"Moreover, if mercury emissions are monetized through market trading, this reduction could be of great value to Alliant customers in the future," he said.

Charlie Higley, head of CUB, said he, too, is in favor of reducing mercury pollution in Wisconsin.

"But we do not think other ratepayers should subsidize it," he said. "It would open a Pandora's Box because of the precedent it could establish. It isn't fair and the PSC should not play favorites.

"Soon, other industries will be asking for special rates and we fear once that has begun, it would be hard to stop," he said. "Perhaps the federal government should pay for the clean-up through something like Superfund, but not other Alliant ratepayers."

Amanda Wollin, a spokeswoman for the PSC, said the commission views the ERCO proposal as "unique" and not necessarily precedent-setting for other industrial users.

"Since this is an open case before the commission, we cannot make any assumptions or predictions on how the commission will decide and what effects there may be on rates for any of the customer classes," she said.

ERCO now pays $49 per megawatt of power, company officials said. It sought a $45 rate from Alliant, with escalation of no more than 4 percent a year for the next decade. Alliant's response was to offer a rate of $53 per megawatt hour.

ERCO plant manager Steve Hieger said he hopes the PSC will approve the plan. In the first year, he said residential customers would pay about a $2 annual surcharge under the deal, while major industrial users would pay about $450 more per month.

Hieger said he will present the final details of the upgrade plan to ERCO's Canadian owners in early November. He is hoping for their tentative approval. But the conversion will not go forward unless the PSC approves of the rate shift, he said.

Hieger said the switch from the mercury-based technology would also cut the plant's power needs by 30 percent and factor significantly into its future plans.

"We have been hit hard by rising energy costs that have escalated at roughly 10 percent a year for the past five years," Hieger said, noting that electric costs have doubled during the past 10 years.

"That has not been the case for our competitors in states in other parts of the country," he said. "Their rates have been going up by less than 5 percent a year."

Hieger complained that his company has been overpaying for energy for years and subsidizing other Wisconsin Power & Light electricity customers.

Scott Smith, a spokesman for the utility, said his company supports ERCO's conversion plans, but argued that Alliant's rates have been fair.

"We work hard to maintain competitive rates," he said. "And fuel costs have gone up considerably. Ultimately, it is the PSC that sets the rates."

Hieger said his company has a shrinking "window of opportunity" that includes a potential $5 million it hopes it could use next year to make the conversion to mercury free technology. A decision must be made this quarter, he added.

He said ERCO must spend the $5 million to meet new federal mercury regulations if it stays with is current technology. If it gets approval from the PSC on its plan, it would petition the EPA to use that money for the mercury-free conversion.

"We'd much rather spend those funds to convert to a mercury-free technology," he said. "But we have to have a favorable ruling this quarter for all the pieces to fall into place.

"We really want to stay here and continue to be a part of this economy," he said. "Now, though, it's in the hands of the PSC. We think we've made a good case."
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