ILLINOIS POLLUTION CONTROL BOARD
August
4,
1988
IN THE MATTER OF:
PROPOSED AMENDMENT TO
35
Iii.
ADM.
CODE 212.209,
)
R86—41
VILLAGE OF WINNETKA
GENERATING
STATION
OPINION AND ORDER OF THE BOARD
(by J. Theodore Meyer):
This matter
is before
the Board on
a petition
for site
specific relief filed by the Village
of Winnetka on September
12,
1986.
Winnetka asks that the interim site specific particulate
emission limitation
for
its generating
station be made
permanent.
The site specific rule,
found at
35 Ill.
Adm.
Code
212.209,
allows
the Winnetka plant to emit up
to 0.25 pounds of
particulates per million British thermal units (lbs/MBtu).
The
general
limitation
is
0.1 lbs/MBtu, set
forth
at
35
Ill.
Adm.
Code 212.204.
The first hearing
in this matter was held
on December
9,
1987 at Winnetka Village Hall.
On February
2,
1988,
a second
hearing was held in Chicago.
On March
10,
1988 the Department
of
Energy and Natural Resources
(DENR)
filed
a negative declaration
stating
its determination that the preparation of
a formal
economic impact study
is not necessary in this proceeding.
The
negative declaration was based on DENR’s finding that the record
contains sufficient information
for
the Board
to make a reasoned
determination.
Thus,
DENR found
that the cost of making
a formal
study
is economically unreasonable
in relation
to
the value of
the study
to the Board.
On April
18, 1988 the Board received
notification that the Economic and Technical Advisory Committee
(ETAC)
concurred
in DENR’s negative declaration.
Background
The Village
of Winnetka owns and operates
its own generating
plant, which provides power
for Winnetka’s 12,500 residents
as
well
as commercial customers.
The plant
is located on the lake
shore,
where Tower Road meets Lake Michigan.
To the north and
south
of the plant are a public beach and residences.
The power
plant, which began operations
in 1900, shares its site with
Winnetka’s water plant.
The plant generates electricity by the use of steam—driven
and diesel generators.
The steam
is supplied by a series of
coal—fired
boilers.
The boilers then exhaust
through
a common
stack.
There
are currently five boilers
in place, numbered
4,
5,
91—283
—2—
6,
7,
and
8.
The generating capacity
of the plant
is as follows:
STEAM GENERATING CAPACITY
BOILER
YEAR INSTALLED
FUEL
STEAM RATE
CONTROLS
(lbs.
per hour)
4
1958
gas/oil
110,000
none
5
1938
coal
40,000
none
6
1938
coal
40,000
none
7
1948
coal
69,000
none
8
1964
gas/coal
125,000
multiclone
OTHER GENERATING CAPACITY
Diesel
1
1978
diesel
2400 Kw
none
Diesel
2
1978
diesel
2400
Kw
none
(Transcript of February 2,
1988
(Tr.
II)
at
95;
Ex.
11.)
Boiler
B
is the plant’s main boiler.
Boiler
4 and the two diesels are
also presently used.
Boilers
5,
6, and
7 do not currently have
operating permits from the Illinois Environmental Protection
Agency
(Agency).
(Transcript of December
9,
1988
(Tr.
I)
at
269.
Until 1971 there was no connection between
the Winnetka
electric system and the Commonwealth Edison system.
There are
now three
interconnects between
the two systems, with
a capacity
of 30 megawatts
(MW).
In the early 1970s Winnetka departed from
earlier practice and bought most
of its power from Commonwealth
Edison.
The electric plant generated only peak load power.
In
the early 1980s Commonwealth Edison’s rate structure changed, and
fuel costs made
it economically desirable for Winnetka
to again
generate as much of
its own power
as possible.
Winnetka
currently generates
a majority of
its power,
but some purchases
are made from Commonwealth Edison almost daily.
(Tr.
II
at
132—
33.)
In 1982 the Agency issued
a permit
to Winnetka which allowed
the generating
station
to emit particulates
up to 0.25
lbs/MBtu.
At that time
the Board was considering
a general
regulation
limiting particulate emission from sources
in the
Chicago major metropolitan area
to 0.1
lbs/t4Btu.
Winnetka
participated
in this general rulemaking
in an attempt
to
establish a site specific limitation.
In its final Opinion and
Order,
the Board declined
to grant such site specific relief
as
91—284
—3—
inappropriate
in
a general
rulemaking.
However,
the Board did
enact
35
Ill. Mm. Code 212.209, which established an exemption
for Winnetka until January
1.,
1989 or until
final decision of
a
site specific rulemaking,
provided Winnetka filed a petition for
site specific relief within
60 days of
the effective date of the
general regulation.
Particulate Emission Limitations, Rule
203(g)(l)
and 202(b)
of Chapter
2,
70 PCB 409,
425—26
(R82—l(A),
July
2,
1986).
The general regulation became effective on July
18,
1986,
and the instant petition was filed on September
12,
1986.
As previously noted,
Winnetka asks that the Board make
permanent the interim regulation which allows Winnetka’s plant
to
emit particulates up to 0.25 lbs/MBtu,
instead of complying with
the general limitation of 0.1 lbs/MBtu.
Winnetka contends that
its plant
is unique
in Illinois by virtue of
its age, location,
and small
size.
Winnetka further argues that
it has amply
demonstrated that its
continued particulate emission of up to
0.25 lbs/MBtu will have
no significant impact on local
or
regional ambient air quality,
and
that the air
in Winnetka
is
consistently monitored as among
the cleanest
in the state.
The
Village does not contend that
it
is technically infeasible
to
bring the electric plant
into compliance with
the general
rule,
but submits that such controls are economically unreasonable.
Both the Agency and John Leslie,
a resident
of Winnetka who
participated through counsel
in this proceeding, oppose
Winnetka’s request.
Environmental Impact
Winnetka argues that continued particulate emissions from
its electric plant at the 0.25 lbs/MBtu level will not threaten
the ambient air quality standards.
In support of
this position,
Winnetka presented testimony from two witnesses who testified to
the results of
a particulate fallout study and a dispersion
modeling study.
This testimony engendered much cross questioning
and rebuttal.
Winnetka first presented testimony from Dr. Jon Swanson, who
designed and performed
a community ambient air study for the
Village.
The study was designed to characterize the particulate
fallout in Wirinetka,
with special attention paid
to the power
plant vicinity.
Particulate matter was allowed
to naturally
accumulate on eight horizontal plates and
in jars.
These
deposits were then compared microscopically with standard samples
of emissions from the electric plant.
Dr. Swanson concluded that
“the impact of
the plant
is absolutely negligible and barely
observable under
the microscope.”
(Tr.
I,
p.
62.)
He stated
that only two percent or
less of the total material collected
could be attributed
to emissions from the Winnetka power plant.
(Tr.
I
p.
66;
see also Ex.
3.)
On cross—questioning,
Dr. Swanson
stated that
the design of the study,
including the selection of
91—285
—4—
sites,
did not take
into account the unique meteorology (such
as
lake shore fumigation)
of the site,
and that the study was
qualitative rather
than quantitative.
(Tr.
I, pp.
74—75, 89—
90.)
Dr.
Swanson also testified that the study basically looked
for large particles.
(Tr.
I,
p.
75.)
The Agency presented testimony from Dr. Daniel D’Auben,
manager
of the Agency’s Air Quality Unit.
Mr. D’Auben
testified
that he found
the Swanson study
to be flawed because
it measured
only large particles.
He concluded that the collection
efficiency of the deposition plates would be less
than five
percent for the small particle sizes emitted by the electric
plant.
Mr.
D’Auben noted that Winnetka uses
a multiclone on
Boiler
8,
and that
a multiclone collects only the
relatively
larger particles.
Thus,
Mr.
D’Auberi stated that the Swanson
study would not show much impact
for the Winnetka power plant
because the study did not collect the particle sizes emitted by
the plant.
(Tr.
II,
pp.
25—26,
31.)
The bulk
of Winnetka’s testimony on environmental
impact was
presented by Mr. John Bradley of Murray and Trettel,
Inc.
Murray
and Trettel conducted
a dispersion modeling study,
and
a three
volume report
of that study was submitted into the record as
Exhibits
7,
8, and
14.
The study used USEPA’s Industrial Source
Complex,
Short Term
(ISCST)
atmospheric dispersion model and
appropriate modeling parameters and meteorological data
to study
estimate ground—level air concentrations of
total suspended
particulates
(TSP)
and the fraction of particles ten micrometers
or
less in diameter (PM—b) emitted
from the Winnetka plant.
(A
description
of the methodology of the study
is contained
in
Exhibit
7 and at Tr.
I, pp.
106—130.)
The Murray and Trettel
study concludes
that Winnetka’s electric plant, with
“a modeled
annual impact
of 0.6 rnicrogçams per cubic meter
ug/m3
TSP and
24—hour
impact of 8.1
ug/m~J
TSP will neither cause nor
contribute
to violations
of the National Ambient Air Quality
Standards
NAAQS
for TSP
——
or
PNI—lO while emitting total
suspended particulates at 0.25 lb/MBtu.”
(Tr.~IIpp. 129—130.)
Many of the details
of
the modeling done by Murray and
Trettel were questioned by Dr. Walter
A.
Lyons, who was retained
by John Leslie.
Dr.
Lyons was unavailable for either of
the two
hearings,
and
so
a deposition was taken of his comments.
Because
his statements were not subject to cross—questioning,
they were
accepted by the Board as Public Comment
#1.
Dr.
Lyons
particularly criticized Murray
& Trettel’s use of the ISCST
model.
Dr.
Lyons
stated that
the lakeside location of this
Winnetka plant necessitates the use of
a model which will account
for the phenomena of fumigation and plume trapping.
Dr.
Lyons
opined that there are advanced models which should have been used
in
this situation rather than
the ISCST model.
Based upon his
review of the Murray and Trettel
study and his experience with
atmospheric effects on emissions and specifically the Lake
91—286
—5—
Michigan shore environment,
Dr.
Lyons concluded that:
(1)
metereological conditions may well result
in occasions where
elevated regional background particulate concentrations, combined
with emissions from Winnetka’s electric plant, could exceed
ambient air quality standards;
and
(2)
such combined effect
is
most likely
to occur with winds
from the southeast,
and thus
Murray
& Tretteb’s modeling will not reflect such an occurrence
because the receptor was located southwest of the plant instead
of northwest.
(P.C.
#1.)
Mr. Bradley later
responded to Dr.
Lyons’ criticisms
in
Public Comment #2.
The Agency,
through Mr.
D’Auben,
testified
that it found
that the Murray and Trettel study is adequately
conservative
so as
to show that emissions at 0.25 lbs/MBtu do not
cause
a violation of
the NAAQS
for TSP
or PM—b.
(Tr.
II,
p.
24;
P.C.
#3.)
Dr.
Lyons replied
to Mr. Bradley’s statements in
Public Comment #5.
Control Alternatives
In 1985 Winnetka contracted with HDR Techserve,
Inc.
to
prepare
a report on particulate control equipment retrofitted
to
existing Boilers
7 and
8.
(It
was necessary to look at the cost
of adding control equipment
to Boiler
7, which does not now have
a permit,
because Winnetka has repeatedly
stated
its intention to
use Boiler
7
in the future
to handle peak loads.)
That report
has been submitted into the record of this proceeding as Appendix
F
to Exhibit
15.
The HDR report
identified seven control
alternatives:
mechanical collector, wet scrubber, electrostatic
precipitator
(ESP), fabric filter, electrostatically assisted
fabric
filter,
flue gas recirculation,
and slip stream fabric
filter.
The mechanical collector and electrostatically assisted
fabric filter options were eliminated from further evaluation
because neither
has been demonstrated
to achieve compliance with
the particulate limitations.
Likewise,
the wet scrubber option
was not considered further because of extensive space
requirements and other disadvantages.
(Ex.
15, App.
F,
pp.
3—1
——
3—9.)
The HDR report thus evaluated
the costs and economics of
five alternatives.
Each alternative was analyzed
in terms of
construction costs, operating and maintenance
(O&M)
costs,
debt
service,
fuel savings, electric generating savings,
and total
annual
cost.
The report gives
the following figures
to retrofit
Boilers
7 and
8
(1984 dollars):
Electrostatic precipitator
Total capital
~L999,ooo
Annual O&M
64,100
Annual fuel savings
(157,000)
Annual electric savings
(
20,000)
91—287
—6—
Annual
debt service
Total annual cost
Fabric
filter
(pulse jet)
456,800
$
343,900
Total capital
Annual O&M
Annual
fuel savings
Annual electric savings
Annual debt service
Total annual cost
Fabric
filter
(reverse gas)
$2,362,000
107,000
(157,000)
(
20,000)
354,800
$
284,800
Total capital
Annual O&M
Annual fuel savings
Annual electric savings
Annual debt service
Total annual cost
Flue gas recirculation
$3,825,000
80,900
(157,000)
(
20,000)
582,700
$
486,500
Total capital
Annual O&M
Annual
fuel
savings
Annual electric savings
Annual debt service
Total annual cost
Slip stream fabric filter
$
531,000
(28,800)
(157,000)
(
20,000)
77,500
($
128,300)
(Ex.
15,
App.
F,
Table 4—5.)
There are several space constraints
associated with the installation of these options.
Boiler
6
would have
to be removed
to permit
the installation of
slip
stream fabric filters on either Boiler
7 or Boiler
8.
Both
Boilers
5 and
6 would
have to be removed for installation of
an
ESP or either
of the full flow fabric filter alternatives.
Flue
gas recirculation equipment could be installed without removing
either Boiler
5 or Boiler
6.
(Ex.
15, App.
F,
p.
4—10.
)
The
$157,000 annual
fuel savings
is the difference between generating
electricity by operation on coal by using Boiler
7,
as compared
to Winnetka’s previous electric generation by operation on
a
combination of coal,
oil,
and natural
gas.
(Ex.
15, App.
F,
p.
4—1.)
(Fuel consumption
rates were based on plant operating data
Total capital
Annual O&M
Annual
fuel savings
Annual electric savings
Annual debt service
Total annual cost
$1,111,000
46,400
(157,000)
(20,000)
164 ,500
$
33,900
9 1—288
—7—
for 1983.)
The estimated electric savings
of $20,000
for each
alternative
is
the differential between the cost
of purchased
power minus the cost of generating the same amount
of power with
Boiler
7 operating on coal.
(Ex.
15, App.
F,
p.
4—6.)
The report states that although
a flue gas recirculation
system
is the least costly alternative,
this system may not
provide compliance with the
0.1 lb/MBtu standard during
fluctuating
load conditions.
Of the other alternatives,
the HDR
report concludes
that installation of slip stream fabric filters
on Boilers
7 and
8
is the most economical method of providing
compliance with the 0.1 lb/MBtu emission standard.
That option
is estimated
to have an annual cost of $33,900.*
The report
further
states that installation of
a
full
fabric filter system
would provide
for the highest overall particulate collection
efficiency, highest small particle collection efficiency,
a
“clean stack”
(less than 10
opacity)
and the widest range
in
fuel
selection.
The pulse jet fabric filter
has
a
lower capital
cost than
the reverse gas filter,
due mostly to reduced building
modification costs.
(Ex.
15, App.
F,
pp.
4—10
——
4—12.)
If
its request for
a site specific rule is denied, Winnetka
apparently plans
to add fabric filter control equipment
to
Boilers
7
and
8.
Winnetka states that this equipment would cost
between $2.7 million and $4.4 million, with annual operating
costs between $26,000 and $32,000.
Winnetka further
notes that
installation of fabric filter equipment would require use of
the
space now occupied by Boilers
5 and
6.
(Tr.
II,
p.
106.)
At
hearing Mr.
Bryan Mclriturff, Director
of Winnetka’s Water and
Electric Department,
testified that the differences between the
costs of
coal, oil,
and gas are currently not as great as they
were in
1985, when
the HDR report was done.
He stated that in
1985
it cost
3
1/2 cents worth of coal
to produce one kilowatt
hour
of electricity,
5
1/2 cents
of oil, and
7 cents
of natural
gas.
Currently, Winnetka’s costs are approximately 3.3 cents for
coal,
4.2 cents
for oil and less than 4.4 cents
for natural
gas.
Mr. Mclnturff thus testified that with these ~coststhere
is
not as much value
in fuel substitution as was estimated
in the
HDR study.
(Tr.
II,
pp.
132—33.)
Technical Feasibility
Winnetka has repeatedly stated
that it does not claim that
compliance with the general rule is not technically feasible.
(Petition p.
8;
Tr.
I
p.
187.)
In fact,
the HDR study found
at
least
four alternatives that would provide compliance with the
*Winnetka submitted
a January 21, 1988
letter from HDR which
estimates that current costs would be
15
above
the values given
i~its 1985 report.
(Ex.
15, App.
I.)
91—289
—8—
general
0.1 lbs/MBtu standard:
electrostatic precipitator, pulse
jet fabric filter,
reverse gas fabric filter,
and slip stream
fabric
filter.
(Ex.
15,
App.
F,
pp.
4—10
——
4—12.)
Therefore,
technical feasibility
is not at issue
in this proceeding.
Economic Impact
Because Winnetka does not dispute that
it is technically
feasible
to meet the 0.1 lbs/MBtu general standard, the heart
of
this case is the economic reasonableness of controlling the
particulate emissions from Winnetka’s electric plant so
as
to
meet that general standard.
Winnetka argues
that the cost
of
installing controls
is “enormous”,
and that the slight decrease
in particulate emissions which
could be obtained by such
installation does not justify the cost.
(Petition,
p.
10; Public
Comment
(P.C.)
#2,
pp.
9—10.)
Thus, Winnetka maintains that
compliance with the 0.1 lbs/MBtu general standard
is not
economically reasonable
for
it.
Winnetka’s electric utility
is
a profitable operation,
with
a net income
of $1,287,059
for fiscal year
1987..
(Ex.
16,
1987
report,
p.
9.)
Every year for at least
the past ten years the
electric utility has transferred funds
to the Village’s general
fund as
a payment
in lieu of
taxes.
That amount has
ranged from
$75,000
in 1978
to $350,000
in
1977.
In fiscal year 1987 the
electric utility paid $300,000
into the general fund,
and
the
1988 payment
is estimated
to be
$350,000.
(Ex.
16,
1987 report,
p.
7;
Ex.
17.)
As Winnetka’s 1987 financial
report states,
“the
annual transfers
from the utilities
to the General Fund,
as
a payment
in lieu of
taxes,
results
in a
reduction of
the
Village property tax levy and
is,
sic
therefore, of benefit
to
all Village
residents.”
(Ex.
16, 1987 report,
p.
7.)
Mr.
Mclnturff explained
that the
theory behind this payment in
lieu
of taxes
is that if
a private utility served Winnetka,
its
property would be taxable.
Since the Village owns the utility,
such tax revenue is foregone.
Thus,
the payment by the electric
utility
is meant
to make up some
of that lost revenue.
(Tr.
II,
p.
127.)
The electric utility does not make such
a payment to
any other taxing body.
(Tr.
II,
pp.
127,
131.)
There is
currently a
“reserve” of $3.9 million
in retained earnings
in the
electric utility’s operating fund.
(Tr.
I,
p.
27.)
As previously noted, Winnetka submits that the cost
of
adding control equipment
to Boilers
7 and
8
to comply with the
general
rule would be between $2.7 to $4.4 million, with
additional annual operating costs between $26,000 and $32,000 per
year.
(P.C.
#2,
p.
9.)
The economic impact study
(EcIS)
performed
in
the general
rulemaking (R82—l(A))
concluded
in 1983
that the cost for such controls would be $2,324,000, plus annual
operating costs
of $153,500,
for an annualized cost
of
$432,400.
(The Economic Impact
of Proposed Regulation R82—l
(June
1983), Table
IV—2.)
At
hearing,
the Agency asked why,
with
91—290
—9—
a $3.9 million reserve
in the electric fund which earns $250,000
to $280,000
in interest per year, Winnetka cannot pay $432,400
in
annualized costs
to comply with the general
rule.
Mr. Mclnturff
testified that the reserve fund is used for operating reserve,
to
replace or repair equipment
in an emergency,
and for site
improvements.
A portion of the reserve fund is
to be
used to put
pollution control equipment on Boiler
7,
if the instant petition
is granted.
(Tr.
I,
pp.
217—219.)
Mr. Mclnturff stated that the
reserve fund is earmarked for upcoming uses and “is not available
for
funding the difference
in cost of buying more power from
Edison or for meeting
an unnecessarily stringent
.1 rule.”
(Tr.
II,
p.
109.)
At both hearings
there was discussion of the electric rates
charged by Winnetka compared
to rates charged by Commonwealth
Edison, which serves
the area surrounding Winnetka.
Comparison
was done with residential
rates
for single family detached
homes.
Current rates
are
as follows:
Summer
Winter
Winnetka
$0.1004/kwh
$0.08l0/kwh
Commonwealth Edison
$0.14165/kwh
$0.07633/kwh
(first
400 kwh)
$0.04786
(all kwh
over 400)
(Ex.
15,
App..
J; Tr.
tI,
p.
99.)
Commonwealth Edison also
charges an $11.24 monthly customer charge
for meter reading,
billing,
and accounting.
Winnetka does not have such a charge,
nor does
it charge
a fuel adjustment.
Additionally, Winnetka
does not charge a municipal
utility tax.
Most towns
in the area
tax utilities at a rate of about
5.
(Ex.
15, App.
K;
Tr.
I,
p.
257; Tr.
II,
p.
99.
)
Assuming level
usage of 750 kwh per month
Over
a year,
the typical Winnetka resident will pay only 88.3
of
the amount paid by a Commonwealth Edison customer.
(Ex.
15, App.
K.)
Winnetka contends that installation of fabric filters on
Boiler
7 and
8
is not economically reasonable because
installation of these filters would require the removal of
Boilers
5 and
6.
Winnetka maintains that it cannot afford such a
loss of capacity.
Winnetka anticipates a continued increase in
the demand
for electricity
in the Village.
The capacity of
the
electric plant, with use of Boilers
4
and
8 and
the two diesel
engines
(as the plant now operates),
is 25.3 MW.
In
1983,
the
instantaneous peak was 21.7 MW.
During
the summers of 1986 and
1987,
that peak rose to 25.3 MW,
the maximum output
of the plant.
Mr.
Mclrjturff testified that as good utility operating practice,
a
15
margin of reserve
is
to be maintained above
the highest
91—291
—10—
system peak.
This requires
a current capacity of
29.1 MW at the
Winnetka plant.
The capacity of the plant with Boiler
7
permitted
is
30.3
MW,
1.2 MW above
the desirable level of
29.1
MW.
Mr. Mclnturff
stated that if recent growth
is
a clue
to the
future, Winnetka may outgrow that 1.2 MW cushion by 1989.
He
testified
that Boilers
5 and
6 are required
for long—term
reserve,
to maintain
a match of boiler capacity
to turbine
capacity at 32.9 MW,
and
to allow
a
few more years before
additional
capacity may be required.
Boilers
5
and
6 would
be
expected
to be used only in system emergencies, perhaps one or
two days
a year.
(Tr.
I,
pp.
188—89;
P.C.
#2,
p.
8.)
Because
of its need for the capacity furnished by Boilers
5
and
6, Winnetka contends that removal of
these boilers would
necessitate an
immediate search
for additional capacity.
Mr.
Mclnturff stated that replacement
of Boilers
5 and
6 with
an
equivalent
type of generation would cost $1.2 to $1.6 million per
megawatt,
or $3.1 to $4.2 million total,
in addition to the cost
of particulate control equipment.
This would result
in
a total
cost of
$5.9 million for control equipment and lost capacity.
(Tr.
I,
p.
189.)
Mr. Mclnturff also testified
that there appears
to be no room at the existing plant site for additional capacity,
and that therefore
it may not be possible
to install equipment at
any practicable price.
(Tr.
I,
p.
190.)
Winnetka further argues that the removal
of Boilers
5
and
6
would adversely affect
its dealings with Commonwealth Edison.
As
previously noted, Winnetka currently purchases some electricity
trom Commonwealth Edison almost daily.
These purchases are done
on an economy transaction basis.
An economy transaction
is one
Where Wirinetka buys power for less than it could generate that
power.
For example,
if Winnetka can generate power
for four
cents per kilowatt hour and Commonwealth Edison can generate
power
for two cents per kilowatt hour,
the
two parties may agree
to split
the difference.
Winnetka will buy power
from
Commonwealth Edison
for three cents per kilowatt hour,
so that
Winnetica saves
a penny and Commonwealth Edison~makesa penny.
(Tr.
I
pp.
202—203.)
Economy transactions are the cheapest type
Of purchase, with
the exception of maintenance transactions,
which are scheduled
in advance
for maintenance purposes.
However, Commonwealth Edison will only allow economy transactions
to be made if the buyer
(Winnetka)
has the ability
to generate
all of its power
needs.
(Tr.
II
pp.
101—102,
154—155.)
If
Winnetka bought some power beyond
its capacity, transactions
Would be done on a partial requirements basis.
A partial
requirements customer
is required
to pay a demand charge
in
addition
to the cost
of the power
itself.
The current demand
charge
is $1.05 per kilowatt per week.
(Tr.
1
pp. 206—207.)
Thus, Winnetka argues that
it must retain all available
9enerating capacity
in order
to purchase power
on an economy
transaction basis.
Mr. Mclnturff did state that Commonwealth
Edison might allow Winnetka
to make economy purchases at some
91—292
—11—
times
(i.e.
off—peak, when Winnetka can generate its needs),
and
not
at other times.
(Tr.
II
p.
155.)
In response to
a hearing officer order, Winnetka addressed
the issue
of projected electric rates
if power must be purchased,
fully or partially,
from another utility.
The Village first
stated that
if
it purchased all
of its power
needs from
Commonwealth Edison,
it (Winnetka)
would
have
to agree not
to
produce any power on
its own.
(Tr.
II pp.
100,
146—47.)
This
would result
in a large cost difference.
In 1987 the Winnetka
generating plant provided power
to the Village at
a cost
of
$2,778,103,
or
3.5 cents per kilowatt hour.
Commonwealth Edison
charges about
5 cents per kilowatt hour when
it sells power on a
total requirements basis.
Under such
a total requirements
contract, Winnetka would have paid $4,246,182 for power
in
1987.
(Tr.
II
p.
100;
Ex.
15, App.
B,
C
and D.)
Winrietka
further stated that it presently has
no guarantee
that
Commonwealth Edison will sell power on demand.
Because Winnetka
has the same climatic conditions as Commonwealth Edison’s service
area, Winnetka submits that the times
it needs
to purchase power
are the same times
that Commonwealth Edison
is least
likely
to
have excess power
available for purchase.
Thus, Winnetka asserts
that partial requirements purchases are not
a realistic option.
(Tr.
II,
p.
101.)
Mr. Mclnturff testified
that in order
to
offset the cost of a total requirements contract, Winnetka would
have
to set approximately the same rate as Commonwealth Edison
plus five percent
in
lieu
of a utilities
tax.
He stated that at
the least,
this would provide comparable service
to Village
residents at substantially greater
cost.
Mr. Mclnturff further
Opined that such
a change might lead
to decreased service because
Commonwealth Edison has historically had more and longer
power
outages than Winnetka.
(Tr.
II
pp.
102—103.)
In response
to Winnetka’s claims
of economic unreasonableness,
John Leslie presented testimony from Dr. Gary Skoog,
who has a
Ph.D.
in economics from the University of Minnesota.
Inter alia,
Dr.
Skoog examined how Winnetka could finance the cost
of control
equipment so
as
to continue
to provide power
at
a reasonable
cost.
Dr.
Skoog’s
testimony was based upon the annual cost of
a
pulse
jet fabric filter
for Boilers
7 and
8 as estimated
in the
tIDR report.
In 1985 that annual cost was $284,800.
Dr.
Skoog
allowed for
a
15 percent price increase, resulting
in a 1988
annual cost of approximately $327,500.
Dr.
Skoog testified
to
four broad strategies for financing the fabric filter
equipment:
(1)
raising electric rates
so that Winnetka residents
pay rates comparable
to those paid by their neighbors;
(2)
imposing
a five percent utility tax,
as neighboring communities
do;
(3) modestly raising
its property tax rate; or
(4)
a
combination of
the above options.
Dr.
Skoog
first
testified that financing the entire $327,500
annual cost through increased property tax rates shows that
91—293
—12—
compliance with the general standard
is economically
reasonable.
(Tr.
II pp.
161—163.)
He provided the following
list
of 1986 property tax rates
for Winnetka and surrounding
communities:
Wilrnette
#37
$
9.436
Wilmette
#39
9.757
Glencoe
#35
9.933
Wirinetka
#36
10.227
Glencoe
#36
10.300
Wilmette
#38
10.392
Kenilworth
#38
10.787
Winnetka #38
10.800
Winnetka Park
(Kenilworth)
11.092
Evanston
12.030
Highland Park
13.67
Lake Bluff
13.81
Lake Forest
15.94
(Tr.
II
p.
161;
Ex.
29.)
(The number following
a community’s
name
is
a school district.)
Dr. Skoog concluded
that
if the
entire annual cost
of the fabric filters was financed through
property taxation,
those currently paying $10.227
in Winnetka #36
would pay $lO.989,
and those
in Winnetka #38 now paying $lO.800
would pay
$ll.605.
Dr.
Skoog stated that these
increased tax
rates would clearly keep Winnetka within
the mid—range
of
its
neighbors and impose no undue burdens on its residents.
(Tr.
II
pp. 162—163.)
Dr Skoog admitted
that if, as Mr. Mclnturff had
testified,
the fuel cost savings
of
$157,000 and the electricity
cost savings of $20,000 estimated by HDR
in 1985 had disappeared,
the
annual
cost
of
the
equipment
would
be
closer
to
$461,000.
However,
Dr. Skoog testified that such
a figure would bring
property taxes
up into the $11
range, which would hardly change
Winnetka’s rank and still
leaves four neighboring communities
with higher
tax rates.
(Tr.
II pp.
169—175.)
Dr.
Skoog next stated that raising
the price
of elect-ricity
to the rates charged by Commonwealth Edison would add $688,966
to
the electricity fund
in the short
run and $399,807
in the long
run.
Dr. Skoog pointed out that both
of these figures are
greater
than his assumed annual cost
of $327,500.
Therefore,
Dr.
Skoog concluded that electric rates could be raised by a lesser
amount,
keeping Winnetka’s rates below
those charged by
Commonwealth Edison, while still
financing the fabric filter
equipment.
(Tr.
II
p.
163;
Ex.
23,
App.
A.)
If
a five percent
utility
tax
was
adopted
by
Winnetka,
Dr.
Skoog
stated
that
$262,777
of additional
revenue would be generated
in the short
run, with $173,583 per year added
in the
long run.
Thus,
Dr.
Skoog testified that
a sizable fraction of the financing could
be
done
merely
by
adopting
the
same
five
percent
utility
tax
commonly
used
in
the
area.
(Tr.
II
p.
164;
Ex.
23,
App.
A.)
Dr.
Skoog
further
pointed
out
that
although
he
found
the
pulse
jet
91—294
—13—
fabric filter alternative
to be “economically feasible”,
other
alternatives recommended by HDR, such as slip stream fabric
filters, would cost less than the pulse
jet alternative while
providing compliance with the general
0.1 lbs/MBtu
limitation.
(Tr.
II
p.
162.)
Dr.
Skoog also examined the likely effect on electric rates
and/or property
tax rates
in Winrietka
if the Village could no
longer operate some or all
of
its boilers.
He calculated
that
if
all electricity were bought from Commonwealth Edison on an
exclusive contracts basis
and distributed
at present Winnetka
rates,
a shortfall
of $1,468,079 would occur.
(Ex.
23, App.
B,C.)
Dr.
Skoog stated that this shortfall could be financed by
increasing property tax rates
in Winnetka #36
to $l3.643 and
rates
in Winnetka #38 to $l4.407.
These rates would
still be
lower
than the tax rate in Lake Forest.
However,
Dr. Skoog
testified that this alternative would
be strongly inferior to
installing pulse
jet fabric filter
equipment,
as discussed
above.
In sum,
Dr. Skoog concluded that the installation of
pulse
jet fabric filter equipment
“is easily affordable, whether
financed by
a modest property tax
increase,
a modest utility
tax,
a modest rate increase or some combination of the three.”
(Tr.
II
p.
166.)
The Agency believes that Winnetka’s petition for site
specific limitation
is not economically justifiable.
(P.C.
#3,
p.
3.)
The Agency points out that customers of Winnetka’s
electric utility pay significantly less than their neighbors who
buy power from Commonwealth Edison:
about 85
to
87 percent as
much,
since Wirinetka does not charge a utility
tax..
The Agency
also states
that Winnetka’s electric utility
is very profitable
and pays quite a bit
of money
to the Village, which produces
a
tax savings.
The Agency points out that in fiscal
year 1987 the
utility paid $300,000
to the Village in
lieu
of taxes and carried
about $3.9 million in
a “reserve
fund”.
The Agency argues that
these monies could be best put
to use
to comply with generally
applicable pollution control requirements,
instead of providing
savings
to Winnetka property owners.
Thus,
the Agency contends
that with the utility’s profit and retained savings, Winnetka can
reasonably afford
to comply with the 0.1 lb/MBtu limitation.
(P.C.
#3, pp.
4—5;
Tr.
I pp.
217,
220—221.)
Conclusions
After
a thorough review of the record
in this case,
the
Board does
not believe that it
is economically unreasonable for
Winrietka to comply with the general 0.1 lbs/MBtu particulate
emission limitation.
This decision
is based upon
a number of
factors.
First,
the Board notes that
it
is uncontroverted that
customers
of Winnetka’s electric utility pay only about 88
of
9 1—295
—14—
what neighboring Commonwealth Edison customers pay
for
electricity.
Rates are lower
for Winnetka customers, who also do
not pay
a monthly service charge or
a fuel adjustment.
Additionally, Winnetka customers are not subject
to
a utility
tax, as are the residents of the surrounding communities.
Throughout
the course of
this proceeding Winnetka has repeatedly
emphasized that
it wishes
to
keep its charges below those of
Commonwealth Edison, and argues that the Board should
not cause
Winnetka’s customers
to pay more for power just because
Commonwealth Edison’s rates are higher.
(P.C.
#4, p.
7.)
The
Board agrees with this claim as far
as
it goes.
However,
on this
record
the Board cannot excuse compliance with
the general
limitations on the grounds of economic unreasonableness when
utility customers
in the area around Winnetka pay more
to obtain
power
from
a company which does comply with the general standard.
Furthermore,
the payments made by the utility
to the Village
in
lieu
of
taxes
($300,000
in fiscal year
1987) help reduce the
property taxes paid by residents of Winnetka.
As Winrietka’s
annual
financial report for fiscal 1987 points out, these
“transfers
from the utilities
to the General Fund, as
a payment
in lieu of
taxes,
result
in
a reduction of the Village property
tax levy and
are,
therefore,
of benefit
to
all Village
residents.”
(Ex.
16, 1987 report,
p.
7.)
The electric utility’s
transfer
is expected
to increase
in fiscal year 1988,
perhaps
further reducing property taxes.
The Board recognizes
that this
transfer,
or payment
in lieu of taxes,
is intended
to compensate
the Village for taxes
lost because the site of
the electric
utility
is owned by the Village and not by
a private party which
would be assessed property taxes.
As the Agency pointed
out,
a
private utility at that site would pay about $350,000 in taxes.
However, only about $125,000 of that amount would
go
to the
Village, with the
rest being distributed
to other taxing bodies
such as
the park and school districts.
(Tr.
I,
p.
129.)
Thus,
Winnetka receives a double benefit:
the Village
receives the
advantages
of operating its own utility while at the same time
receiving
a payment into its general fund higher
than would
be
paid by a private company.
Presumably,
this reduces property
taxes more than
if
a private company operated the electric
utility.
Dr.
Skoog testified that the installation of
a pulse jet
fabric filter
is indeed affordable for Winnetka.
He concluded
that this equipment could be completely financed by:
(1)
raising
electric rates but still
keeping Winnetka’s rates below those
charged by Commonwealth Edison;
(2)
raising property taxes, which
would
still be
in the mid—range of the rates
in surrounding
communities
or
(3)
a combination of these, perhaps
in conjunction
with the imposition
of
a utility tax.
(Tr.
II
pp.
161—166.)
Dr.
Skoog’s analysis did not address the fact that the electric
utility is
a profitable entity which has
a $3.9 million operating
fund which earns between $250,000 and $230,000
in interest per
91—296
—15—
year.
The Board believes that,
at the least, some combination of
these options could be used
to finance particulate control
equipment without burdening Winnetka residents.
Again,
the Board
must point out that
it does not believe that Winnetka residents
should pay increased
taxes or electric rates simply because taxes
arid
rates
in surrounding communities are higher.
However,
the
Board cannot find that the cost of particulate control
equipment
is economically unreasonable where
the utility has
a $3.9 million
operating fund which earns $250,000
to $280,000 per year,
customers
of the utility pay lower taxes and lower
electric rates
than their neighbors,
and the costs of control equipment could be
financed through taxes,
rates,
or
a combination of these and
still not exceed
the costs being paid
in surrounding communities.
The Board further notes
that the $2.7 to $4.4 million figure
asserted by Winnetka
is evidently derived from the 1983 EcIS
in
the general rulemaking
(R82-l(A)).
Winnetka does not explain why
it apparently does not accept
the figures contained in the 1985
HDR report done specifically for Winnetka.
(Ex.
15, App.
F.)
That study concluded that there are four alternative control
options which could be installed with annualized costs of less
than $500,000 per year.
(Ex.
15, App.
F,
pp.
4—10
——
4—12.)
The Board
is also not convinced by Winnetka’s claim that
compliance
is economically unreasonable because the installation
of fabric
filters would require
the removal of Boilers
5 and
6,
thus reducing the plant’s capacity and affecting Winnetka’s
relationship with Commonwealth Edison.
Winnetka has never
explained why it would
not choose to install
a slip stream fabric
filter
instead of pulse
jet fabric filter.
According
to the HDR
report,
a slip stream fabric filter will provide compliance with
the 0.1 lbs/MBtu standard at
a significantly lower cost than the
pulse jet fabric filter.
The HDR study estimated capital costs
of $1,111,000 and
a total annual cost
of $33,900 for the slip
stream filter,
as opposed
to capital cost of
$2,362,000 and
a
total annual cost
of $284,800 for the pulse
jet filter.
(Ex.
15,
App.
F, Table
4—5.)
Even allowing for an estimated 15 peçcent
cost increase,
the cost differential between the two options
remains the same.
Perhaps more importantly,
installation of
a
slip stream fabric filter would require the removal
of only
Boiler
6.
Mr. Mclnturff testified that
it may be possible for
Winnetka
to make economy purchases at some
times
(i.e. when
Wirinetka can generate
its needs) and partial requirements
transactions at other
times.
(Tr.
II
p.
155.)
It might be
cheaper
to pay a demand charge
for the capacity furnished by
Boiler
6 than
to equip it with pollution control
equipment, which
would
be necessary if Boiler
6
is
to be permitted
in the
future.
(The Board notes that Mr. Mclnturff has repeatedly
stated that the capacity of Boilers
5 and
6 will be needed for
only a handful
of days at some time in the future.
(Tr.
I pp.
188—189,
225.))
The Board does not mean
to choose
the control
equipment
installed by Winnetka.
The point
is
that Winnetka has
91—297
—16—
not shown that compliance with the general
standard
is
economically unreasonable.
In
its closing comments Winnetka argues that its
request for
a site specific
rule should be granted based simply upon the
“environmental acceptability” of
the proposal.
Winnetka contends
that the record clearly shows
that there
is no environmental
benefit to be gained by denying
it
a permanent 0.25
lbs/t4Btu
rule,
and that the Board
should,
as a matter
of
law, grant a site
specific rule which will cause no significant environmental
harm.
(P.C.
#2,
p.
5.
)
Winnetka asserts
that to do otherwise
would be contrary
to the manifest weight of
the evidence and
to
Section 27
of the Environmental Protection Act
(Act), which
allows the Board to adopt different regulatory provisions
“as
required by circumstances for different contaminant sources and
different geographical
areas.’’
(Ill.
Rev.
Stat.
1987,
ch.
1111/2,
par.
1027.)
In essence, Winnetka maintains that
the cost
of
adding particulate control equipment
is economically unreasonable
because its emissions do not violate the ambient air quality
standards
for particulates.
The Board disagrees with
these
arguments.
Section
8 of
the Act states
in part:
It
is the purpose
of this Title
to
restore maintain, and enhance the purity
of the air
of this State
in order
to
protect health, welfare, property,
and
the quality of life
and
to assure
that no
air contaminants are discharged into the
atmosphere without being given
the degree
of treatment of control necessary to
prevent pollution.
(Ill.
Rev.
Stat.
1987,
ch.
ll1l/,~., par.
1008.)
Section 10 of the
Act provides:
The Board pursuant
to procedures
prescribed
in Title VII of this Act, may
adopt regulations
to promote the purposes
of this Title.
Without limiting the
generality of
this authority, such
regulations may among other things
prescribe:
a)
Ambient air quality standards specifying
the maximum permissible short—term and
long—term concentrations of various
contaminants in the atmosphere.
b)
Emission standards specifying
the maximum
amounts
of concentrations
of various
91—298
—17—
contaminants that may be discharged into
the atmosphere.
*
*
*
*
(Ill.
Rev.
Stat.
1987,
ch.
1111/2,
par.
1010.)
Thus,
it
is obvious that the promulgation of emission
limitations
and air quality standards are
two distinct methods by
which the Board may act to “restore, maintain, and enhance
the
purity
of the air”
in Illinois.
Both emission
limitations
and
air quality standards represent benchmarks which must
be reached
in pursuing the goals of the Act.
Compliance with one benchmark
does not negate
the necessity for compliance with the other; both
have individual worth in achieving
and maintaining a high quality
environment.
As David Currie,
the first Chairman of the Board,
wrote when the Board adopted water quality standards and effluent
limitations
for mercury:
It
would be folly to set effluent standards
at such
a level
as
to permit existing
pollution sources
in every case to degrade the
water
to the level
set by the standard.
To do
so would
transform standards designed
to
protect the environment into licenses
to
degrade.
It would
ignore
the fact that
a
water quality standard prescribes not the
ideal condition of
the environment, but an
outer
limit
of dirtiness
that should be
avoided
if
it reasonably can be.
It would
commit us
to the philosophy of allowing the
environment
to be
as dirty as we can bear
it,
when our correct philosophy should be
to make
the environment as clean as we reasonably
can.
Finally,
to allocate
to existing users
the entire water—diluting capacity
of the
environment would
leave no room for new
industry, encourage inefficient practices,
and
either discriminate against new entrants or
require a re—examination and tightening of
effluent limit whenever
a new facility was
contemplated.
Mercury Standards,
I PCB 411, 414
(R70—5, March
31,
1971.)
The
Board believes that Professor Currie’s discussion applies with
equal
force
to air quality standards and emissions limitations,
and
to this proceeding.
The Board recently denied
a petition by Schrock/A Division
of White Industries
for site specific relief from the
0.1
lbs/MBtu rule.
In that case,
Schrock argued that
it was not
economically reasonable for
it
to comply with the general
rule at
91—299
—18—
a cost of $80,000 because its emissions do not cause
a violation
of the ambient air quality standards
for particulates.
The Board
agreed
that Schrock’s emissions apparently do not threaten
the
status
of the surrounding area as
an “attainment area”, but
refused
to grant Schrock’s request for site specific relief.
The
Board
stated:
“If the Board granted relief
to Schrock
in
this
instance,
it would be establishing
a
precedent which could undermine the whole
regulatory process.
The implication would
be
that any source which would
incur added
expense,
if forced
to comply with the emission
limits of
a
rule, would be entitled
to relief
merely upon the showing
that its noncompliance
would
not cause a violation of
an air quality
standard.
The result
of such a policy would
be
a series
of exemptions resulting in the
increased degradation
of air quality,
since
under
this interpretation emission limitations
would
be viable only in instances where
a
source failed
to show that an exemption would
not lead
to violation of air quality
standards.
Such
a holding would clearly
contravene the intent of the Act.”
(Proposed Site Specific Particulate Limitations for Schrock’s
Sawdust Fired Boilers
in Arthur,
Illinois,
R87—12,
February 25,
1988,
slip op.
at
7.)
Winnetka attempts to distinguish the instant proceeding from
the Schrock proceeding by arguing,
inter
alia,
that:
(1)
the 0.1
lb/MBtu rule already applied
to Schrock;
(2)
Schrock never
objected
to or participated
in the general rulemaking;
(3)
Schrock sought relief from the general rule only after
its
contractor’s control
equipment failed
to provide compliance;
and
(4) Schrock’s costs
to comply with the gerieralrule were only
$80,000 as opposed
to Winnetka’s estimated costs of between $2.7
and $4.4 million plus increased operating costs.
(P.C.
#4,
pp.
7—8.)
The Board does not agree
that the two proceedings are
distinguishable on the grounds that Schrock never objected
to the
general rule
to which
it was subject.
Under Section 27
of the
Act,
the Board
is
to consider
the “technical
feasibility and
economic reasonableness”
of
a particular regulation.
Whether
a
petitioner previously objected
to a regulation, whether that
petitioner was subject
to that general standard, and what was the
impetus for
a rulemaking petition are simply not
issues
in any
rulemaking.
Likewise, the Board
is
riot convinced by Winnetka’s
bare comparison of compliance costs.
The question of economic
reasonableness does not revolve around a mere look at what
compliance with
a given rule will cost.
Instead, economic
reasonableness must be determined by considering
all
the
91-300
—19—
circumstances of the proceeding together.
To hold otherwise
would result in
a situation where any compliance cost over
a
certain amount,
be
it $5000 or
$5 million,
would almost
automatically be found economically unreasonable.
Thus,
the
Board believes that its decision in Schrock
is applicable
to the
instant proceeding.
Additionally,
the Board must again point out that Winnetka
has failed
to explain why it continues
to quote
a compliance cost
of
$2.7
to $4.4 million in capital costs plus increased operating
costs.
The HDR study concluded that there are four alternatives
which would provide compliance at annualized costs of between
$33,900 and $486,500.
Winnetka has
not provided annualized costs
for
its figures, making comparisons impossible.
For all of the above reasons,
the Board finds that
it was
both technically feasible and economically reasonable
for
Winnetka to comply with the general 0.1 lbs/MBtu particulate
emission limitation set forth
in
35
Ill. Mm.
Code 212.204.
Therefore, Winnetka’s petition
to make permanent its interim site
specific regulation
is denied.
ORDER
The petition for site specific rulemaking filed
by the
Village of Winnetka on September 12,
1986 is hereby denied.
Section
41 of the Environmental Protection Act,
Ill.
Rev.
Stat.
1987,
ch.
1111/2,
par.
1041,
provides for appeal
of
final
Orders of the Board within
35 days.
The Rules of
the Supreme
Court
of Illinois establish filing requirements.
IT
IS SO ORDERED.
I,
Dorothy
M. Gum, Clerk
of
the Illinois Pollution Control
Board,
hereby cert~ythat the above Opinion and Order was
adopted on the
~
day of
____________________,
1988, by
a
vote
of
7—C
.
Dorothy M.
Q7~’nn, Clerk
Illinois Po’lution Control Board
9 1—301
