Bloomington-based Hoosier Energy Rural Electric Cooperative will pay a $950,000 civil penalty and spend $5 million on environmental projects to settle a complaint by the Environmental Protection Agency.

The EPA previously alleged that Hoosier in 2008 modified its Merom power plant in southwest Indiana without complying with so-called New Source requirements. Those modifications required pre-construction permits and emissions reductions based on the “best available” control technology.

Hoosier also plans to upgrade Merom and its Ratts generating plant with new equipment to reduce sulfur dioxide and nitrogen oxides, at a cost of $250 million to $300 million.

Among environmental projects required under the settlement, Hoosier will harness coal-bed methane to generate at least 10 megawatts of electricity, and install solar power systems at public schools and on buildings of not-for-profit groups in its service territory.

Hoosier isn’t the only utility in the region to be targeted by EPA for allegedly violating New Source rules. Last year, the agency issued a 16-page notice of violation to Indianapolis Power & Light, saying the utility updated three generating plants over 23 years without adding the most modern pollution controls.

The IPL case is still pending.