Citizens to convert downtown steam plant from coal to gas

Citizens Energy Group plans to switch the primary power source for its Perry K Steam Plant in downtown Indianapolis from coal to natural gas, the utility announced Wednesday.

The conversion, which will cost about $9 million, could begin in late 2012 and finish in 2014.

The plant, on Kentucky Avenue near Victory Field, supplies steam to about 250 large business and industrial customers downtown, including IUPUI and Lucas Oil Stadium. In warmer weather, the steam turns water chillers that cool the buildings.

“Modifying the plant’s boilers to burn U.S.-produced natural gas rather than coal will improve the environment; reduce environmental compliance costs; and lower operating costs to make the utility’s steam rates more competitive,” Citizens said in a prepared statement.

Citizens spent about $12 million at Perry K in 2006 to comply with Environmental Protection Agency standards. It faces even more emissions mandates by 2014 and must make more changes to the boilers to stay in compliance.

Modifying the boilers to burn natural gas rather than coal will save about $15 million in conversion costs, the utility said.

In addition, the conversion will reduce annual operating costs by about $5 million compared to operating modified coal boilers that would meet the new clean-air standards.

Citizens said it would reduce its work force by 34 positions over the next three years because the conversion will provide operating efficiencies. The utility said it would use attrition to minimize the actual job losses.

The utility said natural gas would provide a cheaper and more stable energy source.

“Over the past five years, we have seen coal costs rise about 55 percent. Meanwhile, over the same period natural gas prices have fallen about 40 percent,” said Citizens CEO Carey Lykins in a prepared statement. “Long-range forecasts indicate stable natural gas prices for the next several years thanks to growing natural gas production from shale formations located throughout the United States.”

The Indiana Utility Regulatory Commission must still approve the conversion plan, which the utility plans to file in January.