From the Pulaski Skyway, the Hudson power plant along the Hackensack
River looks like an artifact of the industrial age, a relic from an era
when few worried about what came pouring out of its 500-foot
smokestacks.

Only a couple years ago, the 40-year-old, coal-fired plant seemed
destined for the junk heap, an outcome sought by environmentalists who
viewed it as one of the dirtiest power plants in the state. Scheduled
to be shuttered at the end of 2006, its closure was only averted when
its owner, Public Service Enterprise Group, agreed to a costly retrofit
to reduce pollution.

Today, the plant is completing the first phase of a three-year, $1
billion makeover. During the first phase, which took 10 weeks and $210
million, up to 1,000 outside contractors were onsite refurbishing or
replacing virtually every major piece of machinery. Over the next two
years, the remainder of the capital budget will be spent mostly on new
environmental controls to reduce pollution.

The
outlay is not without considerable risk. The company does not yet know
what additional constraints the state and federal government will place
on coal-fired power plants because of concerns they contribute to
global warming.

That PSEG is still willing to sink $1 billion into the plant’s
overhaul underscores the lengths energy suppliers will go to keep
running a highly profitable and by most accounts vitally needed plant
in a region where supplies are tight, demand is rising and prices keep
soaring.

Coal-fired plants generate electricity at a cost lower than any
other type of traditional fuel, excluding nuclear. The Hudson plant is
particularly lucrative because it is located in an area where power
lines are congested, which tend to increase the cost of power produced
by plants within the region.

“It should be good for another 20 years,” said Michael Cilinski,
plant manager for PSEG Fossil, a division of Newark-based PSEG. “We
will have better combustion, better reliability and better efficiency.”

It will also run more frequently, a prospect that should prove
profitable given the high cost of power today. The upgrade is expected
to increase the plant’s capacity from 55 percent to 70 percent of the
time.

But whether the refurbished plant generates less pollution is a
matter of dispute. Some environmentalists argue a coal-fired plant that
runs more than it had in the past will produce more greenhouse gases,
regardless of what pollution controls are put on it.

The 250-acre site in Jersey City is where Public Service built its first power plant way back in 1906.

The first phase of the plant’s overhaul is perhaps the largest and
quickest such project ever undertaken by a utility, Cilinski said.
Coordinating the work of hundreds of plumbers, welders, electricians
and insulators proved to be the biggest challenge, he said.

During a 10-week plant outage, PSEG Fossil spent $35.5 million
refurbishing its steam generator, $17 million rehabilitating its
boiler, $4.7 million for new fish screens and $17 million for new
burners where the coal is mixed with air and injected into the boilers.

Typically, a project of this scope is done in an 18- to 24-month
time frame. “We made it happen in seven months,” including obtaining
regulatory approvals, said Russ Arlotta, project director at PSEG
Fossil.

PSEG Fossil borrowed from lessons learned by the company’s nuclear
unit in executing quick refueling outages at its nuclear power plants,
said Rich Lopriore, president of PSEG Fossil and a former executive at
Exelon Nuclear, generally regarded as a leader in operating plants
efficiently and profitably. “We saw a value in bringing to Fossil some
of the best practices adopted by the nuclear sector,” he said.

Whether the value turns out to be as high as the company hopes remains to be seen.

“The economies of what they are looking at are changing,” said Dena
Mottola Jaborska of Environment New Jersey. “Coal will not be the cheap
cash cow it is today when global warming legislation is enacted.”

And even with the environmental upgrades, the plant will still be a
highly polluting facility, she said. “None of the controls will reduce
their greenhouse gas emissions,” she said.

PSEG executives disputed her claims. “With the upgrades, we can
control combustion,” Lopriore said. “We can burn coal as clean as
technology will allow today.”

The pollution controls, to be installed over the next two years,
required a major transformation of the 608-megawatt plant, Cilinski
said. Under a consent decree with environmental regulators, the unit
will run only at 500 megawatts of capacity until the new pollution
controls are installed. One megawatt is enough to supply about 800
homes.

Once installed, the pollution controls will reduce emissions of
nitrogen oxide, a pollutant contributing to smog, by 90 percent; curb
sulfur dioxide emissions, a pollutant in acid rain, by more than 93
percent; and that of mercury, a toxin that affects the central nervous
system, by 90 percent.

The company could face additional requirements if the federal
government, as most expect, adopt new restrictions on emissions that
add to global warming. New Jersey already is joining with other
Northeast states to adopt regional constraints, effective next January,
a step analysts said could help give the company a glimpse of what
greenhouse gas constraints it might ultimately face.

Paul Fremont, an analyst with Jefferies & Co., said the Hudson
project is not a huge risk. “Based on where power prices are today, I
would characterize it as a well-reasoned bet,” Fremont said.