GenCon Energy witnesses told the Public Utilities Regulatory Authority (PURA) hearing that the company27s regulatory liability for selective catalytic reduction (SCR) and CO/VOC catalyst replacement is based on vendor estimates escalated to recent years and an accrual tied to how often the units run. Jacob Hurwitz, senior director of revenue requirements for GenCon, said the company used contractor proposals from 2016 and 2019 escalated by 2.25% per year to produce per-site replacement estimates of about $2.007 million for Devon and $2.052 million for Middletown (total roughly $4.06 million), then explained the accounting and operational assumptions that produced the roughly $3.9 million projected reserve balance for 2025.

Why it matters: The reserve reduces GenCon27s rate base and thus affects rates. Staff and intervenors pressed the company on whether the accrual assumptions match how often the units actually run, how the company would treat an overaccrual or a situation in which replacement is not required during the contract term, and what concrete test data support a near-term replacement need.

What the company said: Hurwitz and Patel (senior vice president, GenCon Energy) explained that the original vendor quotes were a 2016/2019 point-in-time exercise to understand potential replacement costs and are not themselves the legal basis for the reserve. Instead, GenCon establishes the reserve based on unit operation (variable operations and maintenance hours) and applied a 5% capacity-factor assumption (438 hours per year) for the accrual calculation. The company said that the reserve recorded on the books is a regulatory liability (a reduction to rate base) and that the projected 2025 balance shown in RRU35 attachment 1 is approximately $3.9 million. Hurwitz read into the record a breakdown of a ~ $155,000 maintenance balance (SCR coupon & major maintenance $38,424; generator testing $92,632; NERC relay/trip testing $23,958).

What staff and intervenors pressed on: PURA staff asked for: (1) unit-level runtime history (start of commercial operation to 2024 and a 5-year average) to check the 5% capacity-factor assumption; (2) the coupon/test results showing removal efficiency and the testing date per unit (company said recent tests show approximately 90% remaining removal efficiency and OEM replacement is recommended at or below 85%); and (3) an exhibit illustrating the revenue-requirement and rate-base effect of halting future accruals at 12/31/2025 (company agreed to provide an LFE demonstrating alternatives including holding the 2025 balance constant). The company agreed to provide LFEs for unit run-time (LFE 3), coupon/test results and dates (LFE 4), an updated revenue-requirement/rate-base model if accumulation stops after 2025 (LFE 5), and read-in detail for the $155,000 balance.

Timing and uncertainty: Company witnesses emphasized the estimates are several years old and were escalated using a 2.25% rate; actual replacement costs could depart materially from those escalations given recent inflation and market volatility. The panel noted the 5% capacity-factor basis equates to an assumed replacement interval of about 27.4 years (given OEM guidance of ~12,000 run-hours), whereas GenCon27s historical plant-average hours suggest longer replacement intervals under actual operations (staff calculated Devon ~240 hours/year, Middletown ~200 hours/year). Company testimony said coupon tests performed in 2023 showed roughly 90% remaining life and did not indicate immediate replacement; OEM guidance suggests replacement at 85% removal efficiency.

Treatment if circumstances change: Company counsel said it had not previously developed a standard protocol for returning an overaccrual to customers if replacement is never required; the company would address an overaccrual or undercollection in a future revenue-requirement docket and offered to include legal/regulatory implications in the late-file supplements. The company also cautioned that the contract-for-differences structure and certain market/contract mechanics could interact with any proposal to stop accruals mid-contract.

What comes next: PURA asked for the LFEs described above; the panel set a late-file exhibit deadline (Nov. 7) and a late-file hearing (Nov. 12). The record now includes an agreed set of follow-up exhibits that staff and parties will review to test whether current accrual assumptions should be adjusted before the 2026 revenue-requirement decision.

Sources: hearing transcript (staff cross-examination beginning 00:11:43; read-in of the $155,000 components 00:31:56; extended SCR reserve cross-examination and LFE commitments 00:33:572D01:06:00).