TVA to idle four Johnsonville coal units by March 1

The Tennessee Valley Authority, due to operational issues, plans to idle four of the 10 units at its Johnsonville coal plant as of March 1, TVA noted in a Feb. 3 earnings release.

Key initiatives for TVA in 2012 include completing the John Sevier combined cycle plant in northeastern Tennessee. The natural gas-fired facility was connected to the TVA electrical grid for the first time in December 2011, and TVA expects to begin commercial operations in June. TVA also announced plans to idle the four units at its 61-year-old Johnsonville plant in west Tennessee as of March 1. TVA elected to accelerate the shutdown schedule, triggered in part by an air emissions reduction agreement with the U.S. Environmental Protection Agency.

“As of March 1, 2012, TVA plans to idle Units 7, 8, 9, and 10 at its Johnsonville Fossil Plant (‘Johnsonville’) in west Tennessee,” said TVA’s Form 10-Q statement, filed Feb. 3 at the SEC. “The schedule has been accelerated as part of an effort to address operational challenges at Johnsonville and to reduce costs. This is earlier than the retirement dates required by Environmental Agreements with the EPA and other parties, and is earlier than the expected compliance date for the Utility MACT Rule (Mercury and Air Toxics Standards (‘MATS’)). Sixty days after the idle date of these units, TVA plans to put the units in inactive reserve status. Units in inactive reserve status are unavailable for service but can be brought back into service after some maintenance in a relatively short duration of time.”

The winter net dependable generating capacity at Johnsonville is 1,254 MW and the plant consumes some 9,600 tons of coal a day, said the TVA website. In its November 2011 Form 10-K filing, TVA said its plan at that point was to retire six units at Johnsonville by Dec. 31, 2015, and retire four units by Dec. 31, 2017.

In the meantime, a federal court has stayed EPA’s Cross-State Air Pollution Rule, which was due to take effect Jan. 1 and would have some impact on TVA’s coal-fired emissions. “In the interim, the Clean Air Interstate Rule (‘CAIR’) remains in effect for TVA and other utilities,” said the Feb. 3 Form 10-Q. “Speculation is that due to the time required for the [appeals court] review, CSAPR may not become effective until January 1, 2013, at the earliest. In the interim, the Environmental Agreements and CAIR SO2 and NOx allowance allocations remain the air quality compliance drivers for TVA’s coal-fired plants in 2012.”

Milder weather compared to the year-ago quarter in TVA’s service region drove sales of electricity down 5% for the fourth calendar quarter of 2011, which was the first quarter of TVA’s current fiscal year. The lower-than-expected sales and resulting lower revenue is causing TVA to revisit expenditures for 2012, which may include project scope and schedule revisions related to operations, revisions of certain programs and initiatives, and other productivity enhancement initiatives.

The milder weather had a bigger impact on electricity sales to TVA’s municipal and cooperative distributors than industrial customers, as electricity usage is typically more temperature-driven for residential customers. Sales to local utilities declined 6%, while sales to directly served industrial customers were down 1%.

“Weather fluctuations are not something new for TVA, but these uncontrollable conditions impact TVA’s financial results,” utility CFO John Thomas said. “TVA can, however, make adjustments in its operations to mitigate some of the impact of lower sales results. We are currently in the process of evaluating planned expenditures for 2012 to determine if certain programs should be revised and are considering other productivity enhancements.”

TVA is also taking longer term actions that advance its strategic vision of leadership in low-cost, cleaner energy. These include retiring older, less efficient coal units and moving to a more diversified portfolio that includes more natural gas and nuclear power.

“During the first quarter of 2012, TVA remained focused on following the new path forward for its energy future,” said President and CEO Tom Kilgore. “Guided by the Integrated Resource Plan, we are working to achieve our vision while maintaining TVA’s record for reliable service, safe operations and competitive rates.”

Fuel expense was $98m lower in the first quarter of fiscal 2012 compared with the year-ago quarter. Lower commodity prices and more generation from lower-cost sources, particularly hydroelectric power, also resulted in lower rates for TVA’s power customers in the first quarter of fiscal 2012.

Runoff, due to greater rainfall in TVA’s service area, was 120% higher in the first quarter, resulting in a 31% increase in low-cost hydro generation compared with the prior year. Nuclear generation rose by 18% and natural gas generation increased 71%, offsetting higher-cost coal-fired generation, which declined 29% in the first quarter.

TVA reported a $173m net loss in the first quarter of fiscal year 2012, compared with a net loss of $48m in last year’s first quarter.

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.