Vectren South argues for cleaned up final coal procurement order

Southern Indiana Gas and Electric Co. told the Indiana Utility Regulatory Commission that it and the Indiana Office of Utility Consumer Counselor (OUCC) are largely in agreement about the utility’s latest fuel adjustment clause case, but that prejudicial language in the OUCC’s proposed commission order should be excised.

On Feb. 6, the OUCC submitted a redlined proposed order revising the proposed order previously submitted in this proceeding by Southern Indiana Gas and Electric, d/b/a Vectren Energy Delivery of Indiana Inc. (Vectren South). The OUCC’s version of the proposed order agrees that this sub-docket was created for the purpose of reviewing Vectren South’s coal supply activities on a going-forward basis, that a 2011 request for proposals (RFP) for coal supply appears to be competitive and market-based and that the 2011 RFP appears successful in terms of obtaining reasonable market prices and ensuring ongoing re-pricing opportunities over the ensuing years.

“While the OUCC’s proposed order inserts the word ‘appears’ in these findings, the point remains that the parties agree, after a full opportunity for review of all facts related to the 2011 RFP process, that the process and its results were competitive and reasonable, and assure Vectren South will periodically be buying coal to mitigate market volatility,” said Vectren South in its Feb. 20 filing.

The parties also agreed on the future review of coal procurement activities, with Vectren South’s version of proposed order making the commitment that the company will, as it has in the past, provide a description of its procurement process and results in its testimony in future FAC proceedings. Vectren South’s proposed order also states it will report on its portfolio, including contract term staggering, and that if its testimony ever fails to address issues or leads to questions, future sub-docket proceedings are available as necessary to facilitate additional review.

Vectren South said that if the commission were to adopt the OUCC’s version of the proposed order, it needs to delete certain elements based around three main points.

One point is that the OUCC adds significant language in its recitation of the evidence and throughout its findings section related to its perspective on what occurred in a 2008 coal procurement process which, if adopted, would have the commission make statements that are inconsistent with its prior findings regarding the 2008 RFP process made in multiple FAC proceedings as well as in a Vectren South rate case order.

Another Vectren South point is that the OUCC, based on its retelling of 2008 events, asks the commission to find, contrary to all the findings the OUCC agrees with regarding the efficacy of the 2011 RFP process, that by allowing Vectren Fuels Inc. or its subsidiaries to be a competitive bidder, the analysis of the bids (found by the OUCC to be reasonable) was somehow “immediately skewed.”

The third Vectren South point was that the OUCC attempts to transform contingent procurement recommendations from a witness, that the witness says could be considered if and when a problem with the procurement process occurs in the future, into current recommendations being made to the commission.

Much of the issues in this case revolve around the fact that Vectren Fuels, which like Vectren South is a subsidiary of Vectren Corp., supplies Vectren South with much of its coal out of two existing Indiana coal mines, with a third to go into production later this year. Vectren South has said the two top bidders in the 2011 RFP were coal operator Chris Cline’s Foresight Coal for coal out of Illinois, and Vectren Fuels. Vectren South said it used the RFP bids to work out a contract with Foresight and to negotiate down the prices it pays under Vectren Fuels business already in place.

In the Feb. 20 filing, Vectren South said the OUCC “leverages” a discussion of the 2008 RFP, which involved the signing of much of the current Vectren Fuels business, with a proposed conclusion that by contracting with Vectren Fuels over time, despite the fact that the 2011 RFP obtained bids from three of the largest regional producers, including Foresight Coal that has contracted to supply Vectren South, Vectren South has somehow negatively impacted competition.

“This position ignores the fact that for a ten year period through 2008, Vectren South bought the majority of its coal from Vectren Fuels under contract terms that were negotiated and agreed upon with the OUCC,” Vectren South added. “The OUCC’s arguments about the past essentially attack the arrangements it helped create that supported Vectren Corporation’s investment in its mines and as a result created hundreds of Indiana mining jobs. Moreover, it is logically impossible for the OUCC to find the 2011 RFP was successfully competitive and produced a market-based outcome, and then in the next breath attack the RFP process because it allowed an affiliate to submit a competing bid.”

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.