Dominion wants to widen coal options in VPEM agreement

Dominion Virginia Power and an affiliated company, Virginia Power Energy Marketing (VPEM), want to expand the types of coal that Dominion Virginia Power is allowed to buy from and sell to VPEM.

Dominion Virginia Power applied May 14 at the Virginia State Corporation Commission for the change. It is seeking approval of a revised Fuel Purchase, Sale and Services Agreement for affiliate transactions regarding the purchase and sale of “Fuel,” as well as the “Transportation” of fuel and for “Emission Reduction Products,” as those terms are defined in the revised agreement.

“As proposed, the Revised Agreement is substantially similar to the Operative Agreement, which was approved in Case No. PUE-2006-00067 as being in the public interest, and which has resulted in reduced costs for the Company and its customers,” said the company. “However, while the Operative Agreement does not discuss specific types of Fuel – i.e., it relates to coal, but not to specific types of coal, such as Central Appalachian coal (‘CAPP’) or Northern Appalachian coal (‘NAPP’) – it was proposed in 2006 at a time when CAPP prices had risen dramatically, meaning that there were opportunities for the Company to purchase lower-priced international coal from VPEM for consumption at the Company’s coal-fired power stations.”

The companies added: “However, since 2006, CAPP prices have fallen. Recognizing that coal – like other fuel commodities – is subject to transient (and potentially sudden) price swings, the Company and VPEM want to clarify that the Revised Agreement applies in scope to the purchase and sale of all types of coal used at the Company’s facilities. In other words, if there are opportunities for the Company to buy lower priced coal from VPEM, or to sell higher-priced coal to VPEM, for the economic benefit of the Company’s customers, then the Company should be authorized to transact with VPEM under the Revised Agreement – regardless of whether the coal at issue is CAPP, NAPP, or internationally (or other non-traditionally) sourced coal.”

Transactions under the Revised Agreement would continue to be evaluated on a one-time basis prior to execution for compliance with the lower of “Cost at the Delivery Point” or “Market Price at the Delivery Point” (for VPEM’s sales to the company), or the higher of “Cost at the Delivery Point” or “Market Price at the Delivery Point” (for the company’s sales to VPEM). The company and VPEM would also continue to provide detailed quarterly reports of transactions executed under these standards to the commission consistent with the 2006 approval.

To the extent that the applicants enter into a transaction whereby VPEM provides Transportation services to Dominion Virginia Power, and VPEM uses the services of another Dominion Resources (NYSE: D) affiliate, the services of that affiliate will be charged to Dominion Virginia Power at the lower of cost or market. Transportation services involving third parties would continue to be provided at cost with no mark-up from VPEM, the company noted. It wants the commission to approve the Revised Agreement, which would become effective Jan. 1, 2013.

“Emission Reduction Products” are defined as “products that are injected before or after combustion to reduce emissions at the stations. These products include, but are not limited to: Lime, Limestone, Processed Limestone, Ammonia, Urea, Powdered Activated Carbon, DSI [dry sorbent injection], and Calcium Bromide.”

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.