Georgia Power is willing to create a new “ultra high risk category” of coal producers in order to better manage the risks of default by those producers, said utility officials in May 25 testimony filed at the Georgia Public Service Commission.
Elliott Spencer, Assistant Comptroller for Georgia Power, and Thomas Thames, Pricing and Rates Manager for Georgia Power, filed joint May 25 testimony at the commission in a fuel review case. Georgia Power is a unit of Southern Co. (NYSE: SO).
Georgia Power’s March 30 application filing in this proceeding requests commission approval for a significant reduction in fuel rates—a decrease of 19% in the fuel cost recovery (FCR) rates, which equates to a decrease of 6% or $8 per month on the total bill of the typical 1,000 kWh residential customer. The commission voted on May 15 to implement the reduced fuel rates on an interim basis on June 1, one month earlier than originally proposed by the company. Active in the case is the commission’s Public Interest Advocacy (PIA) staff.
“The Company is willing to create the ultra high risk category proposed by PIA Staff for purposes of the Company’s financial assessment of coal suppliers and transportation providers and has provided current information regarding the status of testing of Illinois Basin coal at its coal-fired generating units as requested by PIA Staff,” the Spencer/Thames testimony said.
They added at a later point: “The Company is willing to create this new category as an additional risk ranking in connection with future potential supplier analyses and will include ultra high risk suppliers with high risk suppliers for purposes of its financial risk profile targets going forward. As noted in the Company’s comments to the Staff’s Coal Procurement Report, the financial assessment is only one part of the evaluation of potential suppliers performed by the Company and the actual distribution of financial risk profiles may diverge from the specified targets.”
There is also a heavily redacted section in the filing about test burns of Illinois Basin coal at Georgia Power plants. One point that survived redacting is that the Wansley plant is now authorized to accept 100% Illinois Basin coal.
The Spencer/Thames testimony was responding to points made in May 11 testimony by Randall Falkenberg and Philip Hayet, outside consultants acting as witnesses for the PIA staff. Falkenberg and Hayet noted that a staff report on the utility’s coal procurement raised issues about ultra high risk suppliers and that staff recommended a new risk category.
“This was recommended because Staff noted that the Central Appalachian (CAPP) region is an important coal supply region for the Company, and that a significant number of suppliers from that region are listed by the Company as being high risk,” wrote Falkenberg and Hayet. “Staff believed there were so many high risk suppliers that those suppliers should be re-classified into two categories, high risk, and ultra-high risk. With the single high risk category that the Company has now, it is difficult to discern the difference in the condition of one supplier from the next, given how many there are in the high risk category.”
Falkenberg and Hayet went into some detail on coal supply issues, but that was all redacted from the public version of their testimony.
Prior to the last FCR case, the company was required to keep target coal inventory levels between 45 to 50 days at its coal plants. In that prior case, the company proposed to be able to widen the target range to maintain between 40 and 50 days of inventory at its plants. Staff ultimately supported the proposal as Georgia Power explained it would allow the company greater flexibility to manage unexpected and temporary swings in inventory levels.
“The Company did not report any problems managing its coal stockpiles, and it explained that no coal shortages occurred during the historical period,” Falkenberg and Hayet wrote. “The Company reconfirmed its belief that the larger inventory window continues to provide it with additional flexibility in managing its inventory levels. Staff will continue to monitor the Company’s coal inventory levels in future FCR proceedings to determine if this target inventory level continues to be reasonable.”