Mon Power lays out case for three coal plant deactivations

The coal-fired Albright, Rivesville and Willow Island power plants aren’t needed anymore and there should be no significant generation capacity loss or transmission system impacts from shutting them down, said Monongahela Power in an April 30 filing with West Virginia Public Service Commission.

Monongahela Power, a unit of FirstEnergy (NYSE: FE), had filed plans with the commission in March to shut the three old, subcritical pulverized coal plants. But the commission demanded more details from the company, set an April 30 deadline to file that information and told the company not to make any irreversible changes in the meantime.

“Prior to announcing the deactivation of three subcritical coal-fired power plants, Mon Power completed an extensive study of its older, unscrubbed regulated coal-fired units to evaluate the condition of those units and to determine the expected impact of significant changes in environmental regulations,” Mon Power told the commission. “The study showed that additional needed capital investments, particularly to comply with Mercury and Air Toxics Standards (‘MATS’) Rules and other environment rules, would not be cost effective and would make it even less likely that these plants would be dispatched into the PJM wholesale power market.”

Albright was placed initially in service in 1952, Rivesville in 1919, and Willow Island in 1949, the company noted. “Due primarily to the small size and inefficiency of the facilities, it is not cost effective to install additional air pollution control equipment for their limited generation output,” Mon Power added. “Moreover, they have older boilers, turbines, and generators, all of which negatively affect the facilities’ respective heat rates, costs of production, and economic dispatch into the PJM wholesale power market.”

Mon Power and another FirstEnergy company, Potomac Edison (PE), have agreed to file a resource plan with the West Virginia commission on or before Sept. 1, 2012, to address future supply and price mitigation issues.

Deactivations get PJM clearance

FirstEnergy on behalf of Mon Power notified PJM that it intends to retire Albright 1-3, Rivesville 5-6, and Willow Island 1-2 not later than Sept. 1, 2012. PJM has issued its Reliability Status Report regarding reliability impacts if the three plants are closed. On March 9, PJM responded to Mon Power’s request to deactivate the facilities. The response indicated that the facilities could be deactivated as long as certain scheduled transmission work on the Stonewall-Stephenson 138 kV line is completed in a timely manner.

“The Stonewall-Stephenson 138 kV line upgrades were not factored into the deactivation analysis as they were planned and scheduled prior to the analysis and would occur whether the generating units were deactivated or not,” Mon Power noted. “The necessary upgrades will be made by PE at an estimated cost of approximately $75,000 (includes direct and indirect costs) and are expected to be completed prior to June 1, 2013. The annual incremental revenue requirement associated with the upgrades would be approximately $10,000.”

The capacity revenues that have been or will be received because the facilities cleared in the PJM Reliability Pricing Model (RPM) Base Residual Auction (BRA) for the 2011/2012 delivery year are approximately $20.6m, Mon Power reported.

PJM’s RPM has a must-offer requirement for all existing PJM capacity resources. This means that any capacity not committed in the BRA for a delivery year must be offered in all subsequent incremental auctions for that delivery year. In order to be exempt from the must-offer requirement in RPM, a resource owner needs to submit a plan to deactivate a capacity resource prior to the delivery year. In order to satisfy the 2012/2013 delivery year capacity obligation and must-offer requirement, it was necessary to submit notice to deactivate the plants prior to PJM’s 2012/2013 delivery year third incremental auction, which occurred the week of Feb. 27.

Mon Power secures replacement capacity

The subcritical units slated for deactivation on Sept. 1 represent 469 MW of the 2,596 MW of Mon Power’s capacity commitment for the 2012/2013 PJM delivery year. Mon Power said it purchased replacement capacity that completely offsets the capacity obligations of these plants for just over $400,000. The result of Mon Power’s actions preserved 85%, or approximately $2.4m, of the original capacity revenue for the 2012/2013 delivery year.

“The price of capacity has declined significantly beginning with the 2012/2013 delivery year,” Mon Power pointed out. “This is one factor contributing to the plants becoming uneconomic in the period from now until MATS compliance becomes mandatory in 2015. Capacity commitments made in the PJM BRAS for the 2013/2014 and 2014/2015 delivery years for the three plants are still outstanding. Associated capacity revenues for commitments made for the two delivery years are about $4 million and $16.8 million, respectively. All future RPM auction results and clearing prices are unknown.”

Mon Power is the only FirstEnergy electric utility that owns electric generating stations included in a cost of service for ratemaking purposes, and Mon Power is directly affected by changes in PJM capacity prices that may be quantified, the company said. Using the PJM 2012/2013 delivery year as an example, Mon Power has an unforced capacity (UCAP) obligation of 2,851 MW, which includes Mon Power’s responsibility for PE’s West Virginia load. Mon Power sold 2,596 MW of capacity in the RPM BRA at $16.46/MW-day for the 2012/2013 delivery year.

PJM rules would impact any future plant operation

At this point, the three targeted coal plants cannot be offered into the 2015/2016 BRA. Hypothetically, if one or more of the West Virginia generating units were offered and cleared in the 2015/2016 BRA, and then were subsequently unavailable due to retirement, Mon Power would have the following four options: it could obtain replacement capacity via a bilateral transaction with another party; obtain a capacity resource eligible to replace the committed capacity; purchase replacement capacity in a subsequent PJM RPM 2015/2016 delivery year incremental auction; or choose to do nothing and incur the financial penalties defined in the PJM Tariff.

These plants are:

Albright – is a subcritical coal power plant located in Preston County that was built in 1952. It has a capacity of 292 MW and is 100% owned by Mon Power. All three units are equipped with low NOx burners. None of the units is equipped with SO2 controls. Each of the units uses an ESP (electrostatic precipitator) to control particulate matter, and each is equipped with a cooling tower.

Rivesville – is a subcritical, two-unit plant located in Marion County that was built in 1919. It has a capacity of 121 MW and is 100% owned by Mon Power. Neither unit has NOx or SO2 controls. Each of the units has an ESP. Neither unit has cooling towers.

Willow Island – is a two-unit subcritical plant located in Pleasants County that was built in 1949. It has capacity of 243 MW and is 100% owned by Mon Power. Both units use over fired air (OFA) for NOx control. Neither unit has SO2 controls. Each of the units uses an ESP and neither unit has a cooling tower.

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.