Nevada Power tries to find ways to get rid of coal it can’t burn

Nevada Power is contracted for way more coal than it has been able to burn lately and is looking at ways to ease building coal inventory at its Reid Gardner plant, including force majeure claims “wherever possible” and working with brokers to sell the excess coal on the export market.

Nevada Power parent NV Energy (NYSE: NVE) made those points in an Electric Supply Plan filed June 29 at the Nevada Public Utilities Commission.

Due to factors like a slump in power demand and cheap natural gas, Nevada Power has a surplus of coal. The company noted that besides export sales, the company is looking at ways to re-sell this excess coal on the domestic market. “However, coal markets are very depressed and sales opportunities are not currently available,” it noted. It added that U.S. coal is also “well out of the money” right now in the export market. Other options to get rid of coal commitments include possible coal contract buyouts and tonnage buydowns. The company said its latest projections show depressed coal burns at least through 2014 due to coal-to-gas switching in the region.

One problem is that Nevada Power has minimium tonnages it has to move under a rail contract with Union Pacific, with a $5 penalty to be paid to UP for each shortfall ton. In 2011, the utility was able to work with UP to get the tonnage minimum switched from an annual one, to a total over the whole contract period. But the utility indicated that this change only deferred its problems into the future. The UP contract expires at the end of 2014.

Nevada Power said it has three coal contracts that run through 2012 and 2013.

  • There is a contract with Andalex Resources for coal out of the West Ridge longwall mine in Utah that runs through 2012, with that coal usable in all four units at Reid Gardner.
  • There is a deal with Arch Coal (NYSE: ACI) that was originally for coal out of the Black Thunder surface mine in the Wyoming PRB, with an April deal done to switch the source to the Sufco longwall mine in Utah, with that deal existing through 2013. This coal can be burned in only Units 1-3 at Reid Gardner.
  • There is a second deal with Arch Coal for the Sufco and Skyline mines in Utah, and the West Elk longwall mine in Colorado, with those coals usable in Unit 4 and the contract to run through the end of 2013.

The utility said it has no plans for a request for proposals for coal supply for 2013 and beyond, with any coal needs in the meantime to be filled from the spot market. The projected burn volumes for Reid Gardner are 376,000 tons in 2013, 188,000 tons in 2014 and 466,000 tons in 2015. The maximum storage capacity at the plant is 1.8 million tons of coal.

Said the NV Energy website: “The Reid Gardner Generating Station is a coal-fueled, steam-electric generating plant with four operating units. The first two nearly identical generating units went into service in 1965 and 1968. A third similar unit was added in 1976. Each unit produces 100 megawatts with Foster Wheeler boilers and GE turbine-generators. The plant’s largest generating unit is jointly owned by NV Energy and California Department of Water Resources. This 257-megawatt unit was commissioned in 1983 and uses a Foster Wheeler boiler to drive a Westinghouse turbine generator. Even though the plant was initially built in the 1960s, it has undergone extensive technology improvements and is among the cleanest coal-burning facilities in the nation.”

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.