Buckingham Coal moves to protect the secrets in an AEP contract

Ohio coal producer Buckingham Coal, a major supplier to the Conesville power plant, has taken the unusual step of moving to intervene in a fuel review case for Ohio Power and Columbus Southern Power now pending at the Public Utilities Commission of Ohio.

It is very unusual for a coal producer to intervene in one of these fuel proceedings. Buckingham, which conducts coal mining operations in southeastern Ohio and employs over 200 persons, said the “principal basis” of its business operations is Coal Purchase and Sale Agreement No. 10-61-04-901 between it and Columbus Southern Power, which became effective in November 2004. That contract has a standard confidentiality clause, but Buckingham said it has come to its attention that a party to this fuel case want a copy of that contract.

Attached to the Buckingham filing is an Aug. 2 letter to it from American Electric Power Service Corp. (AEPSC) fuels official Jim Henry that said an unnamed co-owner of Conesville Unit 4 wants to see the contract. Buckingham said it believes this inquiring party is Duke Energy Ohio, which has also taken the unusual step of moving to intervene in the Ohio Power/Columbus Southern Power fuel proceeding.

“Buckingham has objected to the proposed production of this commercially-sensitive information,” it told the commission. “At the time of entering into the Coal Purchase and Sale Agreement, AEP and Buckingham agreed on contractual protection of the confidential terms and conditions of that transaction because access to that information would give an undue and unfair competitive advantage to their respective competitors and other potential coal purchasers. Buckingham seeks leave to intervene in order to further protect its contractual right and to prevent disclosure of the Coal Purchase and Sale Agreement.”

AEP proposes to request that any plant co-owners sign a confidentiality agreement prior to getting a copy of the agreement. But even on a generic basis, the confidentiality agreement that AEP proposes to obtain in connection with production of the agreement would not necessarily be sufficient to protect the interests of Buckingham, the coal producer said. “The requesting ‘co-owner’ of the generating facility is a potential coal purchaser and has not, from the perspective of Buckingham, demonstrated a practical need or legal basis for mandatory production, to it, of the Coal Purchase and Sale Agreement in these proceedings.”

AEP objects to Duke Energy Ohio intervention in this case

The Ohio Power/Columbus Southern Power units of American Electric Power (NYSE: AEP) have objected to Duke Energy Ohio being allowed into this case. Duke Energy Ohio, a unit of Duke Energy (NYSE: DUK), on July 13 asked the commission to let it intervene. Ohio Power/Columbus Southern Power, also known as AEP Ohio, on July 25 said that it is a bad idea.

“Duke’s status as another utility co-owning assets has never been grounds for intervention in an individual utility’s fuel adjustment clause proceeding,” Ohio Power wrote. “The parties have agreements that govern their relationship as co-owners of plants and should not be using a Commission fuel audit review as a means of pressing disagreements or seeking information unrelated to the audit at hand. The Public Utilities Commission of Ohio (‘Commission’) should deny Duke’s request to intervene in this proceeding due to its lack of a real interest in this fuel proceeding as further outlined below. In the alternative, if the Commission finds any merit in Duke’s argument, it could grant a very limited intervention….”

In its memorandum in support of its motion to intervene, Duke argues that it has standing because its ownership interest in certain generating facilities it co-owns with AEP Ohio is directly affected by decisions the company makes regarding those plants. “Duke’s ownership interest in and AEP Ohio’s decisions concerning the jointly-owned facilities are functions of the contracts governing the operations of the jointly-owned facilities, not a matter to press in fuel adjustment proceedings before the Commission,” AEP Ohio said.

The plant operating agreements generally assign one joint-owner to operate and maintain the particular jointly-owned facility on behalf of the other joint owners. AEP Ohio is designated as the operator for the 780-MW Conesville Unit 4; Duke operates Zimmer Unit 1 and Beckjord Unit 6; and Dayton Power and Light operates the Stuart plant. If Duke is granted intervention in this case, the commission should limit its participation to only those issues concerning the particular plants Duke co-owns with AEP Ohio (Conesville Unit 4, Zimmer Unit 1, Beckjord Unit 6 and the Stuart plant) and to the audit period in this case, which is calendar 2011, said AEP Ohio. “In fact, Duke’s participation in this proceeding should be limited to only those issues related to Conesville Unit 4, as that is the only jointly-owned facility for which AEP Ohio is charged with making operating decisions affecting fuel costs,” Ohio Power added.

Energy Ventures Analysis raised Conesville issues in PUCO-ordered audit

The Conesville station consists of four units with a total generating capacity of 1,745 MW. Units 1 and 2 were retired in 2005. Conesville 3 has not been retrofitted with a scrubber and is scheduled to be retired by the end of 2012. Conesville Unit 4’s scrubber retrofit was completed in 2009. Conesville Units 5 and 6 were built with scrubbers. The plant takes coal by truck and rail, primarily from Buckingham Coal and Oxford Mining, which have mines near the plant. The onsite Conesville Coal Preparation Plant (CCPP), which had washed the power plant’s raw coal supply, was closed in January 2012 and put up for sale.

An audit report from consultant Energy Ventures Analysis, done for the commission and filed in May in this case, said that AEP Ohio has indicated that the high delivered cost of coal to Conesville Units 3 and 4 has limited the plant’s dispatch. The audit report said that Conesville consumed 3.3 million tons of coal in 2011, up from 3 million tons in 2010, but down sharply from 4.6 million tons as recently as 2007.

Incidentally, in the heavily-redacted audit, EVA took issue with the fact that AEPSC shut the Conesville prep plant and then tried to sell it, instead of packaging it in with a contract extension with an unnamed coal supplier to the Conesville power plant. EVA said the prep plant would have been more saleable that way, since it has relatively little value on the open market without coal contract business attached to it.

“AEPSC did not adequately explain its reasons for adopting this strategy,” said the audit. “EVA believes that by failing to market CCPP in conjunction with an open coal position at Conesville most likely resulted in significantly higher closure costs associated with the CCPP closure decision.”

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.