Dynegy plans to retire two gas-fired peakers in Illinois by the end of 2012

Dynegy Inc. intends to retire the Oglesby and Stallings peaking facilities in Illinois, representing 152 MW, by the end of 2012, subject to a reliability assessment by the Midwest ISO, Dynegy reported in its Aug. 3 Form 10-Q quarterly report.

While both of these facilities are gas-fired, they are included in the company’s Coal segment, which consists of six plants, all located in the MISO region and totaling 3,132 MW of capacity. The Dynegy website shows Oglesby with 63 MW of net capacity, and Stallings with 89 MW of net capacity, with both having gone into commercial operation in 1970.

Dynegy’s expected coal requirements for the Illinois plants are fully contracted and priced in 2012. Its forecast coal requirements for 2013 are 85% contracted and 53% priced. The remaining contracted volumes are unpriced but are subject to a price collar.

Coal transportation for the Illinois plants, which include Wood River and Havana, are 100% contracted and priced through 2013 when current contracts expire. Dynegy said it recently executed new coal transportation contracts which take effect when current contracts expire. These new long-term deals also cover 100% of coal transportation requirements. “We continue to explore various alternative contractual commitments and financial options, as well as facility modifications, to ensure stable and competitive fuel supplies and to mitigate further supply risks for near- and long-term coal supplies,” the company added.

The Coal segment’s expected generation volumes are volumetrically 75% hedged through 2012 and approximately 13% hedged for 2013.

Moves by various market transmission-owning entities joining or exiting the MISO could impact system planning reserve margins in the future, Dynegy noted about something that could impact the Coal segment. The MISO filed proposed Resource Adequacy Enhancements with FERC in July 2011. FERC conditionally approved MISO’s proposal on June 11, leaving much of MISO’s proposal in place. The proposed tariff revisions require capacity to be procured on a zonal basis for a full planning year (June 1-May 31) versus the current monthly requirement, with procurement occurring two months ahead of the planning year. The new construct will be in place for the 2013-14 Planning Year. “While the new construct is an incremental improvement over the status quo, it is unlikely to have an influence on capacity prices in the near future due to excess capacity in the MISO market,” Dynegy noted. “In addition, increased market participation by demand response resources offset by potential retirement of marginal MISO coal capacity due to poor economics or expected environmental mandates could also affect MISO capacity and energy market prices in the future.”

In 2005, Dynegy settled a lawsuit filed by the U.S. EPA and the U.S. Department of Justice that alleged violations of the Clean Air Act and related federal and Illinois regulations concerning certain maintenance, repair and replacement work at the Baldwin coal plant. A consent decree was final in July 2005. Among other provisions of the decree, Dynegy is required to not operate certain generating facilities after specified dates unless certain emission controls are installed. As of June 30, only Baldwin Unit 2 has material consent decree work yet to be performed, which is scheduled to be completed by the end of 2012. Dynegy has spent approximately $902m through June 30 related to these consent decree projects.

Dynegy fully contracted for 2012 coal for Danskammer plant

Dynegy’s only other coal-fired capacity is under its Dynegy Northeast Generation (DNE) segment. These are leased facilities at the Danskammer plant in New York. Certain Dynegy Inc. affiliates, including Dynegy Holdings LLC, are in bankruptcy and have given up the leases for the coal-fired Danskammer and gas-fired Roseton generating capacity, but are operating those plants while the owner finds a buyer for those facilities.

“DNE is comprised of the Roseton and Danskammer facilities located in Newburgh, New York, with a total capacity of 1,693 MW,” said the Form 10-Q. “A total of 1,570 MW of generation capacity relates to leased units at the two facilities. In connection with the Chapter 11 cases, the Debtor Entities rejected these long-term leases. The Debtor Entities have operated and plan to continue operating the leased facilities until such facilities can be sold in accordance with the terms of the Settlement Agreement and Plan Support Agreement and in compliance with applicable federal and state regulatory requirements.”

All of the expected physical coal supply and delivery requirements for 2012 for Danskammer are fully contracted and priced for the forecasted run throughout the remainder of the year. Any coal shortfall due to unexpectedly high burn rates will be purchased in the spot market from domestic suppliers, the Form 10-Q noted.

Dynegy seeks break on state rule for Illinois coal plants

Incidentally, Dynegy Midwest Generation LLC (DMG) is seeking from the Illinois Pollution Control Board permission to sell excess SO2 credits created under a special state air pollution rule into the open market. DMG wants a variance from certain provisions of the Illinois Multi-Pollutant Standard (MPS) from the date of any board approval order until April 1, 2015.

On June 8, DMG filed its petition with the board, requesting a variance from provisions in the MPS that prohibit owners or operators of Electric Generating Units (EGUs) in an MPS Group from selling, trading to, or otherwise exchanging with any person SO2 allowances that would otherwise be available for sale or trade as a result of actions taken to comply with the SO2 emission standards. Specifically, DMG requests a variance for vintage year 2013 and 2014 SO2 allowances allocated to EGUs under the U.S. EPA’s Cross-State Air Pollution Rule (CSAPR). DMG also requests a variance from the requirement that it surrender excess SO2 allowances to the Illinois EPA instead of selling them.

DMG is requesting the variance for its entire MPS Group, consisting of coal-fired EGUs at Baldwin, Havana, Hennepin, Wood River and the recently-retired Vermilion coal plant. The retirement of Vermilion and its emissions, by the way, is a key factor in why DMG has so many SO2 credits it wants to sell.

“DMG indicates that it controls SO2 emissions at its coal-fired power plants through the use of low sulfur, Powder River Basin coal,” the Illinois EPA noted in recent neutral comments filed at the board about the DMG request. “DMG also operates spray dryer absorbers (dry scrubbers) with fabric filter systems on two Baldwin units and is constructing similar control devices on the third Baldwin unit, which will be operational by December 31, 2012. DMG has installed a dry scrubber on Havana Unit 6, which will also be operational by December 31, 2012.”

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.