TVA idles some coal units, could revive others

The Tennessee Valley Authority idled the coal-fired Johnsonville Units 7, 8, 9 and 10 on March 1 (564 MW of summer net capability) and announced plans to idle Johnsonville Units 5 and 6 and Colbert Unit 5 by Oct. 1 (686 MW of summer net capability), TVA noted in its Aug. 3 Form 10-Q report.

“The idling of the Johnsonville units was earlier than required by the Environmental Protection Agency (‘EPA’) and other parties in 2011 (the ‘Environmental Agreements’),” TVA added. “Due to unanticipated operating challenges of certain generating units, TVA is in the process of re-evaluating the previously announced idling dates of these units. Johnsonville Unit 9 (141 MW of summer net capability) was brought back into service during June 2012. Johnsonville Unit 10 (141 MW of summer net capability) was brought back into service in July 2012. Depending on capacity needs, TVA may bring other previously idled units back into service. TVA still anticipates being compliant with the terms of the Environmental Agreements.”

Consistent with the Environmental Agreements, the coal Units 1 and 2 at John Sevier will be retired by Dec. 31, 2012. The remaining two units at John Sevier will be idled by Dec. 31, 2012. The four John Sevier units have a summer net capability of 704 MW.

Also, Johnsonville Units 1-4 will be retired by Dec. 31, 2017. These four units have a summer net capability of 428 MW.

In April 2011, TVA entered into two similar agreements, one with the EPA and the other with Alabama, Kentucky, North Carolina, Tennessee, and three environmental advocacy groups: the Sierra Club, National Parks Conservation Association and Our Children’s Earth Foundation (collectively, the Environmental Agreements). They became effective in June 2011.

Under the Environmental Agreements, TVA committed to: retire on a phased schedule 18 coal units with a combined summer net dependable capability of 2,200 MW; control, convert, or retire additional coal-fired units with a combined summer net dependable capability of 3,500 MW; comply with annual, declining emission caps for SO2 and NOx; invest $290m in certain TVA environmental projects; provide $60m to Alabama, Kentucky, North Carolina, and Tennessee to fund environmental projects; and pay civil penalties of $10m.

TVA noted in the Form 10-Q that fuel inventories fluctuate from time to time depending on various factors, including demand for electricity, unit outages, transportation infrastructure limitations, plant coal consumption rates, and weather conditions. “Additionally, inventory levels may be affected by the idling of coal-fired units or the installation of emission control equipment,” it added.

Fuel inventories have increased $74m since Sept. 30, 2011, due primarily to lower-than-planned coal-fired generation. This lower coal-fired generation reflects lower overall generation due to the mild winter and weaker than expected economic growth, as well as a shift in generation sources due to lower natural gas prices.

Fuel expense decreased $224m in the nine months ended June 30, 2012, as compared to the same period of the prior year. Overall favorable fuel rates, as a result of the change in the mix of generation resources, accounted for $183m of the decrease. Coal-fired generation decreased 27% while gas-fired generation helped offset the reduction in coal-fired generation, as gas-fired generation was 138% higher as compared to the same period of the prior year. This increase was primarily due to greater capacity as a result of the Magnolia acquisition, the completion of the John Sevier gas-fired plant and lower gas prices.

The average Henry Hub natural gas spot price for the nine months ended June 30, 2012, was $2.68/mmBtu, which was 35% lower than the average price for the same period of the prior year. Nuclear generation also helped offset the reduction in coal-fired generation as it increased 17% as compared to the same period of the prior year due to fewer plant outages. Lower sales of electricity led to a decrease in generation which accounted for the remaining $41m of the decrease in fuel expense.

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.