Wisconsin Electric plans to use 10.1 million tons of coal in 2013

Projected costs for coal generation for Wisconsin Electric Power have decreased about $0.80/MWh for the 2013 plan year as compared to the 2012 PSCR plan, due primarily to reductions in coal commodity prices under contract and continued expectations for lower spot market prices.

Mary Wolter, Manager-Fuel Cost Planning for Wisconsin Electric Power d/b/a We Energies, outlined a few details about projected coal generation in an annual Power Supply Cost Recovery (PSCR) filing. That filing was made Sept. 28 at the Michigan Public Service Commission, which has oversight over the Wisconsin-based utility since WEPCO serves a small part of Michigan’s Upper Peninsula.

WEPCO’s coal capacity is at Oak Creek Units 5-8 (967 MW), Elm Road Units 1-2 (1,057 MW), Valley Units 1-2 (249 MW), Pleasant Prairie Units 1-2 (1,188 MW) and Presque Isle Units 5-9 (343 MW).

Wolter, in a table attached to her testimony, reported that the utility has a projected coal burn of 10.1 million tons in 2013 at an average cost of $2.67/mmBtu. Another table showed the company with four terms coal contracts in 2013 with unnamed suppliers, though two of those contracts have two separate sets of reported prices.

Wolter also offered projections of generation and costs, by facility, for the 2013-2017 period. For example, at Oak Creek Units 5-8, with 967 MW of capacity, the output is projected at: 4,487 GWH in 2013; 4,827 GWH in 2014; 4,949 GWH in 2015; 5,178 GWH in 2016; and 5,139 GWH in 2017.

Existing coal transportation agreements with Union Pacific include provisions which allow a fuel surcharge on transportation rates for delivery of coal to power plants and/or to rail/boat coal transportation transfer points, Wolter reported. Most of the rail contracts have surcharge rates that are driven by changes in the price of diesel fuel, which is used in the locomotives. The rail contract for Elm Road is the exception, since it has a surcharge rate that is driven by changes in the price of crude oil (diesel prices usually track crude oil prices).

It is possible to use NYMEX futures prices to project changes in diesel fuel and crude oil prices, Wolter noted. However the diesel fuel contract futures are still relatively new and trading volumes are very low, making for limited liquidity in that market, Wolter added. Since the price of diesel is very closely correlated with the price of heating oil, WEPCO instead uses heating oil futures prices to forecast changes in the price of diesel fuel. It can project fuel surcharges for coal transportation and use those projections to adjust the projected delivered price of coal, which is then used as an input to the coal inventory model to calculate the revised as-burned (expensed) coal prices for 2013. The utility used the Aug. 13, 2012 NYMEX heating oil and crude oil futures prices in its model to project the coal transportation surcharges for 2013.

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.