Duquesne works out deal with GenOn on Elrama coal shutdown

Duquesne Light filed an agreement with GenOn Energy (NYSE: GEN) on Nov. 14 with the Federal Energy Regulatory Commission related to the shutdown of the coal-fired, 460-MW Elrama power plant in Pennsylvania.

Under Section 205 of the Federal Power Act (FPA) and Part 35 of FERC regulations, Duquesne Light submitted an amendment to an existing Connection and Site Agreement between it and GenOn Power Midwest LP, as successor in interest to Orion Power Holdings, relating to the Elrama units. Duquesne asked the commission to accept the amendment for filing and requested any necessary waivers of the commission’s regulations to permit an effective date of Jan. 13, 2013.

“Duquesne and Orion entered into the Elrama Connection Agreement on September 24, 1999 in connection with Orion’s acquisition of the Elrama Generating Station from Duquesne,” the filing noted. “The Elrama Generating Station is an approximately 460 MW coal-fired generating facility, consisting of the Elrama Generating Units and associated facilities and equipment, located in Elrama, Pennsylvania.”

On Feb. 29 of this year, GenOn Midwest provided notice to PJM Interconnection LLC of its intent to deactivate the Elrama units, as part of a wider deactivation plan involving several coal-fired power plants. “The units had become uneconomic due to market conditions and would require significant capital expenditures by 2015 and beyond to comply with existing and anticipated environmental regulations,” Duquesne noted. “On that same day, GenOn Midwest provided notice to Duquesne of the permanent retirement of Units 1-4 on March 1, 2014.”

On Nov. 6, Duquesne and GenOn Midwest entered into the amendment in order to address transitional issues surrounding the deactivation of the Elrama units and the termination of the Elrama Connection Agreement. Under the amendment, GenOn Midwest agrees to pay $3m to Duquesne and, possibly, to provide a parcel of land for the reconstruction of certain Duquesne equipment currently located at the Elrama site.

In addition, Duquesne and GenOn Midwest agree that the Elrama Connection Agreement will terminate on Feb. 28, 2014, unless Duquesne elects to delay termination for up to 10 months. The amendment further provides that GenOn Midwest is entitled to payment from Duquesne of $166,000 per month if and to the extent GenOn provides specified services under the Elrama Connection Agreement on or after March 1, 2014.

GenOn said in its Nov. 9 Form 10-Q quarterly statement about the deactivation program: “We deactivated the following coal-fired units at the referenced times: Niles unit 2 (108 MW) June 2012, Niles unit 1 (109 MW) October 2012, Elrama units 1-3 (289 MW) mothballed June 2012 (plan to retire in March 2014) and Elrama unit 4 (171 MW) mothballed October 2012 (plan to retire in March 2014).”

GenOn added: “We expect to deactivate the following generating capacity, primarily coal-fired units, at the referenced times: Portland (401 MW) January 2015, Gilbert unit 8 (90 MW) January 2015, Avon Lake (732 MW) April 2015, New Castle (330 MW) April 2015, Titus (243 MW) April 2015, Shawville (597 MW) place in long-term protective layup in April 2015 and Glen Gardner (160 MW) May 2015.”

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.