Dayton says settlement on coal optimization should be approved

Dayton Power and Light thinks a recent settlement related to its fuel “optimization” program, where it buys and sells coal on a daily basis if it thinks it can make money at it, is a good end to a contentious issue, said Nathan Parke, DP&L’s Manager, Regulatory Operations.

The proposed settlement, called a stipulation, was filed Dec. 5 at the Public Utilities Commission of Ohio in a fuel cost review case. On Dec. 10, testimony was filed from Parke in support of the deal.

“I was one of the negotiators for DP&L in the lengthy settlement negotiations in which the following parties participated: the Company, the Commission’s Staff, the Office of the Ohio Consumers’ Counsel (‘OCC’), the Industrial Energy Users-Ohio (‘IEU-OH’), and FirstEnergy Solutions Corp (‘FES’),” he noted. He said that IEU-OH and FES did not sign the stipulation, but both committed that they would not oppose it.

“The Stipulation resolves all the findings and recommendations made in the Management/Performance and Financial Audit of the Fuel and Purchased Power Rider of The Dayton Power and Light Company filed on April 27, 2012 in this proceeding (Audit Report),” Parke added. “Additionally, the Stipulation addressed the Auditor’s recommendations contained in the Audit Report and provides clarity and scope for the next audit. The Stipulation provides a credit to the Fuel Rider for $2.0 million. The Stipulation clarifies DP&L’s optimization process by including more clarification around the calculation methodology. The Stipulation ends the 75%/25% sharing mechanism of optimization benefits for any optimizations that occur starting in calendar 2013.”

The stipulation also contains commitments relating to efforts to reduce fuel costs and modifying processes and computational methods that affect fuel rates, Parke noted.

Optimization is where, for example, Dayton buys coal for a power plant, then re-sells it if it can make money by doing so, while either not burning that coal at its own power plant or buying replacement coal at a lesser price. The audit referred to was done by consulting firm Energy Ventures Analysis on behalf of the PUCO, with audits a routine step in the commission’s fuel review process. EVA basically contested whether any costs of this program should be borne by customers. The stipulation allows the utility to keep doing optimizations, but with limits.

Another part of the stipulation says that Dayton will report on efforts to reduce its use of low-sulfur coal at the newly-scrubbed Stuart power plant to below 25%. It will provide information on those efforts to the next auditor, which will do an audit for 2012 fuel buying that will be filed with the commission in 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.