The Public Utilities Commission of Ohio (PUCO) has picked consultant Energy Ventures Analysis, which did last year’s audit of the fuel buying of Dayton Power and Light, to do this year’s audit.
In 2009, the PUCO established an Electric Security Plan (ESP) for Dayton Power and Light (DP&L). The ESP provided for, among other things, the establishment of a fuel adjustment clause (FAC) mechanism, effective Jan. 1, 2010, with annual audits of DP&L’s 2010 and 2011 fuel costs and fuel management practices. A later order provided for a like audit of 2012 fuel costs and fuel management practices.
The commission in January went out with a request for proposals for a party looking to be the auditor on the 2012 fuel buying, with EVA picked as the winner and approved by the commission on Feb. 13. “The Commission finds that Energy Ventures has the necessary experience to complete the required work,” said the Feb. 13 order. “DP&L shall enter into a contract with Energy Ventures by March 13, 2013, for the purpose of providing payment for its auditing services.”
Energy Ventures needs to submit its draft audit report to PUCO staff by May 30, and file its final audit report by June 14. Any conclusions, results, or recommendations formulated by Energy Ventures may be examined by any participant to the proceeding for which the audit report was generated.
Last year’s audit by Energy Ventures raised issues with DP&L’s coal optimization program, where it buys and sells coal positions on a daily basis if it thinks it can make money at it. The commission on Jan. 23 approved a stipulation agreed to by DP&L with other parties that will, in part, place certain limits on that fuel optimization program.
In terms of the optimization program, a stipulation agreement established, and the commission approved, these parameters:
- For the upcoming 2012 audit period, DP&L will not treat as an optimization and will not seek recovery of a 75% charge-back of optimization gains with respect to any sale or purchase of fuel for a co-owned power plant that DP&L does not operate. An audit of 2012 fuel buying will be filed in a few months.
- For the 2012 audit period, DP&L will not treat as an optimization and will not seek recovery of a 75% charge-back of any optimization gains associated with a sale or transfer of fuel between one station operated by DP&L and another station operated by DP&L.
- For the 2011 and 2012 audit periods, the use of a methodology that includes recording of 100% of accounting gains and losses in FERC Account 456 for recovery through the Fuel Rider, and the charge-back of 75% of optimization gains, is consistent and compliant with the commission’s previously approved 25% sharing method.
- The sales of coal made by DP&L from purchases entered into after April 29, 2011, shall be treated as optimizations only if replaced with a coal with similar sulfur content.
- Except where otherwise excluded or precluded, fuel sales and procurement purchases that result in an improvement on then-existing position may be optimization transactions for which the 75% chargeback mechanism applies.
- Optimization gains can occur where there is an accounting loss and, absent a finding of imprudence, the existence of an accounting loss does not preclude the transactions from being defined as optimization transactions for which a 75% charge-back is made, provided that the fuel sales and replacement purchases result in an improvement on the then-existing position.
- Beginning Jan. 1, 2013, and continuing until directed otherwise by the commission, DP&L will cease the charge-back of 75% of any fuel optimization transaction.
- DP&L will continue to include demurrage differences analysis in its evaluation of optimization trades.
Another element of the stipulation approved by the commission outside of the optimization program is that DP&L will document in writing its efforts to reduce its use of low-sulfur coals below 25% at the Stuart plant in a cost-effective manner and will document its efforts to achieve increased fuel flexibility at the Killen station. Both plants have gotten fairly recent SO2 scrubber installations and there is an effort to take cheaper high-sulfur coals into both plants, with that effort meeting the most success at Killen.