Dayton Power & Light (DP&L) has informed PJM Interconnection that the coal-fired Hutchings Unit 4 has incurred damage to a rotor and will be deactivated June 1, 2013, and that the remaining Hutchings coal units will no longer be operated after May 2013 and will be deactivated by June 1, 2015, said parent DPL Inc. in its Feb. 27 annual Form 10-K report.
Hutchings is a 365-MW (summer) coal plant, owned entirely by DP&L, that is located at Miamisburg, Ohio. Its retirement, due to age and new emissions control burdens, has been expected for some time. DPL Inc. is a unit of AES Corp. (NYSE: AES).
“We have several pending environmental matters associated with our coal-fired generation units,” said the Form 10-K. “Some of these matters could have material adverse impacts on the operation of the power stations; especially the stations that do not have [selective catalytic reduction] and [flue gas desulfurization] equipment installed to further control certain emissions. Currently, our coal-fired generation units at Hutchings and Beckjord do not have this emission-control equipment installed. DP&L owns 100% of the Hutchings Station and has a 50% interest in Beckjord Unit 6. In addition to environmental matters, the operation of our coal-fired generation stations could be affected by a multitude of other factors, including forecasted power capacity and commodity prices, competition and the levels of customer switching, current and forecasted customer demand, cost of capital and regulatory and legislative developments, any of which could pose a potential triggering event for an impairment of our investment in Beckjord Unit 6.”
In July 2011, Duke Energy (NYSE: DUK), a co-owner at Beckjord Unit 6, filed a Long-term Forecast Report with the Public Utilities Commission of Ohio (PUCO). The plan indicated that Duke Energy planned to cease production at Beckjord, including at Unit 6, in December 2014. This was followed by a notification by the joint owners of Beckjord Unit 6 to PJM, dated April 2012, of a planned June 1, 2015, deactivation of this unit. Beckjord Unit 6 has a total capacity of 414 MW (summer), with DP&L controlling 207 MW of that.
DPL noted that in August 2012, a federal court vacated the U.S. Environmental Protection Agency’s Cross-State Air Pollution Rule (CSAPR), leaving the older Clean Air Interstate Rule (CAIR) in its place. “If CSAPR were to be reinstated in its current form, we do not expect any material capital costs for DP&L’s stations, assuming Beckjord 6 and Hutchings generating stations will not operate on coal in 2015 due to implementation of the Mercury and Air Toxics Standards,” the Form 10-K said. “Because we cannot predict the final outcome of the replacement interstate transport rulemaking, we cannot predict its financial impact on DP&L’s operations.”
DP&L is still evaluating the costs that may be incurred to comply with Mercury and Air Toxics Standards (MATS). However, MATS could have a material adverse effect on results of operations and result in material compliance costs, the company noted.
Environmental spending by DP&L has been fairly light
DP&L’s environmental capital expenditures were about $8m, $12m and $12m in 2012, 2011 and 2010, respectively. DP&L has budgeted $26m in environmental related capital expenditures for 2013.
DP&L’s present summer generating capacity, including peakers, is approximately 3,262 MW. Of this capacity, about 2,830 MW, or 87%, is derived from coal-fired stations and the balance of around 432 MW, or 13%, consists of combustion turbines, diesel peakers and solar. Its other coal capacity is at Killen, Conesville Unit 4, Miami Fort Units 7-8, Stuart, East Bend Unit 2 and Zimmer.
Approximately 87% of the existing steam generating capacity is provided by certain generating units owned as tenants in common with Duke Energy and the Ohio Power unit of American Electric Power (NYSE: AEP). DP&L also owns a 4.9% equity ownership interest in Ohio Valley Electric, which has the coal-fired Kyger Creek and Clifty Creek power plants with a combined generation capacity of about 2,265 MW. DP&L’s share of this capacity is around 111 MW.
DPL said it has substantially all of the total expected coal volume needed to meet retail and wholesale sales requirements for 2013 under contract. The majority of the contracted coal is purchased at fixed prices.
DPL’s net fuel costs in 2012 – which include coal, gas, oil and emission allowance costs – decreased $29.7m, or 8%, compared to 2011, primarily due to increased mark-to-market gains on coal contracts and decreased fuel costs partially offset by increased losses from the re-sale of coal. In 2012, there was a 10% decrease in the volume of generation at its stations and mark-to-market gains were $8.5m compared to $19.2m of mark-to-market losses for the same period during 2011. Offsetting these decreases were $11.8m in realized losses from the re-sale of coal, compared to $8.8m of realized gains during the same period in 2011.