Appalachian Power decided not to extend Bowie coal contract

Appalachian Power decided not to exercise options beyond 2012 for contract coal for its Clinch River plant in Virginia with Bowie Resources, the utility said in a May 28 filing at the West Virginia Public Service Commission.

The filing was a response to a series of questions from the state’s Consumer Advocate Division in an Expanded Net Energy Cost (ENEC) case filed on April 1. The filing only says “Bowie,” but the utility’s reports to the U.S. Energy Information Administration show deliveries in 2012 to Clinch River of low-sulfur coal out of the Bowie No. 2 longwall mine in Colorado of Bowie Resources.

“APCo choose not to exercise the Bowie contract options for 2013 and 2014 due to 1) a forecasted reduced burn and 2) the price of Bowie delivered coal is forecasted to be higher than other coal sources including those already under contract,” said the APCo response. “The Bowie contract tonnage was not replaced.”

Another question had to do with the sulfur limitations for coal used in the scrubbed Amos, Mitchell and Mountaineer power plants, including why the sulfur limitations are so much lower at Amos and Mitchell.

The scrubbers at the Amos and Mitchell plants are each designed to burn coal with a maximum content of 4.5 lb SO2/MMBTU. The scrubber at the 1,300-MW Mountaineer plant is designed to burn a coal with a maximum sulfur content of 7.5 lb. SO2/MMBTU.

The Mitchell plant consists of two 800-MW boilers, which are of similar design to Units 1 and 2 at Amos. The design of the 800-MW boilers is not conducive to burning coal with a sulfur content greater than 4.5 lb SO2/MMBTU, and the ash chemistry typical of such coals. The boilers have proportionally less heat transfer area than the 1,300 MW units (Amos Unit 3 and Mountaineer’s single unit), and this design aspect creates more potential for slagging in the furnace, and limits the sulfur content of the coal.

Amos Unit 3 is a 1,300 MW unit, and is of similar design to the Mountaineer plant. These boilers do have the capability of consuming coal with a sulfur content over 4.5 lb SO2/MMBTU, but even these two similarly designed units are not identical. Amos Unit 3 does not have gas recirculation and tempering equipment, which would be a significant and necessary capital investment to allow it to consume coal with a sulfur content of up to 7.5 lb SO2/MMBTU. Other capital investments, such as improved soot-blowing capability, would also be necessary to consume a coal with a sulfur content of up to 7.5 lb SO2/MMBTU at Amos Unit 3.

Also, as the sulfur content of coal increases, so does the capital cost of the scrubber associated with removal of the increased level of SO2. The removal of more SO2 requires larger absorber vessels, larger fans due to increased pressure drop across the absorber vessel, larger reagent handling and disposal systems, and increased pump capacity for circulation of scrubber liquor. For these reasons, the FGD system for Amos Unit 3 was designed for a coal with 4.5 lb SO2/MMBTU.

Separate storage piles are maintained for low-sulfur and high-sulfur coal at both Amos and Mitchell. Blending operations mix the coals at approximately 50% low-sulfur and 50% high-sulfur prior to being consumed at both Amos and Mitchell.

APCo reported poor coal burn figures in this case

APCo had projected a total coal burn of 10.8 million tons in 2012, but due to factors like cheap competing natural gas that burn came in at only 8.3 million tons last year. Those are among the facts that survived heavy redacting that officials of American Electric Power (NYSE: AEP) wrote for the April 1 ENEC filing.

The projected coal consumption for a July 2013-June 2014 Forecast Period is redacted from the April 1 filing, but indications are it won’t be much better than that in 2012. Coal consumption is 2012 was 8.3 million tons at an average delivered cost of $66.20/ton, against a projection for 2012 of 10.8 million tons at $68.12/ton.

Factoring into the future planning of these companies is the planned transfer, by the end of 2013, of 1,647-MW of coal-fired capacity to APCo from another AEP subsidiary. That transfer is now pending before the West Virginia commission in a separate docket. The assets proposed to be transferred are a 50% undivided interest in Ohio Power’s Mitchell plant in northern West Virginia and Ohio Power’s current two-thirds interest in Unit 3 of the Amos plant in southern West Virginia.

APCo is planning to procure more coal during the Forecast Period, but, under the current dynamic market conditions, the exact amount of additional coal needed is not clear, APCo noted.

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.