Vectren South seeks test coal it can qualify for future business

Southern Indiana Gas and Electric d/b/a Vectren South is looking to buy up to 100,000 tons of spot coal in the rest of 2013, with an emphasis on testing out new coals for future consideration beyond 2013.

Wayne Games, the utility’s Vice President-Power Supply noted in May 20 fuel adjustment clause testimony filed at the Indiana Utility Regulatory Commission that as of Feb. 28, coal inventory at Vectren South’s coal-fired generating plants stood at approximately 489,000 tons, with additional off-site storage of 212,000 tons. The company had previously reported that as of Nov. 30, 2012, coal inventory stood at approximately 656,000 tons, with additional off-site storage of 222,000 tons. So the coal piles have come down lately.

Based on the current projected burn for 2013, and as indicated in its 2013 coal supply outlook presented in a prior fuel case, Vectren South plans to acquire approximately 100,000 tons, in one or more spot purchases, during the remainder of 2013. Given a spot purchase does not create a term commitment and is based on near term prices, Vectren South has directly solicited coal quality information from four area competitive suppliers rather than conducting a request for proposals, Games reported.

This May 2 solicitation was done with the assistance of Vectren South’s coal consultant,  Emily Medine of Energy Ventures Analysis. Vectren South identified suppliers, proximate to its plants, which are expected to have coal with qualities consistent with the plant requirements. Vectren South will evaluate responses to determine if the coal meets the specs required by Vectren South’s boilers and also by-product ash will meet ash specifications from cement company Holcim, which takes some of that ash for recycling.

Specs in the solicitation include a minimum of 11,000 Btu/lb and maximums of 16% moisture, 14% ash, 6.5 lbs/mmBtu of SO2 and 0.15% chlorine. Vectren South decided in recent months not to proceed with a contract with Foresight Coal Sales for Illinois coal due to problems with the coal ash quality.

“While pricing is not the key determinant in selecting coals for test burns (as the quantity is relatively small), given the Company has approached multiple potential suppliers for this coal Vectren South expects to obtain competitive pricing for the test coal,” Games wrote. The ability to transact with new suppliers and assess their coal quality should be beneficial in terms of expanding the number of responses to future procurement solicitations, he added.

In order to address the need to make future procurements less contingent upon test burns, Vectren South is focused on using its open position in 2013 to test one or more of these suppliers. Vectren South has not previously bought coal from these unnamed suppliers. By burning this new coal in 2013, Games said the utility can “pre-qualify” the producer for purposes of future RFPs.

Vectren South is a unit of Vectren (NYSE: VVC). Much of the coal for the Vectren South power plants comes from affiliated coal mines, with some outside coal bought from parties like Alliance Coal LLC.

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.