Audit outlines changes in 2012 coal buying for Dayton

In 2012, Dayton Power and Light (DP&L) purchased 6.9 million tons of coal at an average delivered price of $60.05 per ton or $2.55 per MMBtu.

No coal was purchased for the about-to-be-shut O. H. Hutchings plant during the audit period, noted an audit filed June 14 at the Public Utilities Commission of Ohio by PUCO-hired consultant Energy Ventures Analysis. According to DP&L’s classification, 19% of purchases in 2012 were on a spot basis. Average prices declined year over year by over 2%. The decline in price is largely attributed to the change in coal mix. In 2012, DP&L purchased about 580,000 tons or 8.3% of its coal from Central Appalachia versus 2.15 million tons or 29% in 2011. Newish SO2 scrubbers that allow a burn of high-sulfur coals were largely the reason for that.

DP&L’s fuel costs are different than its purchase costs because of contract buy-out payments from one supplier and optimization-related adjustments, the heavily-redacted audit said. The contract buyout payment in 2012 was less than the contract buyout amount in 2011 because the supplier filed for bankruptcy on July 9, 2011. Details of that are redacted, but the audit indicates that coal supplier is Patriot Coal.

DP&L has been very successful in adapting the Stuart plant’s boilers to lower fusion coals without excessive slagging and fouling. All four units now have the capability to burn 100% high-sulfur coal.

DP&L also made significant progress in expanding the potential sources of supply for Killen as a result of controlled testing and analysis.

DP&L generation was down by 11% overall in 2012 with DP&L plant-operated generation down by 12%. Part of the decline is attributable to the extended outage on Unit 3 at Stuart due to a turbine failure and complications in its repair. Coal accounts for 99.5% of DP&L generation.

Audit says Dayton’s coal the most expensive among its Ohio peer group

DP&L’s coal purchase costs as reported to the U.S. Energy Information Administration (EIA) on Form 923 are the highest among the four Ohio utilities for which there is publicly available data, the audit said. DP&L explained that its reported purchase costs include neither the proceeds from a contract buy-down nor the adjustments related to its optimizations. Optimizations are basically daily trades where the utility buys and sells coal positions if it thinks it can make money on them. DP&L agreed to major limits on the optimization program as a result of last year’s audit.

The average delivered price of coal to the Stuart station is the highest among 11 utility plants which receive coal by barge that are equipped with scrubbers and/or burn high-sulfur coals that are proximate to Stuart, the audit said. The average delivered price of coal to Killen is the fourth highest among the same group.

DP&L modified its request for proposals (RFP) procedures during the audit period to explicitly state that coals with qualities outside of the boxed specs will be considered and to include draft agreements in the RFP package. Also, the procedures state that an option value will be quantified for those suppliers which give DP&L volume optionality.

DP&L conducted five contract RFPs in 2012 which were generally consistent with its revised guidelines. As agreed, DP&L considered all coals whether they were consistent with the boxed specs and evaluated option values.

DP&L claimed credits for 13 optimizations during the audit period. The optimizations consisted of both basin and quality swaps. EVA concluded that five of the 13 should not qualify as optimizations and the optimization values in two of the remaining eight should be adjusted. The reasons for the adjustments include: timing; mischaracterization of existing positions; and the imprudence findings related to DP&L’s 2010 failure to exercise a competitive option and coincident purchase of contracts, said the audit.

Hutchings, Beckjord Unit 6 on the retirement list

DP&L wholly and commonly owns 12 power generating facilities with a total capacity of 3,251 MW (2,827 MW of coal and 967 MW of other capacity). DP&L’s coal capacity is expected to decline as DP&L has announced its plans to retire all of Hutchings, and the co-owners of Beckjord Unit 6 have informed PJM Interconnection of their intention to retire this unit by June 1, 2015.

The Stuart station consists of four units with a total generating capacity of 2,308 MW. The retrofits of flue gas desulfurization (FGD) on all four units were completed in 2008. All coal to this station is delivered by barge. Generation in 2012 was at the lowest level in at least 10 years. As a result, this is the first time during this period Stuart burned less than 5 million tons in a year. The lower consumption was due primarily to an extended outage on Unit 3.

Prior to the retrofitting of the scrubbers, the Stuart station burned low-sulfur coal in order to meet its 3.16 lbs of SO2 per MMBtu State Implementation Plan (SIP) limit. The coal originated primarily in Central Appalachia. The retrofit of the scrubbers has allowed higher-sulfur coal. The scrubbers are designed for coals with an SO2 content up to 7.22 lbs/MMBtu. However, given the design of the boilers, DP&L did not assume a complete switch to higher sulfur coals because of concerns over slagging and fouling, but has now overcome that problem.

The Killen station consists of one 600 MW coal-fired plant. The station was designed for two units, but only one unit (Killen 2) was built. The unit was subject to an original New Source Performance Standard emissions limit of 1.2 lbs of SO2 per MMBtu, which the utility chose to comply with through low-sulfur compliance coal. A scrubber was retrofit on the Killen station in 2007. All of the coal consumed by Killen is delivered by barge.

In three of the last six years, Killen operated at plus 75% capacity factors. Coal burn is typically about 1.8 million tons per year. In 2012, coal burn was just under 1.6 million tons.

DP&L’s smallest station is the Hutchings 365-MW power plant, which consists of six small units. This plant receives coal by truck or rail, and it has not been retrofitted with scrubbers. The plant operates at very low levels due to its high cost. In 2012, Hutchings experienced a forced outage due to low staffing, the audit said. Hutchings has now burned less than 50,000 tons per year in the last two years. All of the coal burned by Hutchings is low-sulfur Central Appalachia coal delivered by rail.

Hutchings Unit 4 is currently out of service with damage to its turbine and was retired on June 1. DP&L plans to retire Hutchings Units 1, 2, 3, 5 and 6 by June 2015.

The section with details about 2012 coal contracts is pretty much entirely redacted, but indicates that contracts were with Alpha Natural Resources, Alliance Coal, American Coal, Patriot Coal, Knight Hawk Coal and Williamson Energy.

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.