Gulf Power, in a slight positive for the coal industry after two years of depressed coal use due to cheap natural gas, has burned more coal than expected in the first half of this year, according to Aug. 1 testimony filed at the Florida Public Service Commission.
H. R. Ball, Fuel Manager for Gulf Power, provided “true up” testimony in an annual fuel cost recovery case that reconciles beginning of the year fuel cost projections with actual costs incurred in the first half of this year and updated projections for the last half of the year.
The total cost of coal burned (including boiler lighter) for the first six months of 2013 was $107,456,711 which is $2,388,151 or 2.27% higher than the projection of $105,068,560. The higher than projected total cost of coal burned (including boiler lighter) is due to total MMBtu of coal burn being 4.13% above the estimated burn for the period.
Gulf has fixed price coal contracts in place for the period to limit price volatility and ensure reliability of supply, Ball noted. Actual average prices for coal purchased during the period are lower due to a change in the timing of contract shipments to Gulf’s coal fired generating plants. Another factor contributing to a lower cost of coal-fired generation (cents/kWh) is that weighted average coal unit heat rates are lower than projected for the period. Generating unit heat rates have been impacted by the mix of generating units that operated to meet system loads.
The total cost of natural gas burned for generation for the first six months of 2013 was $57,367,043 which is $4,124,690 or 6.71% lower than Gulf’s projection of $61,491,733. The total gas fired generation was 1,701,038 MWH which is 17.30% lower than the projection of 2,056,898 MWH for the period. The total cost of natural gas burned for generation is lower than the forecast due to the amount of gas fired generation being lower than projected.
On a cost per unit basis, the actual cost of gas fired generation was 3.37 cents per kWh which is 12.71% higher than the projected cost of 2.99 cents per kWh. Actual natural gas prices were $4.60 per MMBtu or 5.50% higher than the projected cost of $4.36 per MMBtu.
Gulf Power getting paid after end of long-running Peabody dispute
Ball also updated a long-running federal court dispute with Peabody Energy’s (NYSE: BTU) Coalsales II LLC for breach of contract due to Peabody’s inability some years ago to ship mid-sulfur Illinois coal to the utility under a long-term contract that has since expired. Peabody said it was force majeure geology problems at the supplying mine that caused it to miss the shipments.
The U.S. District Court for the Northern District of Florida entered a judgment in favor of Gulf Power for more than $20m in contract damages related to breach occurring in 2007, the final year of the contract, along with both pre-judgment and post-judgment interest and taxable costs. The resulting judgment was then appealed to the U.S. Eleventh Circuit Court of Appeals. On June 26, the appeals court issued an opinion affirming all aspects of the final judgment of the trial court. The time period for pursuing further appellate review has passed and the judgment entered by the trial court is now final.
“Peabody Energy has committed in writing to wire transfer sufficient funds to Gulf to fully satisfy the final judgment by close of business on August 8, 2013,” Ball noted. “The damage recovery ultimately obtained from Coalsales has resulted in a credit to Gulf’s retail customers through the fuel cost recovery clause in July 2013….”
Coal burn this year projected at 2.3 million tons in lightly-used units
Gulf Power is projecting 2.3 million tons of total coal burn for 2013, with 810,080 tons of that at Crist Unit 7. Its coal capacity is at Crist Units 4-7, Scholz Units 1-2, Lansing Smith Units 1-2 and Daniel Units 1-2 (Daniel is in Mississippi and co-owned 50-50 with Mississippi Power, another Southern Co. (NYSE: SO) subsidiary).
Below are the net power ratings for each of the coal units and the estimated capacity factors for each of them in 2013. Note that any well maintained coal unit seeing strong demand can usually top an 80% capacity factor. Scholz is a small, old facility that is nearing retirement and is rarely used.
- Crist Unit 4 (75 MW), 9.3% capacity factor;
- Crist Unit 5 (75 MW), 48.8%;
- Crist Unit 6 (298 MW), 21.3%;
- Crist Unit 7 (474 MW), 43.4%;
- Scholz Unit 1 (46 MW), 5.1%;
- Scholz Unit 2 (46 MW), 2.2%;
- Lansing Smith Unit 1 (162 MW), 53.3%;
- Lansing Smith Unit 2 (195 MW), 19.7%;
- Daniel Unit 1 (255 MW Gulf Power share of total unit), 24.6%; and
- Daniel Unit 2 (255 MW Gulf Power share), 25.2%.