Indiana commission approves coal costs for NIPSCO

The Indiana Utility Regulatory Commission on Oct. 23 approved the latest fuel adjustment clause case for Northern Indiana Public Service Co. (NIPSCO), which gets much of its power from coal.

NIPSCO fuels official Kevin Strnatka testified in the Aug. 1 open of this case that the delivered cost of coal for NIPSCO for the twelve months ending June 30, 2013, was $50.78 per ton or $2.527/mmBtu. The delivered coal cost for the reconciliation period (April-June 2013) was $49.63 per ton or $2.506/mmBtu.

Strnatka stated that NIPSCO purchased high sulfur spot coal and transportation for the Bailly Generating Station for the period May through September 2013. He testified that the average spot market price of coal (excluding transportation costs) during the reconciliation period was $10.83 per ton for Powder River Basin (PRB) coal, $39.36 per ton for Illinois Basin high sulfur coal, and $62.04 per ton for Pittsburgh #8 coal.

With respect to the market factors affecting the supply, demand, and cost of coal during the reconciliation period, Strnatka testified that coal supply during the reconciliation period continued to be impacted by natural gas pricing and weak coal demand in both the domestic and international markets. Consequently, spot market pricing across all coal regions remained relatively soft.

Strnatka testified that NIPSCO’s delivered cost of coal during the reconciliation period decreased compared to the first quarter of 2013 from $53.50 per ton or $2.616/mmBtu to $49.63 per ton or $2.506/mmBtu. He stated this decrease was largely due to the completion of a planned dumper outage at R.M. Schahfer Generating Station enabling NIPSCO to increase its shipments of economical PRB coal during the reconciliation period. Strnatka testified that rail fuel surcharges remained relatively flat during the reconciliation period.

Strnatka testified that NIPSCO considers several factors in purchasing coal, including the delivered price, the coal quality that is best suited for a particular generating unit, the sulfur content, mercury content, and the economic and technical suitability of certain low cost fuels to be blended at NIPSCO’s generating units to maintain the lowest, reasonably possible “as-burned” fuel cost.

Strnatka testified that NIPSCO also considers the availability, reliability, and diversity of particular coal suppliers and coal transporters in its fuel procurement practices. He stated that NIPSCO has four long-term contracts in 2013 with Arch Coal Sales (for PRB coal), Enserco Energy LLC (PRB coal), Consol Pennsylvania Coal (Pitt 8 coal) and Peabody COALSALES LLC (Illinois Basin coal).

NIPSCO uses: a blend of PRB coal and Pittsburgh #8 coal in Unit 12 at Michigan City; Illinois Basin high sulfur (ILB) coal in Units 7 and 8 at Bailly; and a blend of PRB coal and Pitt 8 coal in Unit 14, PRB coal in Unit 15, and ILB coal in Units 17 and 18 at R. M. Schahfer.

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.