Dayton Power & Light (DP&L) deactivated the coal-fired Hutchings Unit 4 in Ohio on June 1 and deactivated the other five units at the plant as of Sept. 30.
DP&L is a subsidiary of DPL Inc., which is in turn controlled by AES Corp. (NYSE: AES). DPL Inc. on Nov. 7 filed a quarterly Form 10-Q report with the Securities and Exchange Commission that describes its latest activity.
Much of the situation with its coal plants (some plants are part owned with others) is being driven by clean-air rules, particularly the federal Mercury and Air Toxics Standards (MATS), which are due for initial implementation in April 2015.
DP&L’s coal-fired units at Hutchings (365 MW total summer rating) and Beckjord do not have selective catalytic reduction (SCR) and flue gas desulfurization (FGD) emission-control equipment installed. DP&L owns 100% of Hutchings and has a 50% interest in Beckjord Unit 6 (207 MW of summer capacity as DP&L’s share).
In July 2011, Duke Energy (NYSE: DUK), a co-owner at Beckjord Unit 6, filed its Long-term Forecast Report with the Public Utilities Commission of Ohio (PUCO). The plan indicated that Duke Energy plans to cease production at the Beckjord Station, including the jointly owned Unit 6, in December 2014. This was followed by a notification by the joint owners to PJM Interconnection, dated April 2012, of a planned June 1, 2015, deactivation of this station.
As for the Hutchings deactivation plan, the decision to deactivate these units has been made in part because they are not equipped with the advanced environmental control technologies needed to comply with the MATS, and the expected cost of compliance with MATS for these units would exceed the expected return. Additionally, conversion of the coal-fired units to natural gas was investigated, but the cost of investment exceeded the expected return.
As part of a settlement with the U.S. Environmental Protection Agency, DP&L signed a Consent Agreement and Final Order (CAFO) that was filed on Sept. 26, 2013. The CAFO resolves the opacity and particulate emissions notice of violation (NOV) at Hutchings and requires that all six coal-fired units at Hutchings cease operating on coal by Sept. 30, 2013. The deal also includes an immaterial penalty and the completion of a Supplemental Environmental Project of $0.2m within one year. The units were disabled for coal operations prior to Sept. 30, 2013.
The other DP&L coal stakes are in Conesville Unit 4, East Bend, Killen, Miami Fort Units 7-8, Stuart and Zimmer. DP&L also owns a 4.9% equity ownership interest in Ohio Valley Electric, which controls the coal-fired Kyger Creek and Clifty Creek power plants.
DP&L also noted an ongoing issue at the PUCO over its fuel costs. Fuel and purchased power recovery costs can be recovered from or returned to customers through a fuel and purchased power recovery rider. This rider fluctuates based on actual costs and recoveries and is modified at the start of each seasonal quarter. DP&L implemented the rider on Jan. 1, 2010. As part of the PUCO approval process, an external auditor is hired to review fuel costs and the fuel procurement process. On June 12, DP&L received a report from the external auditor (consulting firm Energy Ventures Analysis) recommending a pre-tax disallowance of $5.3m of costs. “We intend to vigorously contest that disallowance,” DP&L said. “This case has been set for hearing starting December 9, 2013.”