Big Rivers Electric told the Federal Energy Regulatory Commission on Dec. 10 that a life-support deal with the Midcontinent ISO for its coal-fired Coleman plant, which runs until September 2014, is just and reasonable.
Big Rivers, based in western Kentucky, was responding to criticism of a System Support Resource (SSR) agreement that MISO has filed that runs from September 2013 to Sept. 1, 2014. The SSR allows MISO to pay costs of keeping the Coleman plant in operation while grid fixes are made so the plant can be idled over the longer term.
Big Rivers is the owner of Coleman Units 1-3, which MISO proposes to require to continue to operate in order to reliably serve Century Aluminum’s load at its aluminum smelter in Hawesville, Ky. Coleman consists of the three units with a combined capacity of 443 MW.
Until Aug. 20, 2013, the capacity of Coleman was used to provide power to Century through Big Rivers’ member distribution cooperative, Kenergy Corp. Earlier this year, Century determined that its negotiated rate for energy and ancillary services from Big Rivers was higher than what it would pay for the same services in the MISO market. Big Rivers then worked with Century to negotiate a series of agreements, which have been filed with and accepted by the Kentucky Public Service Commission, whereby Big Rivers, while it acts as a MISO market participant on behalf of Century, has agreed to procure from the MISO markets energy and ancillary services to serve Century’s load.
Due to the loss of Century as a large industrial customer, Big Rivers determined that it was no longer economic to continue operating Coleman. It submitted to MISO an Attachment Y notice of suspension of Coleman, effective Sept. 1, 2013, until Jan. 1, 2016, when Big Rivers expects that either: one or more industrial loads will be added or Big Rivers will enter into bilateral contracts, that collectively will require Big Rivers to operate Coleman; or wholesale market prices will have improved enough to make it economic to resume operation of Coleman.
In response to the Attachment Y notice, MISO determined that the continued operation of Coleman was required to maintain grid reliability, resulting in the SSR.
Big Rivers responds to criticism on deal length, costs
Critics, including Century, argue that the commission should condition its acceptance of the SSR agreement on Big Rivers and MISO agreeing to implement feasible alternatives that would limit the term of the agreement. “The Commission should reject these arguments because Big Rivers and MISO have negotiated an agreement that is consistent with the pro forma SSR agreement set forth in the MISO OATT, with revisions that provide MISO with additional flexibility to terminate the agreement when feasible alternatives are implemented,” Big Rivers said in its Dec. 10 filing. “Moreover, Big Rivers has diligently coordinated with Century, MISO, SERC, and others, in order to implement feasible alternatives to the SSR agreement. Proposed deviations from the pro forma SSR agreement, negotiated by Big Rivers, will ensure that the SSR agreement is not in place longer than necessary.”
The SSR also has been drafted to permit MISO to terminate the agreement with respect to Coleman Unit 1 only, in the event that feasible alternatives are implemented that require the operation of Coleman Units 2 and 3 only, Big Rivers noted.
Big Rivers said it also has been diligently coordinating with MISO, Century and SERC to implement demand response programs that would eliminate the need for the SSR agreement. In particular, Big Rivers has negotiated a load curtailment agreement with Century by which Big Rivers can curtail the Century load in the event of a system emergency. Such a load curtailment agreement also would permit the suspension from service of one or more of the Coleman units, if Century agreed to further curtailments of its load.
The capital costs contributing to the annual SSR amount relate to the replacement of equipment that is necessary to maintain the operation of Coleman during the term of the SSR agreement. “The fact that some of these capital costs could benefit Coleman when it is returned to service is inconsequential because the costs must be incurred within the term of the SSR agreement in order to ensure the reliable operation of the Coleman units, and compliance with relevant environmental regulations throughout the term of the SSR agreement,” Big Rivers noted. “MISO and the [Independent Market Monitor] have reviewed such costs and determined that they are just and reasonable. Moreover, all fixed SSR costs will be subject to a monthly true-up. Based on these representations, the Commission should determine that the capital costs are just and reasonable.”