Big Rivers wins and loses points on Coleman coal plant issues

The Kentucky Public Service Commission on Dec. 10 ruled on a Big Rivers Electric Corp. reconsideration motion that in part deals with a life-support agreement for the coal-fired Coleman power plant.

In an Oct. 29 order, the commission granted Big Rivers Electric an increase in its wholesale base rates to generate additional annual revenues of $54.2m. The rate hike was needed largely to help make up for the loss of aluminum smelter electric load. That loss of load put into danger the operation of Coleman, since the plant is in excess of Big Rivers’ reduced need and would be the easiest plant to idle until more power sales can be generated.

A motion was filed by Big Rivers on Nov. 20 seeking clarification on the issue of whether it has the authority to record as a regulatory asset the severance costs it incurs as a result of idling the Coleman station. On that same date, the Kentucky Attorney General and other parties, including the Sierra Club, requested rehearing on three issues related to the rate order.

On Dec. 9, Big Rivers asked to withdraw its motion for clarification. With the Dec. 10 order, the commission granted Big Rivers’ motion for leave to withdraw its motion for clarification, granted rehearing on one of the issues raised in the intervenors’ petition, and denied rehearing on the remaining two issues raised by the intervenors.

On one issue, the rate order required that Big Rivers defer the depreciation on Coleman in a regulatory asset account and stated that the deferred depreciation expense may be considered for recovery at a future point in time. The intervenors claimed the commission erred by not excluding this depreciation expense from current rates and by not disallowing any such recovery in the future. The PSC concluded that none of the intervenors has presented sufficient grounds to support rehearing on this issue.

The second issue revolves around the fact that on Nov. 1, the Midcontinent ISO filed with the Federal Energy Regulatory Commission a System Support Resource (SSR) agreement with Big Rivers regarding the operation of Coleman. Under the SSR, with MISO financial support, Coleman will stay in operation during the period September 2013-September 2014 while MISO makes compensating grid fixes. The intervenors claimed that the agreement provides for Big Rivers to receive $40.974m annually from MISO for fixed and capital-cost recovery related to operation of Coleman as an SSR, or $12.313m greater than the amount estimated by Big Rivers and accepted by the commission in setting Big Rivers’ revenue requirement in this case.

The intervenors stated that the commission can reduce rates and order refunds of the $12.313m difference or re-open the record and take additional evidence on this issue.

In its response to the intervenors’ petition, Big Rivers stated that the documents in MISO’s Nov. 1 FERC filing did not exist at the time of the hearing in this case, or at the time the rate order was issued, and cannot be presented for rehearing.

“The Commission notes that the issue of revenue under an SSR agreement was extensively discussed during this case,” the PSC wrote about this poinrt. “While the SSR agreement was filed at FERC after the date of the Rate Order, Big Rivers’ response to the Intervenors’ petition did not affirmatively state that it was unaware prior to the Rate Order that $40.974 million was the annual amount of SSR revenue, nor did Big Rivers affirmatively state why it did not disclose that amount immediately upon knowing it was different (and over 40 percent greater) than its estimate that was reflected in this case.”

The PSC added: “Based on this FERC filing date, there is credible reason to believe that Big Rivers may have been aware of the higher amount of SSR revenues it would receive prior to issuance of the Rate Order. Thus, there is an issue of whether the MISO FERC filing should be considered newly discovered evidence. Therefore, the Commission will grant rehearing to explore the issue of when the amount of SSR revenues was determined and known to Big Rivers and whether any such additional revenues should be recognized in establishing Big Rivers’ revenue requirement.

Intervenors turned back, mostly, on issue of load-mitigation plan

A third issue cited by the intervenors points to the language in the rate order wherein the commission said it “finds it reasonable to afford Big Rivers the time to pursue its mitigation strategies….” The intervenors claimed the commission should have specified how much time to allow before assessing whether Big Rivers’ mitigation strategies have failed. The intervenors also argued that the order does not set forth specific parameters regarding implementation of the plan, including how to assess whether the plan has failed.

“The Commission finds that the Intervenors’ arguments are simply challenges to Big Rivers’ load-mitigation plan,” the PSC ruled. “These arguments could have been, and should have been, raised earlier in the case, but were not. Therefore, these arguments are not now sufficient grounds for rehearing in this case. However, while we are denying rehearing on this issue, the Commission will allow the parties to explore this issue in Big Rivers’ pending case, Case No. 2013-00199.”

Big Rivers owns the Coleman facilities, located near Hawesville, Ky. These facilities include four generating units, the first three of which provide 443 MW of capacity that are the subject of the SSR submission. Coleman has coal-fired steam boilers that were installed in the 1969-1971 period.

In December 2012, Big Rivers submitted an Attachment Y-2 (Request for Non-Binding Study Regarding Potential SSR Status) to MISO in order to assess the potential suspension of Coleman Units 1-3, beginning on Aug. 20, 2013, and resuming operations Jan. 1, 2015. MISO completed its analysis of this request, identifying reliability issues associated with the suspension of these units. On May 24, 2013, Big Rivers submitted a letter to MISO indicating its desire to suspend Coleman for 28 months, and included an Attachment Y Notice that designated Sept. 1, 2013, as the beginning for the suspension. The SSR deal was then worked out to support operation until Sept. 1, 2014.

Big Rivers owns and operates 1,444 MW of generating capacity in four coal-fired stations: Robert A. Reid (130 MW), Kenneth C. Coleman (443 MW), Robert D. Green (454 MW) and D.B. Wilson (417 MW).

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.