Indiana commission to look at Vectren’s 2014-2015 coal plans

The Indiana Utility Regulatory Commission on April 23 approved the latest coal costs for Southern Indiana Gas and Electric (known as Vectren South), while also creating a sub-docket to look at issues with future coal buying.

Michael Eckert, a Senior Utility Analyst for the Office of the Utility Consumer Counselor (OUCC), had testified that Vectren South purchased 100% of its long-term contract coal from affiliate Vectren Fuels in 2013. This is a result of the cancellation of the Foresight Coal Sales agreement and the deferral of take from the Alliance Coal contract in 2013.

Eckert expressed the OUCC’s continuing concern that Vectren South is over-relying on its affiliate Vectren Fuels for coal supply. He expressed his opinion that in the past certain coal purchases had been made at above market prices. He also stated that the commission and Vectren South should not rely solely on the request for proposal (RFP) process in the future, but should review future RFP responses in conjunction with past, present and future coal markets.

Eckert also recommended that if applicant’s future RFP process does not provide a competitive response, the commission may want to revisit a cost-plus contract between Vectren South and Vectren Fuels. He concluded by recommending the commission create a separate sub-docket to this proceeding for Vectren South to file its coal procurement plan for 2014 and 2015.

Wayne Games, the utility’s Vice President of Power Supply, testified that Eckert’s statement that Vectren South’s monthly fuel costs are among the highest in the state is not accurate. Games stated that since January 2012, Vectren South’s fuel costs have been consistently similar to its Indiana peer utilities and that during June, July, and August 2013, the months being reconciled in this fuel cost proceeding, Vectren South’s fuel costs were actually lower than several of its Indiana peer utilities.

Games also testified regarding Vectren South’s long-term contract purchases. Games stated that in 2013 Vectren South made spot coal purchases from two suppliers other than Vectren Fuels, as well as purchasing 85% of its contracted volumes from Vectren Fuels. Games explained that in 2014 Vectren South is purchasing contract coal from Alliance Coal and is planning to issue an RFP to solicit bids for coal in 2015 and beyond.

Regarding the prices reflected in its contracts, Games stated that all of Vectren South’s contracts over the last several years have been entered into based on RFPs where the lowest responsive bids were accepted, and those contracts have been found to be at market prices.

Games stated that while Vectren South is not opposed to the creation of a sub-docket for the purpose of filing its 2014-2015 coal supply plan, it feels that it may be unnecessary since such a sub-docket created now would consider a 2014 plan after half the year is over, and likely after Vectren South has conducted another RFP.

“Consistent with the OUCC’s recommendation, Vectren South’s agreement and the Commission’s Order in Cause No. 38708 FAC 98, the Commission finds that Applicant’s coal procurement plan should be presented in a sub-docket proceeding,” said the April 23 commission order. “Therefore, a sub-docket, Cause No. 38708 FAC 102 SI, is hereby created.”

Vectren South and Vectren Fuels are both units of Vectren Corp. (NYSE: VVC).

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.