Empire District Electric (NYSE: EDE) on Aug. 29 filed a request with the Missouri Public Service Commission (MPSC) for changes in rates for its Missouri electric customers.
The company is seeking an annual increase in base rate revenues of approximately $24.3m (5.5%).
The most significant factor driving the need for a rate increase is the cost associated with the installation of the Air Quality Control System (AQCS) at the coal-fired Asbury Power Plant. Additional factors include increased operating costs, a new maintenance contract covering the Riverton 12 gas-fired generating unit, an increase in Regional Transmission Organization charges and increases in property taxes.
Brad Beecher, utility president and CEO, said: “The AQCS we are installing at the Asbury Power Plant carries a cost of between $112 and $130 million and includes a scrubber, fabric filter, and powder activated carbon injection system. This will allow the plant to meet the Environmental Protection Agency (EPA) rules on air quality, namely the Mercury Air Toxic Standards.”
Beecher continued: “Several factors did allow us to hold down the size of our request. These include savings experienced through the Southwest Power Pool Integrated Marketplace that began March 1, 2014, lower debt cost and a reduction in expenses related to vegetation management. “
The company is also asking to continue the use of the Fuel Adjustment Clause (FAC). The continuation of the FAC will allow it to adjust customers’ bills twice each year, on June 1 and December 1, based on the varying costs of fuel used to generate electricity at its generating units and electric energy it purchases on behalf of its customers.
The MPSC will now perform an audit of Empire’s operations, hold public hearings, and hold an evidentiary hearing.
Based in Joplin, Missouri, Empire District Electric is an investor-owned, regulated utility providing electric, natural gas (through its wholly owned subsidiary Empire District Gas), and water service, with approximately 217,000 customers in Missouri, Kansas, Oklahoma, and Arkansas.
Riverton coal units also going down for the count
Said Beecher in Aug. 29 testimony filed at the commission: “The dominant factor driving the need for a Missouri rate increase at this time is Empire’s capital investment at its Asbury generating unit, which is required to meet EPA rules on air quality. In addition to the environmental investment at Asbury, EPA’s air quality rules will substantially contribute to the retirement of two of Empire’s oldest coal fired units and the conversion of our Riverton 12 unit to a combined cycle.”
The addition of the air quality control equipment at Asbury also required the retirement of Asbury Unit 2, a small steam turbine that was used as a peaker. The retirement of this unit came in December 2013. The Asbury air emissions retrofit is scheduled to be complete and in service on Feb. 1, 2015.
Empire’s compliance plan also called for the transition of the Riverton Units 7 and 8 from operation on coal to full operation on natural gas after the summer of 2012, and the eventual retirement of Units 7, 8 and 9 in 2016. Unit 9 is a small combustion turbine that requires steam from Unit 7 for start-up. Units 7 and 8 began operation in 1950 and 1954, respectively. Due to an electrical malfunction at Unit 7 earlier this year, Unit 7 was retired from service on June 30, 2014.
Riverton Units 7 and 8 operated primarily as small coal units since the early 1950s until they were transitioned to natural gas only operation in September 2012. Prior to its recent retirement, Unit 7 was rated at 38 MW, but since its partial conversion to western coal in 1990 to meet tightening EPA SO2 requirements, it could only operate at a maximum of about 24 MW net on coal. Unit 8 is rated at 54 MW and prior to its transition to sole operation on natural gas operated at a maximum of 45 MW net on coal since the partial western coal conversion in 1990.
Empire’s strategy to comply with the most recent EPA rules at Riverton calls for the retirement of Unit 7 (which occurred at the end of June 2014), and the retirements of Units 8 and 9 at the completion of the construction and conversion of Riverton Unit 12 to a combined cycle unit, which should occur in mid 2016, Beecher noted.
FAC touted as best way to keep current on fuel cost passthoughs
Todd Tarter, the utility’s Manager of Strategic Planning, said in companion testimony about the FAC: “I believe there are significant benefits for all of the Company’s stakeholders. First, Empire benefits by being able to recover most of its actual fuel and energy costs through the FAC. This strengthens Empire’s financial profile and enhances its ability to attract the financing necessary to meet its customers’ needs and to obtain that financing at the best rates possible. In addition, the need to file general rate cases for the purpose of recovering ongoing fuel and energy costs in base electric rates has essentially been eliminated. Over time, this may reduce the overall number of electric rate cases in Missouri, and a reduction in the number of general rate cases will ultimately lower Empire’s regulatory costs and ultimately the cost to serve Empire’s Missouri customers.”
Tarter was asked if any recent events have changed the utility’s computer model related to unit dispatch. “Yes, there are few changes of note. First, the model takes into account the retirement of Asbury Unit 2 (14 MW), which was removed from service as of midnight December 31, 2013. At the time of its retirement, this unit had been used only for peaking purposes. As planned, this unit was retired in conjunction with the Asbury AQCS and turbine project. The model has also been updated to account for the new unit characteristics of the Asbury Unit 1 coal-fired unit following its AQCS and turbine project. This includes changes to the unit’s rated capacity and heat rate curve. During the tie-in of the new AQCS, certain turbine hardware will be replaced. These components utilize a newer design, increasing unit efficiency and capacity. The additional capacity will partially offset the capacity lost due to the retirement of Asbury Unit 2 and due to the additional auxiliary loads imposed by the new AQCS. The other change to the model accounts for the retirement of Riverton Unit 7, which was officially removed from service on June 30, 2014. This unit had operated as a small coal unit for many years, before being transitioned to full operation on natural gas in September of 2012. After its transition to a natural gas only unit, it had operated zero service hours. The unit was about 64 years old at the time of its retirement.”
Tarter said all coal costs in the model are based on the expected 2015 delivered cost (initial and freight). The following solid fuel types were modeled: Asbury western coal; Asbury blend coal; Iatan western coal; and Plum Point western coal.
Empire has an ownership portion and a power purchase agreement (PPA) portion of the Plum Point coal-fired unit. Both portions were modeled at 50 MW each, for a total capacity from this facility of 100 MW.