Big Rivers says Wilson plant is valuable, talk of coal retirements is premature

Big Rivers Electric, as part of an ongoing integrated resource plan case at the Kentucky Public Service Commission, filed Oct. 15 testimony that said that continued life for its coal-fired D.B. Wilson plant has been a benefit to member rural cooperatives.

Due to a loss of load from local aluminum smelters, this western Kentucky cooperative had been looking at shutting Wilson. But it has been able to win enough off-system power sales to keep the plant going for the time being. Big Rivers idled its coal-fired Coleman plant on May 9, but was able to delay an idling of the Wilson coal plant until at least the end of 2015 due to its success in making the off-system sales of power.

In an Oct. 15 filing, which was a response to questions from PSC staff, Big Rivers said: “Big Rivers’ operation of Wilson Station has increased margins for the organization and provided direct savings to Big Rivers’ Members through the Fuel Adjustment Clause. The ‘direct savings’ referenced do not refer to fuel costs assigned to off-system sales being subtracted from fuel costs charged to native load customers in calculating Big Rivers’ monthly fuel adjustment clause (FAC) factors. The ‘direct savings’ refer to the overall reduction in Big Rivers’ average cost of fuel that flows through the FAC.

“Because Big Rivers is operating Wilson Station, it has been able to procure coal for the operation of Wilson Station at spot market prices which are lower than the price of coal Big Rivers has under contract. As a result of including this lower cost fuel in the calculation of average fuel costs, Big Rivers’ average cost per MWh for fuel has decreased by roughly $2.25 per MWh versus what it would have been if Wilson were not operating. This reduction in average fuel cost is directly, and on a near-real time basis, reducing the cost Big Rivers’ Members are actually paying for fuel through the FAC. Big Rivers’ Members will save an estimated $5.8 million in 2014 through reduced fuel costs driven solely by the continued operation of Wilson Station. It is estimated that the Members will directly save $7.1 million in 2015 as a result of Wilson’s continued operation.”

Big Rivers owns 1,444 MW of capacity at: Robert A. Reid (130 MW), Kenneth C. Coleman (443 MW), Robert D. Green (454 MW) and D.B. Wilson (417 MW). It also has rights to Henderson Municipal’s coal-fired Station Two.

In answer to another question, Big Rivers said in the Oct. 15 filing: “Market prices for energy and capacity continue to show signs of increase. Big Rivers notified the Commission on several occasions of postponements of the idling of Wilson Station, the most recent being a postponement until January 2016. Big Rivers has not yet postponed the idling of Wilson Station with MISO beyond January 1, 2016; however, given current year and projected future market prices, it is anticipated that Wilson will be cost-effective to operate indefinitely.”

Said another Oct. 15 Big Rivers answer about whether coal plant retirements should be contemplated right now: “As Big Rivers has previously stated in Cases No. 2012-00535 and 2013-00199, the units are valuable assets that should be maintained to provide future benefits to Big Rivers’ Members. No formal analysis is required to understand that the retirement of assets at this juncture would be imprudent and not in the best interests of Big Rivers’ Members. The cost of maintaining Coleman Station is minimal, and idling it will allow Big Rivers to evaluate its continued operation based upon how the power markets change over the next few years. The Wilson Station has already proven its ability to add value to Big Rivers’ Members. Thus, consideration of its retirement would be irresponsible at this time.”

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.