Big Rivers defends two coal plants, one of which is currently idled

Big Rivers Electric, in Dec. 18 comments filed at the Kentucky Public Service Commission in an ongoing integrated resource plan case, said that recent suggestions by the state Attorney General and the Sierra Club that the recently-idled, 443-MW Coleman coal plant should be sold or retired are premature.

“Most of the criticisms from the Attorney General and Sierra Club relate to Big Rivers’ Coleman generating station,” the cooperative utility wrote. “The Attorney General claims that Big Rivers should have performed a net present value revenue requirements analysis regarding Coleman’s value and that Big Rivers should model scenarios for the sale of Coleman. Sierra Club similarly argues that Big Rivers should evaluate retiring, repowering, or selling one or more units.

“Both the Attorney General and Sierra Club fail to recognize the circumstances surrounding Big Rivers’ valuation of Coleman Station during the preparation of the 2014 IRP. When Big Rivers began preparing the 2014 IRP in late 2013 and through the time that Big Rivers filed the IRP in May 2014, Big Rivers was in the midst of two rate cases, both of which were needed to address the revenue shortfall resulting from the two aluminum smelters on Big Rivers’ystem terminating their power contracts. Those two smelters provided approximately 65% of Big Rivers’ revenue. In both rate cases, the Attorney General and Sierra Club were advocating positions, which if adopted by the Commission, would have inevitably led to a Big Rivers bankruptcy.

“The rate cases were an integral part of Big Rivers’ Load Concentration Analysis and Mitigation Plan (‘Mitigation Plan’). The rate cases provided sufficient revenues for Big Rivers to be financially stable, while at the same time giving Big Rivers the opportunity to pursue various strategies under the Mitigation Plan for reducing rates by maximizing the value of the Wilson and Coleman Stations, which include, but are not limited to: (i) marketing all available power when the market price is greater than the marginal generation cost, through increased sales into the MISO market, economic development, long-term contracts, new members, etc.; (ii) temporarily idling Wilson and/or Coleman when market prices do not support the cost of generating; and (iii) exploring selling or leasing Wilson and Coleman. While the rate cases were pending, Big Rivers was also aggressively pursuing these strategies.

“The first of these strategies involves Big Rivers’ efforts to secure replacement load. Big Rivers has been successful in securing sufficient market energy and capacity sales to enable Wilson Station to continue to operate through at least the end of 2015. Big Rivers has seen approximately 25 MW of internal load growth plus an announced $350 million expansion at a large industrial facility (Aleris) that will involve additional load growth. Big Rivers has negotiated agreements to supply a consortium of municipalities in Nebraska with another 672 MW. And Big Rivers is actively negotiating with other potential power purchasers.

“The second strategy involves reducing costs by temporarily idling generating units when market prices do not support the cost of generating. When it filed the two rate cases, Big Rivers anticipated idling both the Wilson and Coleman Stations (one on August 20, 2013, and the other on January 31, 2014) because of continued weakness in the market at that time. As noted above, Big Rivers’ plans to idle Wilson Station were postponed because of an increase in market prices that enabled Big Rivers to continue operating Wilson, and market prices are now anticipated to be sufficient for Big Rivers to continue operating the Wilson Station for the foreseeable future. The continued operation of the Wilson plant has protected 93 direct jobs, provided $126 million of economic benefit to the local economy and provided significant benefit to Big Rivers’ members. Big Rivers’ plans to idle Coleman Station were delayed because the Midcontinent Independent System Operator, Inc. (‘MISO’) required Big Rivers to continue operating that station for reliability reasons until May 2014.

“The third strategy involves efforts to sell or lease generating units. Big Rivers has offered and continues to offer both Wilson and Coleman for sale, and it continues to evaluate this opportunity. Also during this time, Big Rivers was negotiating new contracts with the smelters that would allow the smelters to purchase power at market-based rates, in an effort to allow the smelters to continue operating and to avoid the negative economic impacts to the region that would have resulted from the loss of nearly 1,200 direct jobs and other indirect economic benefits that would result from a cessation of their operations. Big Rivers’ goal in the new smelter agreements was to impose no costs on the remaining customers on Big Rivers’ system that they would not have been exposed to if the smelters had terminated operations.”

Big Rivers says, market prices willing, Coleman could be back in 2016 or 2017

Market prices already justify running Wilson, and market prices (energy and capacity) could justify returning Coleman to service in 2016 or 2017, Big Rivers noted. “If market prices are sufficient, even if Big Rivers is unable to secure firm-contract replacement load, Coleman could be dispatched sufficiently enough in the MISO markets to justify returning it to service as early as 2016 or 2017. However, instead of relying entirely on the day-ahead and real-time markets, Big Rivers anticipates that it will hedge the market risk by entering into longer-term contracts.

“In other words, Wilson’s favorable position compared to current and projected market prices justifies continuing to run Wilson, and Coleman’s favorable position compared to market prices may justify running Coleman as early as 2016 or 2017. Thus, Wilson is expected to continue to run throughout the planning period and can serve over 400 MW of firm-contract replacement load. If Big Rivers does not secure 400 MW of firm-contract replacement load, Wilson will still likely run; it will just be used for sales into MISO. Coleman would be used to serve the next 400 MW of firm-contract replacement load. But if Big Rivers secures less than 800 MW of firm-contract replacement load, Coleman could instead be used for sales into MISO beginning in 2016 or 2017, or when market prices justify returning it to service. The replacement load assumptions are thus a function of Coleman’s and Wilson’s relative market positions. Securing less replacement load would not change whether Wilson and Coleman are economic to run but would instead only increase MISO market sales.”

At a later point in the filing, Big Rivers wrote: “Sierra Club notes that Big Rivers has run models with Green Station converted to natural gas and argues that those model runs should have been included in the IRP. The Sargent & Lundy study prepared and filed as part of Big Rivers 2012 Environmental Compliance Plan did suggest converting Green Station to natural gas as one approach for compliance with [the Cross-State Air Pollution Rule]. However, the conclusions o fthe study showed that [selective catalytic reduction for NOx control] at Green and enhanced [flue gas desulfurization] at Wilson were preferred compliance methods for Big Rivers, assuming Coleman was still in operation. Thus, Big Rivers did not include the potential conversion of the Green Station to natural gas in the IRP. Nevertheless, Big Rivers continues to evaluate the possible natural gas conversion of its coal units as natural gas prices change and new environmental regulations are proposed.”

Big Rivers owns and operates 1,444 MW of net generating capacity from four coal-fired stations:

  • Kenneth C. Coleman – 443 MW – Hawesville
  • Robert A. Reid Station – 130 MW – Robards
  • Robert D. Green Station – 454 MW – Robards
  • D. B. Wilson Station – 417 MW – Centertown
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.