Wisconsin PSC looks at Elm Road coal blend program in rate order

In a Dec. 23 rate hike approval, the Public Service Commission of Wisconsin addressed an effort by Wisconsin Electric Power to add ever-increasing blend percentages of Powder River Basin coal at the Elm Road Generating Station (ERGS), which was basically designed to burn bituminous coal out of the Pittsburgh seam in Northern Appalachia.

The Dec. 23 decision was on the application of Wisconsin Electric Power Co. (WEPCO) and Wisconsin Gas LLC (collectively We Energies) for authority to change electric, natural gas, and steam rates on Jan. 1, 2015, and to change electric rates and Wisconsin Gas natural gas rates on Jan. 1, 2016.

“In 2011, WEPCO started planning to implement its ERGS Fuel Flexibility project with the goal of modifying the necessary equipment at the power plant to allow combustion of a blend of bituminous and PRB coals,” said the order. “ERGS was designed to burn bituminous coal but the delivered cost of that coal compared to PRB coal has changed significantly so that having the flexibility to burn PRB coal will result in overall savings for WEPCO’s ratepayers.

“Blending levels may reach 100 percent PRB coal depending on the economics of the cost of the modifications to ERGS and the resulting fuel cost savings. WEPCO’s approved 2014 fuel cost plan reflected a 20 percent PRB coal blend rate at ERGS Unit 2 and no PRB coal burned at ERGS Unit 1. In January 2014, WEPCO fully converted ERGS Unit 2 to a 40 percent PRB coal blend rate and started burning a 20 percent PRB coal blend rate at ERGS Unit 1. In May 2014, WEPCO increased the PRB blend rate at ERGS Unit 2 to 60 percent.

“During the summer of 2014, WEPCO continued to test both 40 and 60 percent PRB blend rates at ERGS Unit 2 although the majority of that testing had been done at reduced loads due to operational issues including low coal inventory levels. WEPCO’s filed 2015 fuel cost plan reflected a 40 percent PRB coal blend rate at ERGS Unit 2 and no PRB coal burned at ERGS Unit 1. During Commission staff’s audit in this proceeding, WEPCO proposed that a 40 percent PRB coal blend rate at ERGS Unit 2 and a 20 percent PRB coal blend rate at ERGS Unit 1 was appropriate for 2015 based on its testing results experienced to date. Commission staff noted that WEPCO had been conservative in its forecasting of attainable PRB coal blend rates at the ERGS units based on the experience of its fuel flexibility project during 2014. Commission staff proposed that a more aggressive 40 percent PRB coal blend rate should be forecasted for both ERGS units during 2015.

“The Commission observes that WEPCO’s approved 2014 fuel plan forecasts has resulted in fuel cost over-collections during the year due to higher than forecasted PRB coal blend rates. WEPCO has been conservative in its forecasts. Its testing of PRB blends in 2014 of both 40 and 60 percent PRB blends is indicative that a 40 percent blend at both units is more likely to occur. The Commission finds it reasonable that the 2015 fuel plan should reflect a 40 percent PRB blend rate for both ERGS units.

“WEPCO testified that for any ERGS unit that has a PRB coal blend rate greater than 20 percent, a one- to two-week inspection outage should be scheduled. Commission staff agreed that it made sense for an inspection outage for an ERGS unit burning greater than 20 percent PRB coal and suggested that an additional one and one-half-week inspection outage be used. The Commission finds it reasonable to forecast that WEPCO will have an additional one and one-half-week inspection outage at each ERGS unit during 2015.”

The relatively new Elm Road units, having a combined net capacity of approximately 1,268 MW, are operated by WEPCO.

PSC addresses revenue from life-support deal for Presque Isle coal plant

The rate order also addressed costs for the coal-fired Presque Isle Power Plant (PIPP) in Michigan’s Upper Peninsula. In 2013, WEPCO lost a significant amount of Michigan retail load due to the Empire and Tilden mines and other customers in the Upper Peninsula electing to take service from an alternative energy supplier under Michigan’s retail choice law. In August 2013, WEPCO submitted an Attachment Y request at the Midcontinent ISO to suspend operations of PIPP beginning February 2014, and ending May 2015.

On Jan. 31, 2014, MISO filed with FERC an executed system support resource (SSR) agreement with respect to PIPP. This PIPP SSR agreement became effective Feb. 1, 2014, and was set to expire on Jan. 31, 2015. The PIPP Suspension SSR agreement had a variable component, which reimbursed WEPCO for PIPP’s production fuel costs when dispatched, and a fixed component, which reimbursed WEPCO for O&M expenses, carrying costs of inventories, and ongoing capital expenditures incurred to keep PIPP operational. The monthly payment for the fixed component was $4.353m.

On April 15, 2014, WEPCO submitted an Attachment Y request with MISO to retire the PIPP units effective Oct. 15, 2014. On Sept. 12, 2014, MISO filed with FERC a request to terminate the Suspension SSR agreement and to approve a Retirement SSR agreement with respect to PIPP. The PIPP Retirement SSR agreement was requested to become effective Oct. 15, 2014, and set to expire on Dec. 31, 2015. In a Nov. 10, 2014, order, FERC accepted termination of the PIPP suspension SSR Agreement and directed that cost components of the PIPP Retirement SSR Agreement be set for settlement conference and hearing.

The Dec. 23 rate order establishes how WEPCO’s SSR revenue is to be accounted for. The Presque Isle facilities are located in Marquette, Mich. These facilities include five major generating units that provide about 344 MW of capacity in total.

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.