The Kentucky Public Service Commission on Jan. 12 approved Duke Energy Kentucky to amend its operating agreement with affiliate Duke Energy Miami Fort LLC related to a planned sale of part of the Miami Fort power plant.
On Aug. 12, 2014, Duke Energy Kentucky has sought PSC authorization to enter into a transaction and agreement which amends its current operating agreement with Duke Energy Miami Fort. This is related to the operation of the coal-fired Miami Fort Unit 6 (MF6) owned by Duke Energy Kentucky and currently operated by Duke Energy Miami Fort in conjunction with Miami Fort Units 7 and 8 (MF7 and MF8), which are currently majority owned by the unregulated Duke Energy Commercial Asset Management, another subsidiary of Duke Energy (NYSE: DUK).
The PSC order noted: “Duke Kentucky states that when it acquired MF6 in 2003, it expected to operate the unit for 17 years, until approximately 2020. However, as a result of federal environmental regulations, particularly the Mercury and Air Toxics Standards (‘MATS’) rule, MF6 will likely be retired early. Duke Kentucky expects to retire the unit by June 1, 2015. In anticipation of the early retirement, Duke Kentucky applied for and recently received approval to acquire Dayton Power and Light Company‘s 31 percent interest (186 megawatts) in the East Bend Unit 2 Generation Station in which it already owned a 69 percent interest.”
The PSC added: “The proposed amended operating agreement with Duke Energy Miami Fort was drafted in contemplation of a future sale of MF7 and MF8 to Dynegy, Inc. (‘Dynegy’), an unaffiliated third party. On August 21, 2014, Dynegy Resource I, LLC (‘Dynegy Resource’), a subsidiary of Dynegy, and Duke Energy Corporation entered into an agreement for the sale of Duke Energy Commercial Asset Management to Dynegy Resource. As a result of the sale, Dynegy will acquire MF7 and MF8, as well as Duke Energy Miami Fort. As part of the sale and acquisition, the operating agreement by which Duke Energy Miami Fort operates MF7 and MF8 will be assumed by Dynegy Resource. Duke states that because Dynegy Resource will be acquiring Duke Energy Miami Fort, it will not be necessary for the MF6 amended operation agreement to be assigned or assumed. As a result of Dynegy Resource’s acquisition of Duke Energy Miami Fort, Dynegy will be obligated to continue operating MF6 pursuant to the amended operating agreement, upon Commission’s approval of the agreement. Should the sale be closed prior to the Commission’s adjudication of the application, MF6 will be operated consistent with prior practice and operations.”
Dynegy (NYSE: DYN) had announced in August 2014 that it will acquire 12,500 MW of coal and gas generation in two separate transactions from Duke Energy and Energy Capital Partners (ECP), almost doubling its existing portfolio to nearly 26,000 MW.
Miami Fort Station is a nominal 640-MW facility with three coal/steam units located in North Bend, Ohio, approximately 20 miles west of Cincinnati. Duke Energy owns 64% of both unit 7 and unit 8, and Dayton Power and Light owns the other 36% of each unit. Miami Fort Station is located in the Reliability First region and dispatched into PJM.