East Kentucky Power Cooperative ready for short Dale coal unit extension

The Kentucky Department for Environmental Protection has granted a one-year extension, to April 2016, on the initial compliance deadline under the federal Mercury and Air Toxics Standards (MATS) for the coal-fired Dale Units 3 and 4 of East Kentucky Power Cooperative.

EKPC on Jan. 23 filed an update and response to questions with the Kentucky Public Service Commission, which relates to a possible one-year life extension for these Dale coal units to meet PJM Interconnection grid reliability needs.

Attached to the filing is a Jan. 6 letter from the DEP that said: “This letter is in response to your letter dated December 16, 2014, requesting a compliance extension to the federal Mercury and Air Toxic Standards (MATS) requirements for the William C. Dale Power Station located in Clark County, Kentucky. After reviewing the request, the Division concludes that the submittal contains sufficient information to make a determination regarding the request for an extension of compliance. Furthermore, the Division grants the compliance extension request for Dale Units 3 and 4 until April 16, 2016.”

Also attached to the Jan. 23 filing was various correspondence, including a Dec. 16 letter from PJM to the DEP that outlines power plant retirements in the PJM region, adding: “It is for these reasons that PJM supports East Kentucky Power Cooperative’s request for a one year extension on ths deactivation of their Dale 3 and 4 Units. As the initial compliance date for the US EPA’s MATS is April 16, 2015, a one year extension for these units, as provided for under the Clean Air Act and enforcement guidance provided by EPA, will ensure they are able to operate through the winter of 2015/2016 where they will conbtbute to maintaining resource adequacy during that time.”

A direct EKPC answer to one of the questions by the parties to this case said: “Prior to the request by PJM to extend operation of Dale, EKPC was planning to replace this capacity obligation by buying an equivalent amount of capacity from the Third Incremental Auction for 2015/16, which will be held in February 2015. The most recent Second Incremental Auction cleared at $136/MW-day. Market projections indicate the Third Incremental Auction may clear at this level or higher. The extension of Dale 3 and 4 therefore potentially avoids EKPC paying a replacement cost of ($136 – $43)/MW-day times 147.6MW, or $5,010,282.”

A question to the cooperative said that given that EKPC’s original intent was to place Dale Units 3 and 4 in indefinite storage beginning in April 2015, will EKPC receive any compensation from PJM, either in the form of a Reliability Must Run agreement or a similar type of arrangement, for EKPC’s decision to now continue operation of Dale Units 3 and 4 through April 2016 as a result of the reliability concerns raised by PJM?

EKPC responded: “In order to qualify for a Reliability Must Run agreement, EKPC would have to define and prove its additional costs to keep the units viable and request repayment from PJM, net of any other compensation received. EKPC expects the fixed costs of continuing to operate the units for another year to be minimal. Since EKPC is already receiving an equivalent value of $2.3 million from the capacity market, and it is not expected that the costs to keep the units viable for an additional year will approach anything near this value, then EKPC would not be qualified to receive additional compensation through a Reliability Must Run agreement.”

EKPC’s Dale Station is home to four units comprised of pulverized coal-fired boilers with steam turbine generators. Units 1 and 2, each rated at 25 MW, were commissioned in 1954. Dale Station Units 3 and 4, each rated at 75 MW, were commissioned in 1957 and 1960, respectively. This PJM need doesn’t impact the closure of Units 1 and 2.

EKPC noted in a Jan. 23 public statement that it had announced last year plans to deactivate Dale Units 3 and 4 by April 2015 due to the cost-prohibitive measures that would be needed to meet the provisions of the MATS rule. This one-year reprieve for the two units will not delay EKPC’s plans to remove coal ash currently stored on the Dale Station property and transport it to a permitted coal ash landfill at another Clark County power plant. In April 2014, EKPC made the decision to close Dale Station Units 1 and 2 and begin exploring the marketing of those assets.

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.