AEP ready to zero out coal at Tanners Creek plant in May of this year

All of the Tanners Creek coal units are due to stop burning coal in May of this year, putting all of the coal focus for the Indiana Michigan Power subsidiary of American Electric Power (NYSE: AEP) on the Rockport power plant, which is getting new emissions controls in operation.

Charles F. West, Manager, Fuel Procurement in the regulated Commercial Operations Department for American Electric Power Service Corp., provided the latest update on the Tanners Creek retirement in Jan. 29 semi-annual fuel cost testimony filed at the Indiana Utility Regulatory Commission.

I&M has two coal generating stations, Rockport and Tanners Creek. Rockport is projected to receive coal deliveries during the entire fuel cost forecast period of April 2015 through September 2015. Tanners Creek is projected to receive coal deliveries in April and May 2015 only.

Rockport, located in Spencer County, Indiana, consists of two 1,300-MW coal-fired units. SO2 emissions at Rockport are limited by the New Source Performance Standard to 1.2 lbs SO2/MMBtu. Compliance with the emission limit is achieved by using a blend consisting primarily of low-sulfur subbituminous coal. The coal supply for Rockport currently uses a blend of Powder River Basin (PRB) coal from Wyoming and low-sulfur bituminous coal from eastern sources. In order to comply with stricter U.S. Environmental Protection Agency (EPA) emissions standards, Dry Sorbent Injection (DSI) technology will be used at both Rockport units.

Rockport Unit 2’s new DSI technology began operating in December 2014. Installation of new DSI technology is currently underway at Rockport Unit 1 and is expected to be operational by May 2015. The new DSI technology is not expected to change the current coal blend at Rockport.

Tanners Creek is located in Dearborn County, Indiana, and consists of four coal-fired units with a total nominal capacity of 995 MWAs a result of the different air emissions standards, as well as differences in the boiler designs, the coal supplies for Tanners Creek 1-3 (TC 1-3) and Tanners Creek 4 (TC 4) vary. The fuel requirements of TC 1-3 will be met by bituminous coals from Colorado and eastern sources. TC 4, similar to Rockport, uses a blend of PRB coal from Wyoming and high sulfur bituminous coal from eastern sources. Because of stricter EPA emissions standards, all units of Tanners Creek are scheduled to be retired in May 2015. 

During the fuel case reconciliation period of June-November 2014, I&M’s delivered cost of coal was $45.01/ton or 240.52 cents/MMBtu. These results are 3.69% and 3.66% lower than the forecast, respectively.

During the reconciliation period, the overall weighted average delivered cost of coal for the Rockport plant from all sources was forecasted to be $44.67/ton or 245.18 cents/MMBtu. The actual delivered cost was $43.47/ton or 236.73 cents/MMBtu.

For TC 1-3 the overall weighted average delivered cost of coal from all sources was forecasted to be $68.93/ton or 287.20 cents/MMBtu. TC 1-3’s actual delivered cost was $74.11/ton or 299.15 cents/MMBtu. For TC 4 the overall weighted average delivered cost of coal from all sources was forecasted to be $50.68/ton or 262.14 cents/MMBtu. TC 4’s actual delivered cost was $48.96/ton or 255.60 cents/MMBtu.

Said West about coal market conditions: “During 2013, low NYMEX (New York Mercantile Exchange) and CSX1 coal pricing and reduced demand led to the closure of a significant portion of the Central Appalachian (CAPP) coal production in Kentucky and West Virginia. The Polar Vortex events in the first quarter of 2014 led to unprecedented natural gas prices in the northeast United States setting record high power prices in PJM. This led to a temporary increase in coal prices in the first half  of 2014. Cool summer weather reduced power demand which led to lower gas pricing and lower coal prices in the back half of 2014. The market for Eastern bituminous coal at the end of 2014 showed much lower demand and pricing than has been seen for several years. The cost of compliance sulfur NYMEX coal for TC 1-3 was higher in mid-2014, but the NYMEX coal prices have since dropped off. Coal suppliers continue to use the lower sulfur coal to blend down the sulfur content of their coal to make a NYMEX product which significantly reduces the availability and increases the price of compliance coal. PRB coal pricing began 2014 relatively strong because of rail delivery problems and low coal plant inventories but pricing has softened somewhat in the back half of 2014. In general, slight increases in PRB demand and pricing are expected as we see an increase in either demand for electricity or pricing of natural gas supply.

“Rockport’s scheduled tonnages of coal during the forecast period from April 2015 through September 2015 will be supplied primarily by an agreement with Peabody COALSALES, LLC that has been in place for several years. The overall forecasted weighted average delivered cost of coal for Rockport from all sources during the period of April 2015 through September 2015 is projected to be $46.32/ton or 250.89 cents/MMBtu.

“Due to the planned retirement of the Tanners Creek plant in May 2015, inventory levels at both TC 1-3 and TC 4 are forecasted to be zero by the end of May 2015. TC 1-3’s scheduled supply of coal during the forecast period will be supplied primarily by spot agreements. The overall forecasted weighted average delivered cost of coal for TC 1-3 from all sources during the months of April and May 2015 is projected to be $66.86/ton or 278.58 cents/MMBtu. TC 4’s deliveries during the forecast period will be supplied from the Peabody COALSALES, LLC long-term coal contract that began in 1989 and from spot coal purchases. The overall forecasted weighted average delivered cost of coal for TC 4 from all sources during the months of April and May 2015 is projected to be $47.89/ton or 272.10 cents/MMBtu. Additional coal requirements that are not already committed will be purchased, as necessary, to fulfill any remaining supply requirements.”

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.