East Kentucky Power reports latest coal contract, usage data

East Kentucky Power Cooperative in Feb. 24 fuel-cost recovery testimony, described its latest coal buying, including a major lack of bidding these days from Central Appalachia coal producers.

The report, filed at the Kentucky Public Service Commission, has relatively little narrative testimony, but a wealth of data about coal procurement and contracts.

Mark Horn, employed by EKPC as Fuel and Emissions Manager in the Power Supply Division, said about the recent lack of Central Appalachia bids: “Increasing production costs, lower market pricing, and extended lead times for permits continue to reduce the amount of coal mining in the Central Appalachian Basin, EKPC continues to see fewer responses to coal solicitations from this area. The continued production increases in the Illinois Basin continues to push the use of this coal farther east at competitive pricing. Lower natural gas prices have increased the use of EKPC’s gas turbines for generation and reduced the amount of coal being burned as plant optimization occurs.”

Said Julia Tucker, Director of Power Supply Planning for EKPC: “EKPC integrated its operations into the PJM market on June 1, 2013. PJM operates a reliability constrained two-settlement Energy Market that Day-Ahead matches load requirements with economic generation and demand resources and balances the actual needs in Real-Time. EKPC’s generation fleet is now dispatched with PJM’s other generation and demand resources (over 165,000 MW) which has significantly affected EKPC’s electric power procurement and energy accounting practices. As expected, EKPC’s total power supply production costs to its owner members have decreased subsequent to integration, due to the economies of scale of a much larger system dispatch. … Looking forward, the Environmental Protection Agency’s (EPA) Mercury and Air Toxics Standards (MATS) will cause a significant number of existing coal fired units to retire between April 16, 2015 and April 16, 2016. The result of these changes has yet to be completely revealed and could significantly impact the energy market during the next two years.”

As part of an evaluation of retaining the current base fuel cost, East Kentucky Power Cooperative said it compared the June 2010 generation mix to the projected 2015 and 2016 generation mix. In June 2010, the mix was 96% coal-fired generation and 4% gas-fired generation, which included landfill gas. For 2015 the projected generation mix is 95% coal-fired generation and 5% gas-fired generation. For 2016 the projected generation mix is 94% coal-fired generation and 6% gas-fired generation. The cost of coal for East Kentucky’s generating units is expected to remain stable over the next two years. The cost of natural gas for its combustion turbines is also expected to remain stable.

EKPC expects to need 4.5 million tons of coal in 2015 and 4.8 million tons in 2016. The co-op’s fuel contracts and key data about them are listed, including contracts with Central Appalachia coal producer B&W Resources and Illinois producer Williamson Energy.

East Kentucky’s coal inventory level as of Oct. 31, 2014, was 982,729 tons, which is 44 days of supply. The target range is 25-40 days. The Dale plant’s stockpile was actually lower than target, while Cooper and Spurlock were well above their targets.

EKPC said about its efforts in federal bankruptcy to pursue a claim against long-defunct Appalachian Fuels LLC over a busted coal contract: “The Bankruptcy Court enlarged the time period by which the Bankruptcy Trustee may object to claims, and the Trustee filed a timely objection to East Kentucky’s proof of claim on December 30, 2014. East Kentucky and the Trustee are in discussions concerning the Trustee’s objection. Since discussions are ongoing, the parties have agreed to extend the deadline for East Kentucky to respond to the Trustee’s objection to March 2, 2015, and the Bankruptcy Court has entered an agreed order to that effect.”

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.