Wisconsin Public Service expects surviving coal units to run harder in 2016

Wisconsin Public Service Corp. retired two coal units at its Pulliam plant, retired one coal unit at the Weston plant, and switched one Weston unit to natural gas, all on June 1 of this year, said the utility in Sept. 28 testimony filed at the Michigan Public Service Commission.

Wisconsin Public Service (WPS Corp) applied Sept. 28 at the Michigan PSC for authority to implement its annual Power Supply Cost Recovery (PSCR) plan and establish a PSCR factor for the calendar year 2016. The utility, which mainly serves Wisconsin, has a small service area in Michigan’s Upper Peninsula. WPS Corp is a wholly-owned subsidiary of WEC Energy Group (NYSE: WEC).

John G. Guntlisbergen, the Manager of Electric Fuel Cost Recovery in the Regulatory Affairs Department of WEC, noted in his supporting testimony: “WPS Corp retired Pulliam units 5 (45 MW) and 6 (61 MW), and Weston unit 1 (47 MW) as of June 1, 2015. Therefore Pulliam units 5 and 6 and Weston unit 1 have no generation in 2016. WPS Corp continues to operate Weston unit 2 (69 MW), but has switched fuel from coal to natural gas as of June 1, 2015. These changes were made to comply with the Consent Decree with the United States Environmental Protection Agency (‘EPA’).

“As part of the Consent Decree with the EPA WPS Corp agreed to discontinue burning coal at Pulliam units 5 and 6 and Weston units 1 and 2. The retirement of Pulliam units 5 and 6 and Weston unit 1 were based on the higher cost of repowering or refueling the units relative to other power supply options for meeting WPS Corp power supply requirements on both a short-term and long-term basis due to the capital cost required to refuel those units. The decision to refuel and operate Weston unit 2 on natural gas makes economic sense, since the unit was initially constructed and is already able to use natural gas as a fuel source without any additional capital expenditures.”

WPS Corp is also installing a new multi-pollutant control system, commercially known as the ReACT system, which will reduce SO2, NOx, mercury, and other air pollutant emissions from the process of burning coal to generate electricity at Weston unit 3. The reduction of emissions at Weston unit 3 was also agreed to as part of the Consent Decree. The capital costs for constructing the ReACT system are estimated to be $345 million, but are not considered PSCR costs and have not been included in the 2016 PSCR Plan. The ReACT system is expected to be completed and operational by the beginning of April 2016, with seasoning of the activated coke and testing of the emission removal capabilities throughout 2016. The company expects to incur costs of $9.9 million for activated coke and $906,000 for ammonia used in the ReACT process in 2016. These costs have been included in the PSCR Plan as part of the cost of chemicals used to control emissions. 

Total fossil generation is projected to be 1,015,724 MWhs or 27% higher in the 2016 Plan as compared to 2015, Guntlisbergen said. This increased fossil generation is due to factors impacting market conditions including lower rail costs for Pulliam and Weston and higher forecasted Midcontinent ISO market locational marginal prices (LMPs), along with variations in plant maintenance outages.

The 2016 projections by plant are:

  • Pulliam – The MWhs for Pulliam are projected to increase in 2016 compared to 2015 mainly due to a nine week planned maintenance outage at Pulliam 7 and a three week outage on Pulliam 8 in 2015 with no outages planned in 2016. The $/MWhs for Pulliam are projected to decrease in 2016 compared to 2015 mainly due to a new rail contract in 2016 resulting in a $4.10/MWh lower coal cost and no rail contract obligation costs which were $2.95/MWh in 2015.
  • Weston – The MWhs for Weston are projected to increase in 2016 compared to 2015 mainly due to ReACT Guaranteed Performance Standard (GPS) testing on Weston 3 in 2016 requiring increased operations. Overall, the $/MWh costs for Weston are projected to slightly increase in 2016 compared to 2015. The change is mainly due to increased costs of $1.66/MWh for activated coke and ammonia used to control emissions, as a result of the new ReACT emission control process at Weston 3, which is forecasted to begin operation in 2016. The conversion of Weston 2 to only burning natural gas resulted in a $0.80/MWh increase. The higher cost/MWh is largely offset by lower coal transportation costs due to a new rail contract in 2016, resulting in a $0.97/MWh lower cost, and no rail contract obligation costs in 2016, as compared to $0.95/MWh in 2015.
  • Edgewater – The MWhs for Edgewater are projected to increase in 2016 compared to 2015 mainly due to a four week planned maintenance outage in 2015 versus no planned outages in 2016. The $/MWhs for Edgewater are projected to increase by 2.7% in 2016 as compared to 2015. This is primarily due to higher forecasted chemical costs to control emissions.
  • Columbia – The MWhs for Columbia are projected to increase in 2016 compared to 2015 mainly due to planned maintenance outages at Columbia 1 for six weeks and Columbia 2 for six weeks in 2015 versus four weeks each in the 2016 Plan. The $/MWh cost for Columbia are projected to increase in 2016 compared to 2015 due to a new rail contract effective January 1, 2015, which includes a contract price that escalates from 2015 to 2016. In addition, during the first part of 2015 lower cost coal in inventory from 2014 was expensed resulting in 2015 costs being approximately $3.45/MWh lower.
  • Fox Energy Center – The company’s combined cycle generation is highly variable and is affected by market conditions, peak demands and baseload unit outage schedules. The Fox Energy Center generation is expected to decrease by 165,058 MWhs or 8.38% in 2016 due to market conditions. The cost per MWh is expected to increase by approximately 27% in 2016 due to the forecasted higher cost for natural gas and increased use of fuel oil. The average price for natural gas for Fox Energy Center in the 2016 Plan is projected to be $3.339/dekatherm or 13% higher than actual 2015 average prices of $2.938/dekatherm and was 81% of the variance. The alternate fuel was $.91/MWh higher or 16% of the variance.
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.