Empire seeks rate hike based in part on Riverton power plant conversion costs

Empire District Electric Co. (NYSE: EDE) said Oct. 16 that it has filed a request with the Missouri Public Service Commission (MPSC) for changes in rates for its Missouri electric customers.

The company is seeking an annual increase in base rate revenues of approximately $33.4 million, or about 7.3%.

The most significant factor driving the rate request is the cost associated with the conversion of the Riverton Unit 12 natural gas combustion turbine to combined cycle operation. The conversion replaces the production capacity of retiring coal-fired generators at Riverton and carries a cost of between $165 million and $175 million. Scheduled to be complete in early to mid 2016, the conversion project consists of a new heat recovery steam generator, steam turbine generator, auxiliary boiler, cooling tower and other balance of plant equipment. The conversion was necessary to comply with federal Mercury and Air Toxics Standards (MATS) as related to coal-fired capacity.

Other factors in the case include increased transmission expense, administrative and maintenance expense and costs incurred as a result of a mandated solar rebate program. The request also reflects cost-savings for customers resulting from revised depreciation rates and lower average interest costs.

In the coming months, the MPSC will perform an audit of Empire’s operations, hold public hearings, and conduct an evidentiary hearing. Any new rates granted would take effect at the conclusion of this process, typically in approximately 11 months, or late-summer 2016.

In this same filing, the Company is asking to continue the use of the Fuel Adjustment Clause (FAC). The FAC provides for semi-annual adjustments to customers’ bills, based on the varying costs of fuel and purchased power used to serve customers.

Brad Beecher, president and CEO, stated: “The Riverton Combined Cycle Unit was the most economic option to replace the coal units at Riverton and comply with MATS. This new configuration captures the exhaust heat from the existing natural gas unit and uses it to power a new steam turbine. This highly efficient process will help us hold down fuel costs for customers while lowering emissions and protecting the environment.”

A corresponding filing will also be made with the Oklahoma Corporation Commission (OCC) using the Missouri proposed tariffs. An administrative rule providing rate reciprocity to any electric company that serves less than 10% of its total customers within Oklahoma took effect in August 2015. The rule is intended to provide cost savings for customers related to rate case expenditures. As a result, future Missouri commission-approved increases in Missouri rates will be effective for Empire’s Oklahoma customers subject to approval of the OCC.

Based in Joplin, Missouri, Empire is an investor-owned, regulated utility providing electric, natural gas and water service, with approximately 218,000 customers in Missouri, Kansas, Oklahoma, and Arkansas.

The Asbury air emissions project was covered in a prior rate case

Empire’s MATS compliance plan called for the installation of a scrubber, fabric filter, and powder activated carbon injection system at the Asbury plant (collectively referred to as the “Asbury air-quality control system” or “AQCS”) by early 2015, the company noted in the Missouri testimony. The addition of this equipment also required the retirement of Asbury Unit 2, a small steam turbine that was used for peaking purposes. The retirement of this unit took place in December 2013, and the environmental project at Asbury was in service on Dec. 31, 2014. Empire’s most recent Missouri rate case, completed in July 2015, included the bulk of the investment in the environmental retrofit at Asbury.

Empire’s compliance plan also originally called for the eventual retirement of Riverton Units 7, 8, and 9 in 2016, though retirement of the units actually occurred slightly ahead of schedule. Unit 9 was a small combustion turbine that requires steam from Unit 7 for start-up. Units 7 and 8 began operation in 1950 and 1954, respectively.

Riverton units 7 and 8 were older coal-fired units with capacities of 38 MW and 54 MW, respectively. Riverton Unit 9 was a gas turbine that was operated using steam from units 7 and 8 for start-up. Unit 9 was rated at 12 MW. In total, 104 MW of capacity has been eliminated with the retirement of these three units.

The Riverton natural gas combined cycle (NGCC) conversion project, with 100 MW of additional capacity, replaces the capacity lost with the retirement of those three Riverton units. Unlike Empire’s Asbury unit, the size and age of the Riverton units did not make it feasible to add additional pollution controls to meet the MATS requirements.

Major construction activities for the NGCC conversion are complete. Empire personnel will be working with the engineering, procurement and construction contractor, Burns and McDonnell out of Kansas City, Mo., on upcoming start-up and commissioning activities. Empire expects substantial completion for the project to be achieved by mid 2016.

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.