Wisconsin PSC okays Elm Road coal blending program for 2016

The Public Service Commission of Wisconsin on Dec. 23 issued a fiinal decision in the application of Wisconsin Electric Power Co. (WEPCO) for approval of its 2016 Fuel Cost Plan and for authority to decrease Wisconsin retail electric rates in accordance with its 2016 Fuel Cost Plan monitored fuel costs.

The case involved a number of parties, including the Wisconsin Industrial Energy Group (WIEG). There was a focus on 2016 plans for use of blends of Powder River Basin coal at the Elm Road Generating Station (ERGS), with WEPCO looking to use cheaper PRB coal to supplant some of the high-Btu Pittsburgh-seam bituminous coal the plant was designed to burn.

Said the commission order: “WEPCO filed its 2016 Fuel Cost Plan assuming a blend of 40 percent PRB/60 percent Bit coal for Unit 1 and 80 percent PRB/20 percent Bit for Unit 2, based on the weight of the coal. WEPCO testified that the impact of this blend as compared to the authorized blend from the 2015 rate case was a decrease in fuel costs of approximately $8.0 million.

“Commission staff testified that it would be appropriate to assume a PRB/Bit blend of 60/40 for Unit 1 and 80/20 for Unit 2, at a minimum, given the average blend of PRB and Bit coals for year-to-date 2015 actual of 72 percent PRB coal. Commission staff testified that WEPCO had overestimated its fuel costs with respect to the ERGS units by approximately $13.1 million in 2014 and approximately $6.6 million for January through August of 2015. The impact of Commission staff’s proposal was a decrease in fuel costs of approximately $3.9 million. This impact includes the impact of adjusting price adders on the Oak Creek/Elm Road units to reflect a limit of 7.5 coal trains per week for coal deliveries.”

Oak Creek is an adjacent coal-fired plant that has burned PRB coal for years and shares coal intake and handling facilities with Elm Road.

“Responding to the foregoing proposed adjustment, WEPCO raised the issue of the need to reduce running capacities of the ERGS units when running on the higher blends of PRB coal,” the commission added. “Commission staff, on sur-rebuttal, incorporated a further adjustment. The adjustment reflected the capacity limits actually experienced in 2015 year-to-date in the assumptions for capacities for 2016. This adjustment raised fuel costs by $950,000 to result in a net decrease of $2,950,000 ($3,900,000 – $950,000).

“WIEG presented testimony and argued that a 70 percent or 80 percent PRB blend based on millions of British Thermal Units (MMBTU) as opposed to blending by weight, was appropriate. In its initial brief, WIEG supported Commission staff’s proposed adjustment of $3.9 million. In rebuttal to WIEG testimony supporting a higher PRB blend, WEPCO testified that there was far too much uncertainty in the process of increasing PRB blends. WEPCO cited many issues with respect to operating the units at higher PRB blends on a sustained basis without damaging the units.

“The Commission finds it reasonable to accept WEPCO’s forecast of a 40 percent PRB blend for Unit 1, as in the last test-year, and 80 percent PRB blend for Unit 2. The Commission concludes that WEPCO is persuasive regarding the likelihood that past operating capacity levels are not a good predictor of future operating levels, especially given varying current testing needs. The Commission believes that caution is warranted when dealing with the very large investment in the ERGS facility, and therefore accepts a 40 percent blend for Unit 1, rather than increasing it for the reasons advanced by WIEG and Commission staff.”

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.