The head of fuel supply at Northern Indiana Public Service Co. (NIPSCO) on Jan. 28 described the coal supply situation at the utility in the latest version of NIPSCO’s twice-yearly fuel adjustment case.
Dennis S. Rackers, Director of Fuel Supply for NIPSCO, testified: “For the three months ended December 31, 2015, NIPSCO’s fuel requirements for its generating units were supplied by coal (78.63%) and the remainder by natural gas (21.37%), including the Sugar Creek Generating Station. NIPSCO uses a blend of Powder River Basin (“PRB”) coal and Pittsburgh #8 (“Pitt8”) coal in Unit 12 at its Michigan City Generating Station; Illinois Basin (“ILB”) coal in Units 7 and 8 at its Bailly Generating Station; a blend of PRB coal and Pitt8 coal in Unit 14, PRB coal in Unit 15, and ILB coal in Units 17 and 18 at its R. M. Schahfer Generating Station.
“NIPSCO had six (6) long term supply contracts in the fourth quarter of 2015 with Arch Coal Sales Company (PRB coal), Peabody COALSALES, LLC (PRB coal), Consol Pennsylvania Coal Company (Pitt8 coal), Peabody COALSALES, LLC (ILB coal), Oaktown Fuels Mine No. 1, LLC (ILB coal) and Sunrise Coal, LLC (ILB coal). The remainder of NIPSCO’s coal requirement was met through a spot purchase from Foresight Coal Sales LLC (ILB coal).
“The delivered cost of coal for the twelve months ending December 31, 2015 was $ $50.71 per ton or $2.482 per million Btu. The delivered cost of coal for all coal shipments during the reconciliation period of October, November and December 2015 was $49.66 per ton or $2.423 per million Btu. The delivered cost of coal for contract coal shipments during the reconciliation period was $50.78 per ton or $2.497 per million Btu. The delivered cost of coal for spot coal shipments during the reconciliation period was $40.26 per ton or $1.846 per million Btu.
“NIPSCO solicited proposals for high-btu coal and committed to a one-year contract in December 2015.
“The average spot (prompt month) market price of coal during the reconciliation period was $10.47 per ton for PRB coal, $31.42 per ton for ILB coal and $39.44 per ton for Pitt8 coal. NIPSCO tracks spot market pricing by reviewing various daily and weekly coal publications. These prices do not include transportation charges.
“NIPSCO’s delivered cost of coal during the reconciliation period was $49.66 per ton and $2.423 per million Btu. This decreased $0.82 per ton and $0.047 per million Btu from $50.48 per ton and $2.470 per million Btu in the third quarter of 2015. The cost decrease was primarily due to a change in the mix of coals received. The volume of less expensive ILB spot shipments was up from the previous period (eight versus five trains), while the more costly Pitt8 shipments were down from the previous period (three versus five).
“Although small compared to the impact of the change in the mix of coals, NIPSCO made payments for the first time under a new rail contract provision that requires payments for train detention time beyond the free unloading time allowed under the contract. To mitigate the impact of this new contract provision, NIPSCO has increased its efforts to expedite the unloading process and find a solution to the train delays.
“NIPSCO anticipates that the cost of coal to be burned for generation in the forecast period of April, May and June 2016 will be approximately $46.88 per ton or an estimated $2.373 per million Btu.
“The average spot market prices for calendar year 2016 are currently $10.68 per ton for PRB coal, $32.10 per ton for ILB coal and $40.59 per ton for Pitt8 coal. These average spot market prices do not include the cost of transportation.
“Improved rail cycle time performance for NIPSCO coal movements is expected to continue into 2016 due to sluggish demand for rail transportation of all products and commodities. This performance along with reduced demand for coal-fired generation means that NIPSCO currently has idle equipment in its rail car fleet. Leases for five of NIPSCO’s twelve train fleet will expire by January 1, 2017, and NIPSCO will continue to assess its future need for rail cars as it determines whether to renew these leases.”