LS Power’s Columbia Energy takes shots at Duke’s Asheville project cost estimate

Columbia Energy LLC told the North Carolina Utilities Commission on Feb. 12 that it doesn’t known precisely what Duke Energy (NYSE: DUK) is including in the $1.1 billion pricetag for its Asheville coal-to-gas repowering project, but that on its face that pricetag is hugely overinflated.

Columbia Energy, a unit of LS Power Development, had filed some of its arguments against the Asheville project in a Feb. 2 motion to intervene in this case. The commission granted it intervenor status on Feb. 4, with the Feb. 12 filing being a fuller brief outlining why Columbia Energy thinks Duke should buy capacity from its existing power plant in South Carolina and not undertake the Asheville conversion project.

Columbia Energy owns and operates an existing 523-MW combined cycle facility located in Gaston, S.C. Columbia Energy’s facility is a cogeneration facility and a Qualifying Facility (QF), as that term is defined in Section 210 of the Public Utility Regulatory Policies Act of 1978 (PURPA). Pursuant to PURPA, Duke Energy Progress (DEP) is legally obligated to purchase Columbia’s energy and capacity at DEP’s avoided cost, Columbia Energy said. It said Duke has not responded to its offers to sell capacity to Duke.

Columbia Energy said it has filed for long-term (10 year) firm transmission service to deliver all of its energy and capacity to DEP’s service territory.

On Jan. 15, DEP filed its application for a Certificate of Public Convenience and Necessity authorizing it to construct what it describes as its Western Carolinas Modernization Project, which would include closure of the existing 379-MW Asheville 1 and 2 coal units and construction of approximately 752 MW of natural gas-fueled generation (two 280 MW combined cycle units proposed to commence operations in 2019 and an optional or “contingent” 192 MW combustion turbine unit proposed to commence operations in 2023). The combined cycle units are proposed for baseload operation, with the combustion turbine to apparently be contingent on future peak needs. At some unknown point in the future, DEP may also install a solar system at the facility site, Columbia Energy noted.

Columbia Energy offered comments on three aspects of DEP’s application that it said are inconsistent with the public interest and the public convenience and necessity:

  • First, in its application, DEP has offered no information to the North Carolina commission regarding optional sources of power available to DEP from the wholesale market for serving all or part of this load. In fact, in its application, DEP acknowledges that “the Company did not evaluate the wholesale market for alternatives to meet these resource needs.” The public convenience and necessity will best be served if the commission requires DEP to implement the most cost effective solution to reliably meet the needs of DEP’s customers in Western North Carolina. As such, the commission should consider the cost implications of long-term contracts with Columbia Energy or other providers in evaluating DEP’s application. “Columbia Energy is ready, willing, and able to enter into a long-term contract to provide 523 MW of capacity and energy to DEP annually, at DEP’s avoided cost for energy and capacity,” it said.
  • Second, Columbia Energy believes that DEP’s publicly available estimate for the cost of building the proposed facilities is much higher than the reasonable market costs for such facilities. Columbia parent LS Power has actively developed both power generation and transmission infrastructure to serve the need for new generation and improve the aging transmission system. LS Power has significant experience and insight into the cost of constructing facilities such as those described in the public version of DEP’s application and supporting materials. DEP estimates a $1.1 billion cost for constructing the project described in the application. Given the optional component of the application (the “contingent” 186 MW combustion turbine unit “potentially” needed in 2023 and the potential future unspecified solar installation) it is not clear what DEP’s cost estimate covers, i.e., the two base units, the contingent combustion turbine, or all three. “Even if the $1.1 billion cost estimate is for all three units, based on LS Power’s significant experience relating to the costs of constructing such facilities, a projected cost of $1.1 billion is approximately 60% higher than the market cost of building such facilities,” the company said. “If, however, the $1.1 billion cost estimate is to construct just the two 280 MW units, then that is approximately double the market cost of building such facilities. LS Power’s experience and other publicly available information confirm that under current market conditions such facilities can be built for less than $1,000 per KWH.”
  • Third, in its application DEP states that the “contingent Asheville Combustion Turbine unit would potentially begin commercial operation in 2023 if the current peak demand growth is not sufficiently reduced by the alternative approach discussed herein.” The commission should not grant certification for construction of this “contingent” combustion turbine that may “potentially” be needed at some future time, because DEP has not established that such construction would be warranted by the public convenience and necessity, said Columbia. The record fails to establish anything more than an unripe “contingent” or conditional need for the 186 MW combustion turbine at some relatively remote future time. Columbia Energy endorsed the comments of the North Carolina Sustainable Energy Association on this point, and urged the commission to not issue a certificate at this time authorizing construction of the 186 MW combustion turbine.
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.