Gulf Power losing long-term offtakers for power from Scherer Unit 3

Gulf Power told the Florida Public Service Commission on May 24 that it wants to change its accounting for the share of the coal-fired Scherer Unit 3 in Georgia that it owns.

The 3,600-MW Scherer plant is co-owned by several parties, including plant operator Georgia Power, which like Gulf Power is a subsidiary of Southern Co. (NYSE: SO).

Said the May 24 filing: “Effective January 1, 2016, for the first time since Scherer Unit 3 began commercial operation on January 1, 1987, a majority of Gulf’s ownership in Scherer is now uncommitted to interim long-term off system power sales and no new off system sales are anticipated. This change is a result of the expiration at the end of its term of a purchased power agreement (‘PPA’) committing 110 megawatts from Gulf’s ownership in Scherer Unit 3 to a Florida utility from the summer of 2010 through December 2015. At the end of May 2016, another 50 megawatts to a Florida utility comes out from under the commitment to interim long-term off system sales. This occurs when the next contract tied to Gulf’s ownership in Scherer Unit 3 expires at the end of its term.

“Finally, on January 1, 2020, for the first time since Scherer Unit 3 began commercial operation, 100 percent of Gulf’s ownership interest in Scherer will be available to serve Gulf’s native load customers in Northwest Florida when the last 50 megawatts of Gulf’s ownership share comes out from under the commitment to interim long·term off system sales due to the expiration at the end of its term of the third and final PPA in effect since the summer of 2010.

“Thus, between January 1, 2016, and December 31, 2019, increasing amounts of Gulf’s ownership in Scherer are no longer supported on an interim basis by revenues from interim long-term off system sales. It is therefore appropriate for the current investment and related expenses to now be reflected as serving the native load customers for whom it was originally planned, acquired and built for the remaining life of Scherer Unit 3. This was the plan all along as evidenced by the decisions of the Commission when it encouraged Gulf to pursue acquisition of its ownership in Scherer as a prudent and cost effective alternative to generation that Gulf was otherwise planning to construct during the late 1970s and early 1980s at the Company’s Caryville site.”

Scherer is located in Juliette, Ga., just north of Macon and approximately 70 miles south of Atlanta. The four-unit plant is co-owned by Georgia Power, Oglethorpe Power Corp., Florida Power & Light, Municipal Electric Authority of Georgia, Gulf Power, Jacksonville Electric Authority (JEA) and Dalton Utilities. The plant is one of the nation’s largest single users of Powder River Basin coal.

Said Gulf Power’s May 24 filing: “During the period that Gulf’s ownership of Scherer has been committed to interim long-term off system sales, the Company has retired seven of its older and smaller fossil-fired generation units. Between 2003 and 2006, Gulf retired Crist Units 1, 2 and 3 representing approximately 94 megawatts of generating capacity (Generation Maximum Nameplate capacity as reflected in Gulf’s Ten Year Site Plan filings). Between April 2014 and April 2016, Gulf retired its two oldest coal-fired generation units (Scholz 1 and 2) and the two coal-fired units at Plant Smith (Smith 1 and 2), representing approximately 397 megawatts of generating capacity. Gulf’s Scherer Unit 3 is effectively the long-term replacement for approximately 45 percent of this retired generation (approximately 223 megawatts replacing approximately 491 megawatts measured on a Generation Maximum Nameplate basis).”

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.