Kansas City Power & Light reports on coal procurement

Kansas City Power & Light on July 1 filed for a rate increase at the Missouri Public Service Commission, with heavily-redacted testimony on fuel issues supplied by Wm. Edward Blunk, Kansas City Power & Light’s Generation Planning Manager.

He noted that the Company decided to cease burning coal in Montrose Unit 1 effective April 15, 2016. Blunk wrote: “Montrose 2 and 3 will continue to burn coal. Retiring unit 1 reduced the projected coal requirements for the station. That reduction is reflected in the volume projections used to develop my coal inventory values.”

Blunk reported that from January 2010 through May 2016 the price for natural gas has ranged from $1.64/million British thermal units (MMBtu) to $6.15. While not as dramatic as natural gas, Powder River Basin (PRB) coal that the utility uses has also demonstrated significant price changes in that same period. It has ranged from $0.40/MMBtu to $0.86/MMBtu.

Prompt month prices for PRB coal have experienced changes similar to natural gas. In June 2012, PRB coal prices were $0.40/MMBtu. In less than two years, the price had almost doubled to $0.76/MMBtu. Since then prices have, “with a few hiccups,” trended down to end May 2016 at $0.50/MMBtu, Blunk reported.

Over the four-year period of 2017 through 2020 KCP&L is exposed to a redacted dollar figure in adverse coal price risk, Blunk said, since not all of its coal is under long-term contract. Besides that market risk for coal, KCP&L’s rail contract expires at the end of 2018. With transportation costs representing approximately half of the delivered cost of coal, that is another major exposure to prices which is beyond the company’s control.

By the end of the first quarter of 2016, KCP&L had contractual commitments for essentially all of its expected coal requirements for 2016 and about 75% of its expected coal requirements for 2017. It also has commitments for about 45% for 2018 and about 10% for 2019, but no coal commitments for 2020.

Burton L. Crawford, the utility’s Director, Energy Resource Management, said in July 1 companion testimony that KCP&L is currently making the investments necessary to comply with the U.S. EPA’s Coal Combustion Residual, Effluent Guideline and Clean Water Act rules. These investments include:

La Cygne plant

  • Storm water pond construction
  • Landfill runoff berm
  • Bottom ash pond clean closure
  • Wet-to-dry ash handling conversion
  • Traveling screens

Iatan plant

  • Holding Basin Liner replacement
  • Groundwater monitoring wells
  • Landfill cell expansion

Hawthorn plant

  • Groundwater monitoring wells
  • Recycle ash silo transfer piping, screen replacement
  • Replace washdown system
  • SDA basin return line
  • New ash silo and plug mill

Montrose plant

  • Dry vacuum system

The total estimated capital cost of these environmental related investments is approximately $61 million (KCP&L share for any co-owned capacity). In addition, KCP&L may add cooling towers to Hawthorn and Iatan Unit 1 at a total estimated cost of $264 million (KCP&L share). Cooling towers may be needed for future compliance with EPA water regulations. The timing of these investments is uncertain.

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.