Audit of Dayton Power and Light fuel buying filed with PUCO

Dayton Power and Light (DP&L) continued to struggle with slagging problems with a new coal supply for its Stuart plant and with high coal inventories.

That is according to a fuel audit filed Aug. 23 at the Public Utilities Commission of Ohio by Energy Ventures Analysis, a consulting firm hired by the PUCO in recent years to perform these annual audits.

In July 2014, utility parent AES Corp. (NYSE: AES) announced that it planned to retain DP&L’s generating assets and it would do so by transferring them to an affiliate by Jan. 1, 2017, consistent with one of the allowed options in the approved DP&L Electric Security Plan (ESP). Other utilities in Ohio, including those owned by FirstEnergy (NYSE: FE) and American Electric Power (NYSE: AEP), have had to divest power plants in recent years in this deregulated state.

AES indicated this strategy was preferable because it allowed the ultimate sale value to benefit from a recovery of power prices. In September 2014, the PUCO approved DP&L’s plan to sell most of its generation to an affiliate. The PUCO indicated that DP&L needs to at least try to market its stake in the coal-fired Ohio Valley Electric Cooperative (OVEC), despite numerous challenges associated with it.

In 2015, DP&L purchased 5.8 million tons of coal at an average delivered price of $2.19 per MMBtu. This volume is about 1.1 million tons lower than purchased in 2014. On a dollars per MMBtu basis, the price is about the same. In 2015, generation year on year declined by 6.6% overall and 4.3% for DP&L operated plants. With the exception of Miami Fort, all of the coal plants in which DP&L either operates or is a non-operating partial owner had lower generation in 2015 compared to 2014.

DP&L’s 2015 coal purchase costs as reported to the U.S. Energy Information Administration (EIA) on Form 923 are competitive with other Ohio and nearby utilities for which data are available, said the audit, which was heavily redacted. The average delivered prices of coal to the Kilien and Stuart Stations in 2015 are competitive with the average delivered cost to nine utility plants which receive coal by barge that are equipped with scrubbers, burn high sulfur coals, and that are proximate to Kilien and Stuart. In 2015, a Director of Commercial Operations was named. The DP&L fuel procurement organization reports to this director.

The inventory levels at Stuart and Killen were higher than target inventory levels throughout the audit period but consistent with industry levels due to the low coal bum experienced in 2015.

DP&L owns all or part of 13 power generating facilities. DP&L’s share of total capacity is 2,504 MW of which 2,071 MW or 82% is coal. DP&L’s coal capacity declined in 2015 with the retirement of Hutchings in 2015 and the sale of DP&L’s share of East Bend to Duke Energy Kentucky, which was completed in January 2015.

The Stuart Station consists of four units with a total generating capacity of 2,308 MW. The retrofits of flue gas desulfurization units on all four units were completed in 2008. All coal to this station is delivered by barge. Prior to the retrofitting of the scrubbers, the Stuart Station burned low sulur coal in order to meet its 3.16 pound of SO2 per MMBtu SIP limit. The coal originated primarily in Central Appalachia. The retrofit of the scrubbers has allowed higher sulfur coal. The scrubbers are designed for coals with an SO2 content up to 7.22 pounds per MMBtu. However, given the design of the boilers, DP&L did not assume a complete switch to higher sulfur coals because of concerns over slagging and fouling. DP&L ultimately switched all four units to burn 100% high sulfur coal which has a lower ash fusion temperature. After the conversion, DP&L has struggled with slagging issues at Stuart, the audit noted. DP&L installed a magnesium oxide injection system but found it expensive to use and not particularly effective, it added.

The Killen Station consists of one 600-MW coal-fired unit. The station was designed for two units, but only one unit (Kilien 2) was built. The unit was subject to the original New Source Performance Standard of 1.2 pounds SO2 per MMBtu which the utility chose to comply with through the use of low sulfur compliance coal. A scmbber was retrofit on the Kilien Station in 2007. All of the coal consumed by Killen is delivered by barge. Kilien has converted almost completely to high sulfur coal. Due to its size, Killen’s boiler is capable of accommodating the higher sulfur and lower-fusion Illinois Basin coals with fewer operational challenges than Stuart. After significant testing, the plant thought it could accept lower quality coals for up to 33% of its supply.

Killen retains a small amount of low sulfur Central Appalachian coal, which allows the plant a larger degree of flexibility during start-up after maintenance outages. The low sulfur coal has two applications, both related to the scrubber operations. After an extended maintenance outage, the chemical reaction in the jet bubbling reactor (JBR) must be initiated before it reaches a level sufficient to remove SO2 from high sulfur coal. Kilien has a short (one hour) air permit, requiring the plant to meet a lower level of emissions during start-up which is more difficult with high sulfur coal. DP&L believes the plant start-up with the low sulfur coal is a better strategy for enabling the JBR reaction to reach the level needed to effectively scrub the higher sulfur coal to comply with the air permit.

The second use of low sulfur coal is when issues arise with the scrubber which may compromise its operation, but are not sufficiently problematic to require complete shut-down, the audit said. During this time the plant may burn low sulfur coal in order to slow the chemical reaction in the JBR down and make repairs, while the unit remains in service. The plant operated at a 65.5% capacity factor in 2015 and bumed approximately 1.6 million tons.

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.