Gulf Power projects fuel use, cost figures for 2017

The coal share of the power generation of Gulf Power is expected to climb in 2017, said the Southern Co. (NYSE: SO) subsidiary in Sept. 1 fuel cost testimony filed at the Florida Public Service Commission.

H. R. Ball, the Fuel Manager for Gulf Power, supplied the utility’s projection of fuel expenses, net power transaction expense, and purchased power capacity costs for the period Jan. 1, 2017 through Dec. 31, 2017.

The total updated cost of fuel to meet 2016 system generated power needs is projected to be $267,852,395. The projected total cost of fuel to meet system net generation needs for the 2017 period reflects an increase of $6,725,021 or 2.51% greater than the same period in 2016. Total system net generation in 2017 is projected to be 9,352,830,000 kWh, which is 2,493,306,000 kWh or 36.35% greater than is currently projected for 2016.

The higher projected total fuel expense is the result of a higher projected cost of coal, due primarily to the inclusion of Scherer Unit 3 coal cost for the period (which is serving Gulf’s native load customers during the 2017 period), offset somewhat by a lower cost of natural gas (includes estimated hedging settlement costs). On a fuel cost per kWh basis, the 2016 projected cost is 3.9048 cents per kWh and the 2017 projected fuel cost is 2.9358 cents per kWh, a decrease of 0.9690 cents per kWh or 24.82%. The lower average per unit fuel cost is the result of both lower coal- and gas-fired generation cost (cents/kWh) for the 2017 period.

Weighted average coal burned price including boiler lighter fuel for 2016 is projected to be $3.43 per MMBtu. Weighted average coal burned price including boiler lighter fuel for 2017 is projected to be $2.69 per MMBtu. This reflects a cost decrease of $0.74 per MMBtu or 21.57%. The cost decrease is due to inclusion of Scherer Unit 3, which utilizes a lower cost Powder River Basin (PRB) coal supply, combined with coal supply contracts that have or will expire by the end of 2016 being replaced with lower priced coal supply agreements in 2017.

Gulf’s coal supply agreements have firm price and quantity commitments with the contract coal suppliers and these contracts will cover a portion of Gulf’s 2017 projected coal burn needs. The remaining coal supply needs will be purchased on the spot market.

Weighted average natural gas price for 2016 is projected to be $3.38 per MMBtu. When the cost of natural gas hedging settlements is included in the total delivered gas cost, the 2016 projected cost is $4.34 per MMBtu. Weighted average natural gas price for 2017 is projected to be $3.95 per MMBtu. This is a decrease in price of $0.39 per MMBtu or 8.99%.

The projected fuel cost of Gulf’s coal-fired generation is 3.26 cents per kWh and the projected fuel cost of Gulf’s gas-fired generation is 2.74 cents per kWh for the 2017 period. The generation mix in 2016 is projected to be 46.91% coal and 52.71% gas. The generation mix in 2017 is projected to be 56.13% coal and 43.61% gas.

The company is projecting nearly 2.1 million tons of coal burn in 2017 at its plants (excluding Scherer), against 2.2 million tons projected in 2016, 1.8 million tons of actual burn in 2015 and 2.4 million tons of actual burn in 2014.

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.