PJM Interconnection said in a Dec. 5 update of its pending deactivation list that it got Dec. 1 deactivation requests for the Roanoke Valley 1 and 2 power plants, with the plants to be shut as of March 1, 2017.
The plants are:
- Roanoke Valley 1, 165 MW, located in the Dominion (DOM) zone, unit is 22 years old, reliability analysis underway related to the pending deactivation and its impacts on the grid; and
- Roanoke Valley 2, 44 MW, DOM zone, 21 years old, reliability analysis underway.
Under standard PJM policy, the owner of these units is not named. But these are two adjacent, coal-fired plants owned by Westmoreland Coal that were developed in the early 1990s and are located in North Carolina, near the state line with Virginia. They are known for short as the “ROVA” plants.
Westmoreland said about the plants in its March 14 annual Form 10-K report: “We own two coal-fired power-generating units in Weldon, North Carolina with a total capacity of approximately 230 megawatts, which we refer to collectively as ROVA. We built ROVA, which commenced operations in 1994, as a Public Utility Regulatory Policies Act co-generation facility to supply Dominion North Carolina Power (“DNCP”). ROVA is held by our wholly-owned subsidiary Westmoreland Partners. … ROVA purchases coal under short-term contracts from coal suppliers with identified reserves located in Central Appalachia, and supplies the power it produces to DNCP.”
The Form 10-K added: “Westmoreland Partners is party to a consolidated power purchase and operating agreement (the “Consolidated Agreement”) with Virginia Electric [and] Power Company that is scheduled to terminate in March 2019. The Consolidated Agreement provides for the sale to DNCP and its affiliates of all of ROVA’s net electrical output and dependable capacity. The Consolidated Agreement permits Westmoreland Partners to mitigate its cash losses through the sale to DNCP of substitute power not produced by ROVA during periods when it is uneconomical to operate the ROVA units. Under the Consolidated Agreement, we forego dispatching the ROVA units in low demand periods and maintain them in idle status. During such low demand periods, we meet DNCP’s power needs with fixed-price purchased power when doing so is more economically attractive than our physically operating the ROVA plants to generate power. Alternatively, we operate the ROVA plants, sell our produced power to DNCP and resell the fixed-price purchased power in the open market.
“When we operate the ROVA plants and resell our fixed-price purchased power into the open market, any such resales are made at prevailing market rates. In the event that the prevailing market price for power falls below the level of our hedged position during periods when we are reselling the fixed-price purchased power in the open market, those resales result in losses to us. The fixed-price purchased power contracts cover the period from April 2014 to March 2019 and contracted power prices range from $41.05 to $55.20 megawatts per hour, with a weighted average contract price of $43.93 over the remaining contract lives.
“For the year ended December 31, 2015, we incurred losses related to these hedging arrangements of $5.6 million. Based on current market pricing trends, we expect to experience losses from time to time under these hedging arrangements when the market price for power is not commensurate with our hedged position. Further, we are required to post collateral to cover certain projected long-term losses under these hedging arrangements based on the market price for power. The amount of such collateral may be significant and may negatively impact our liquidity.
“During the fourth quarter of 2015 we evaluated our ROVA asset group for impairment primarily as a result of an impairment indicator related to the continued decline in forecasted electricity prices. We believe the depressed power prices will persist in the future. The asset group is comprised of property, plant, and equipment and related capital spares used to generate electricity. Our evaluation concluded that the long-lived assets at ROVA were impaired, and the carrying value of those assets was written down to zero as a result of an impairment charge of $133.1 million, with the charge included in the Loss on Impairment line item on the Consolidated Statement of Operations for the year ended December 31, 2015.”
Virginia Electric and Power d/b/a DNCP listed these contracts in an integrated resource plan filed April 29 at the Virginia State Corporation Commission and the North Carolina Utilities Commission. They are:
- Roanoke Valley II, Weldon, N.C., Baseload, Coal, 44 MW summer, contract start 6/1/1995, contract expiration 3/31/2019; and
- Roanoke Valley Project, Weldon, N.C., Baseload, Coal, 165 MW summer, contract start 5/29/1994, contract expiration 3/31/2019.