Vectren wins approval related to coal-to-gas conversion by Sabic

The Indiana Utility Regulatory Commission on Nov. 9 approved a July 22 application from Southern Indiana Gas and Electric d/b/a Vectren Energy Delivery of Indiana (Vectren South) for an amendment to an electric service agreement between Vectren South and Sabic Innovative Plastics Mt. Vernon.

Thomas L. Bailey, Director of Industrial Sales and Economic Development for Vectren Utility Holdings Inc., the immediate parent company of Vectren South, supplied the supporting testimony.

Bailey testified that Vectren South and Sabic in 2011 entered into a special contract for electric service that was approved by the commission and expired on May 2, 2016. The 2011 agreement did not have a renewal provision because Sabic anticipated building its own gas-fired cogeneration unit by the time the contract was to expire.

Bailey testified that the cogeneration facility was expected to be operational in November 2016, at which time Sabic will receive electric service pursuant to Vectren South’s Backup, Auxiliary, and Maintenance Power Services Rate (Rate BAMP). He explained that because the 2011 agreement expired in May 2016, Vectren South and Sabic negotiated a new agreement to cover the gap between the time the 2011 agreement expired and the cogeneration facility becomes operational. The new agreement (“2016 Agreement”) provides for the provision of electric service under Rate HLF, which is for a five-year term.

Bailey testified that the amendment will allow the 2016 agreement to terminate once Sabic’s generating unit goes online and shows it is capable of serving Sabic’s load. Bailey testified that Vectren South has served Sabic, which employs approximately 1,200 people in Posey County, Indiana, for approximately the past 50 years. He explained that the Mt. Vernon facility has to compete with other Sabic manufacturing sites that already have cogeneration facilities and that this change is one that has been anticipated for several years. Even with the significant load reduction, Mr. Bailey stated that Sabic will remain a major local employer and a top-five Vectren South electric customer contributing to the recovery of fixed costs.

Sabic’s operations rely on steam for internal production processes. That steam has been produced by coal-fired boilers, and Sabic has long considered more environmentally friendly alternatives to these boilers. Sabic fomrnlly announced in December 2013 its intention to build a cogeneration facility for its Posey County operations. The project includes an approximately 30-mile natural gas pipeline to the new cogen.

Coal-fired boilers power approximately 40% of the site’s steam and are restricted based upon recently issued U.S. Environment Protection Agency regulations. Sabic must retire these coal boilers no later than February 2017.

Once complete and commercially operational, Sabic’s industrial cogeneration unit will become the first retail customer Behind the Meter (BTM) generating unit interconnected to Vectren South’s system. The BTM designation is important as it allows parallel interconnection to Vectren South’s electric transmission system and the instantaneous operational opportunity for Sabic to buy through to the Midcontinent Independent System Operator (MISO) during time periods the cogeneration unit is partially or completely interrupted.

Under the BAMP rate, Sabic may purchase energy from MISO’s Locational Marginal Pricing (LMP) market if the generating unit is curtailed or off-line. This allows for continual operations of the production facility and reduced risk of operational downtime and lost production revenues.

The expected non-firm back up need for Sabic is approximately 86 MW. In addition, Vectren South will provide Sabic incremental firm service of approximately 21 MW equating to an expected 107 MW of production facility electric demand.

Texas Gas Transmission LLC had won a December 2015 Federal Energy Regulatory Commission authorization for the pipeline to serve this project. Said the FERC order: “Texas Gas states its proposed Southern Indiana Market Lateral will consist of a 30.6-mile-long, 10-inch-diameter pipeline lateral extending from Robards Junction on Texas Gas’s mainline in Henderson County, Kentucky, to Mount Vernon, in Posey County, Indiana. The proposed lateral will be able to deliver 53,500 million British thermal units of gas per day (MMBtuf/d) to the existing SABIC Innovative Plastics Mt. Vernon, LLC’s (SABIC) chemical manufacturing plant and planned co-generation plant in Mt. Vernon, Indiana. Power for SABIC’s existing plant is provided by coal, and the proposed project will enable SABIC to convert over to gas.

“Texas Gas conducted an open season from March 28, 2014 to April 22, 2014. Texas Gas received binding bids from SABIC for firm transportation capacity on its existing mainline and proposed pipeline lateral. Texas Gas executed precedent agreements with SABIC to provide 53,500 MMBtu/d of firm transportation service on the proposed lateral at negotiated rates for a primary term of 20 years. Texas Gas plans to provide service on the proposed Southern Indiana Market Lateral facilities under its recently established Firm and Interruptible Lateral Service rate schedules.”

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.