Kentucky Power seeks buyer for coal surplus

Published on March 15, 2018 by Kevin Randolph

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Kentucky Power is seeking buyers for excess coal following approval from the Kentucky Public Service Commission (PSC) of a proposal to sell up to 200,000 tons of high-sulfur Northern Appalachian coal and pass reduced fuel costs onto customers.

The coal is scheduled for delivery in 2018 to the Mitchell Plant, a two-unit, coal-fired facility in Moundsville, West Virginia that is co-owned by Wheeling Power and Kentucky Power. The plant generates approximately 1,560 megawatts (MW) and uses about 3.1 million tons of coal a year, including nearly 325,000 tons of low-sulfur eastern Kentucky coal.

In its proposal filed with the PSC in November, Kentucky Power said that it had enough high-sulfur coal to operate at capacity for 53 days. The company’s target is 15 days.

“We are pleased that the Commission approved our proposal,” Kentucky Power President Matt Satterwhite said. “The Commission agreed with us that this plan is in the best interest of our customers by reducing the cost paid for coal used to generate electricity.”

Kentucky Power purchases high-sulfur coal from Consolidation Coal Co. (Consol) through a long-term contract that ends in 2022. Under the contract, Kentucky Power must purchase 666,500 tons in 2018 and 500,000 tons in each year from 2019 through 2022. High-sulfur coal is delivered to the power plant via conveyor belt from an adjoining mine.

In its order, the PSC authorized Kentucky Power to use an independent broker to find an unaffiliated third party to purchase up to 200,000 tons of unneeded coal. The company may also sell the coal directly to an unaffiliated third party.

Any sale price must exceed the 2018 weighted average cost of high-sulfur coal under Kentucky Power’s Consol contract, as well as the market index price. If a buyer is not found, the coal can be deferred to 2019.

Selling the unneeded coal would allow Kentucky Power to reduce its fuel costs, which are charged as a direct pass through to customers through the Fuel Adjustment Clause. Proceeds from any sale of coal would be reflected on customer bills through reduced fuel costs.