The Kentucky Public Service Commission authorized Kentucky Power Co. to sell up to 200,000 tons of its coal surplus scheduled for delivery to one of its plants and to pass along the resulting reduced fuel costs to customers.
The commission said Kentucky Power may sell the Northern Appalachian coal directly to an unaffiliated third party. In a March 13 news release, Kentucky Power said proceeds from the transaction would be reflected on customer bills through fuel adjustment costs.
The coal was scheduled for delivery in 2018 to the 1,560-MW Mitchell plant, located in Moundsville, W.Va., and co-owned by Wheeling Power Co. Both are subsidiaries of American Electric Power Co. Inc..
According to PSC filings, Kentucky Power purchased from Consolidation Coal Co. 666,500 tons of Northern Appalachia coal in 2017 plus 196,710.5 tons carried over from 2016 to 2017; will buy 666,500 tons of coal in 2018; and will buy 500,000 tons of coal each year from 2019 through 2022.
The Mitchell plant is currently burning approximately 1.4 million to 1.6 million tons of high-sulfur coal each year.
The surplus coal stockpiling under the contract is due mainly to recent wholesale market conditions in PJM Interconnection, where natural gas units are setting the clearing price, which Mitchell cannot clear, so it is not being dispatched as often.
The company's target level is a 15 full-burn-day supply of high-sulfur coal to operate the Mitchell plant. Kentucky Power expects its Northern Appalachian coal inventory level for Mitchell to remain substantially above its target level in 2018 and potentially into 2019.
In its order the commission also noted in case the AEP subsidiary is unable to find a buyer, the coal could be deferred to 2019.
The PSC asked Kentucky Power to file a report of the terms of any sale of the coal within 15 business days from the execution date of the agreement between Kentucky Power and the potential buyer. (Case no. 2017-00446)
