Kentucky Power seeks buyer for coal surplus to cut costs

The Mitchell Plant in Moundsville, W.Va.
The Mitchell Plant in Moundsville, W.Va.

ASHLAND, Ky. (March 13, 2018) — Kentucky Power has received authorization from the Kentucky Public Service Commission to sell up to 200,000 tons of high-sulfur Northern Appalachian coal and pass reduced fuel costs onto customers.

The coal is scheduled to be delivered in 2018 to the Mitchell Plant in Moundsville, W.Va. Mitchell, a two-unit, coal-fired facility that generates 1,560 megawatts, is co-owned by Kentucky Power and Wheeling Power. The plant is operated by Kentucky Power and uses about 3.1 million tons of coal a year, including nearly 325,000 tons of low-sulfur Eastern Kentucky coal.

In its order, the commission said the proposal “is consistent with the public interest, is for a proper purpose, and should be approved.”

“We are pleased that the commission approved our proposal,” said Kentucky Power President Matt Satterwhite. “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.”

In its application filed in November, Kentucky Power told the PSC that it currently had enough high-sulfur coal to operate at capacity for 53 days. The company’s target is 15 days. Kentucky Power purchases high-sulfur coal from Consolidation Coal Co. through a long-term contract ending in 2022.

High-sulfur coal is delivered to the power plant via conveyor belt from an adjoining mine. Under the Consol contract, Kentucky Power is obligated to purchase 666,500 tons in 2018, and 500,000 tons in each year from 2019 through 2022. By gaining authorization to seek a buyer through an independent broker, Kentucky Power can reduce its fuel costs. Such costs are charged as a direct pass through to customers through the Fuel Adjustment Clause. Proceeds from any coal sold would be reflected on customer bills through reduced fuel costs.

In its order, the commission authorized Kentucky Power to use an independent broker to find an unaffiliated third party to purchase the unneeded coal, up to 200,000 tons. The company also can sell the coal directly to an unaffiliated third party. Any sale price is to 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 could be deferred to 2019.

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