As the embattled Central Appalachian coal basin struggles to recover from a multi-year downturn, East Kentucky Power Cooperative, a major utility player in the region, continues to see a dearth of CAPP responses to coal solicitations.
Mark Horn, fuel and emissions manager for the Winchester-based generation and transmission co-op, painted a picture of a coal basin still in crisis in testimony with the Kentucky Public Service Commission.
East Kentucky's 1,371-MW Spurlock and 341-MW Cooper baseload coal plants operate in the region and have burned their share of CAPP thermal coal in the past.
Horn, however, told the PSC the co-op "continues to see fewer responses to coal solicitations from suppliers or brokers in the CAPP basin."
According to Horn, issues regarding production costs, market pricing and lead times for permits continue to reduce the amount of thermal coal in CAPP that can compete with other coal basins in the US.
Production costs in the high-sulfur Illinois Basin, for example, "continue to push the use of this coal, at competitive pricing, into a market with a larger footprint," he said.
Lower natural gas prices have increased the use of East Kentucky's simple-cycle gas turbines for generation and reduced the amount of coal being burned as plant optimization occurs, he added.
Horn said that if current coal inventory levels allow it, the co-op will attempt to negotiate an acceptable new delivery schedule.
"If stockpile levels dictate immediate deliveries as outlined in the contract agreement, EKPC would go to the market to replace the coal and have the supplier reimburse EKPC for the difference in the coal cost if the cost is higher than the contract price," he said.
At times, Horn said East Kentucky has canceled contract tonnage that has not been delivered on time if the co-op does not need the tonnage or can replace it at lower prices.
East Kentucky recently set its coal budgets for the next two years, with plans to purchase 4.46 million st of coal in 2017 and 4.1 million st in 2018.
As of late last year, the co-op's coal inventory stood at 175,890 st, or 48 days of supply, at Cooper, and 450,122 st, or 28 days' supply, at Spurlock.
East Kentucky said in the filing coal costs for Spurlock Units 1 and 2 and Cooper are expected to be slightly lower in 2017 and slightly lower in 2018 for Spurlock Units 1 and 2. Meanwhile, coal costs are expected to be higher for the Gilbert unit, which is part of the Spurlock plant, and for Spurlock Unit 4. In 2018, coal costs are expected to be higher for Gilbert, Spurlock Unit 4 and Cooper. The costs were not quantified.
