Fuel Diversity and Fossil Fuel Generation Efficiency

Section 1251 of the EPAct of 2005, PURPA 111(d) Standard (12) Fuel Sources states the following:

Each electric utility shall develop a plan to minimize dependence on one fuel source and to ensure that the electric energy it sells to consumers is generated using a diverse range of fuels and technologies, including renewable technologies.

Section 1251 of the EPAct of 2005, PURPA 111(d) Standard (13) Fossil Fuel Generation Efficiency states the following:

Each electric utility shall develop and implement a 10-year plan to increase the efficiency of its fossil fuel generation.

SouthEastern Illinois Electric Cooperative, Inc. (SEIEC) signed a full-requirements power supply contract with Southern Illinois Power Cooperative, Inc. (SIPC), on December 8, 1959, and Supplement No. 3 of said contract was executed on May 31, 2000, both of which occurred prior to the enactment of the Energy Policy Act of 2005, extends the term of this full-requirements power supply contract until the year 2033.  Therefore, SIPC is responsible for supplying the generation and transmission requirements of SEIEC.  SEIEC is only one of six distribution cooperatives that own and control SIPC in equal amounts.  In addition, SEIEC only has four Board of Director positions on the twenty-four person SIPC Board of Directors.  Lastly, SEIEC is the only one of the six distribution cooperatives that own and control SIPC that meets the requirements of the new federal standards.  Therefore, SEIEC does not have the sole ability to control the operations of SIPC's generation facilities or the fuels used.  Therefore, SEIEC is not in a practical position to be able to implement these standards.  The fuel diversity and fossil fuel generation efficiency is achieved by SIPC and not directly by SEIEC.

Through active participation on the SIPC Board of Directors, SEIEC has and will continue to encourage SIPC to diversify the fuels used to generate the electricity purchased.  Fuel diversity mitigates the risk associated with fluctuations in the price of generation fuels and the regulatory risk associated with individual fuels.  These benefits associated with fuel diversity along with other operational and environmental benefits create a natural incentive for SEIEC to encourage SIPC to comply with fuel diversity standards.

Through active participation on the SIPC Board of Directors, SEIEC has and will continue to encourage SIPC to maximize the efficiency of its generation facilities.  Maximizing the efficiency of the generation facilities serves to provide more economical energy solutions by using less generation fuels which also creates environmental advantages as well.  These benefits create a natural incentive for SEIEC to encourage SIPC to comply with efficiency standards.

At SEIEC's request, SIPC prepared its response to the Fuel Diversity and Fossil Fuel Generation Efficiency standards.  The following exert is from a document prepared by Southern Illinois Power Cooperative titled "Energy Policy Act Compliance".

                                                    SOUTHERN ILLINOIS POWER COOPERATIVE’S

The Energy Policy Act of 2005 amends PURPA by adding standard (12) that requires the consideration of “Fuel Sources” or fuel diversity plans by utilities. Each electric utility shall develop a plan to minimize dependence on one (1) fuel source, and ensuring that the electric energy it sells to consumers is generated using a diverse range of fuels and technologies, including renewable technologies.

Since SIPC has a full-requirements power supply contract with each member, fuel diversity is achieved by SIPC and not directly by the member system. SIPC will meet these diversity requirements through a combination of: (a) existing generation and power contracts; (b) load management and distributed generation; and (c) new supply resources. These new resources may be long-term purchased power contracts, generating facilities owned by SIPC, or short-term wholesale market purchases.

SIPC has a number of supply-side resources to meet the power requirements of our members. SIPC has four units, 4, 5, 6 and 123, at its Marion plant site, with the following capacities:

                               _________________________________________

                               Marion Plant                Generation Capacity(MW)

                                                             Summer                       Winter

                               Unit 4                         165                            173 

                               Unit 123                      109                            109

                               Unit 5                         75                               84

                               Unit 6                         75                               84

                               Total Plant Capacity     424                             450

Unit 4, a cyclone boiler, burns primarily bituminous coal and bituminous coal refuse, supplemented at times with small amounts of petroleum coke, sub-bituminous coal, tire-derived fuel and waste oil. 

       Unit 123, a fluidized bed boiler, burns primarily bituminous coal refuse and bituminous coal, supplemented at times with small amounts of petroleum coke, sub-bituminous coal, tire-derived fuel, waste oil, and wood chips.

Together, the Marion solid units use approximately 1.3 million tons of solid fuel per year. SIPC purchases all of its fuel supply within a fifty-mile radius of the Marion plant site.  The contract range is from spot purchase to long term, ten years in length. 

Unit 5 & 6,each a simple cycle combustion turbines, burn primarily natural gas, but will have the capability to use No. 2 diesel oil as a back-up fuel. Natural gas is supplied by pipe from the Trunkline Gas.

SIPC also has a contract with the Southeastern Power Administration (SEPA) that began on 10/27/1966 and is valid through June 30, 2017.  The contract automatically extends one year at a time after that date.  The contract has a cancellation notice period of 36 months.

SEPA provides 28,000 kW of firm capacity and 42,000,000 kWh of energy under this agreement over each calendar year period beginning July 1 of each year.  No less than 60,000 kWh nor more than 240,000 kWh may be scheduled in any calendar month.  In any one hour, no more than 28,000 kW may be scheduled. This energy is generated using water from the Cumberland dam project.

SIPC has purchase rights to 19.529MW of Diesel Generation from the Cities of Redbud (13,589 kW) and McLeansboro (5,940 kW).

                                _____________________________________________

                                                                         Purchased Capacity (MW)

                                                                        Summer                  Winter

                                                       SEPA            28                            28

                                       Redbud/McLeansboro   19.529                  19.529

                                Total Purchased Capacity     471.529              497.529

In 2006 on a Btu basis, solid fuel contributed 99% of our generation, while natural gas contributed the remaining one percent.  On a MWH basis, in 2006, solid fuel contributed 81%, natural gas 3%, hydro 1.7% with the remainder purchased from others. 

Additionally, SIPC has and will continue to work with its member systems on a case ¬by-case basis to support distributed generation projects at end-user sites.  Examples of successful collaboration would include the two coal bed methane projects, presently inactive, in SouthEastern’s area.

Through this portfolio approach, SIPC demonstrates its commitment to fuel diversity through supply-side resources. SIPC's fuel diversity includes coal, petroleum coke, hydro, natural gas, and diesel fuel.

FOSSIL FUEL GENERATION EFFICIENCY

The fossil fuel generation efficiency suggested standard requires each electric utility to develop and implement a 10-year plan to increase the efficiency of its fossil fuel generation. The goal of increasing fossil fuel generation efficiency is a worthy endeavor, but one that may prove difficult to implement and oversee. SIPC makes every reasonable effort to generate or purchase power, or both, so as to provide electricity to its members at the lowest fuel cost reasonably possible.  The development of the wholesale markets, namely Midwest Independent System Operator ("MISO") has created a natural incentive for SIPC to improve efficiency and therefore the marketability of our generation fleet.

SIPC’s 10-year plan includes replacing older motors with new high efficiency motors and replacing incandescent lighting with florescent and sodium vapor along with other efficiency improvements.  One example is our scheduled turbine overhaul that will increase the #4 turbine efficiency by 3.5 %.

We must also consider that the most efficient generation may not be the lowest cost.  Of our coal units, Unit 123, our CFB, has the lowest fuel cost in $/kWh and also the lowest efficiency at 12,855 Btu/kWh in 2006. On the other hand, Unit 4, our cyclone, has a higher fuel cost in $/kWh but a higher efficiency at 10,686 Btu/kWh in 2006.  We constantly monitor our efficiency and can point to improvements on Unit 123 in the last year, with Unit 4 remain the same.  Unfortunately, we are burning our fuel more efficiency at the same time that fuel purchase costs are increasing.