Oklahoma regulator backs coal for fuel diversity

OREANDA-NEWS. June 15, 2015. An Oklahoma Corporation Commission administrative law judge said the largest utility in the state should upgrade 2GW of coal capacity instead of turning to alternatives, arguing that preserving coal plants is important for fuel diversity and price stability.

Oklahoma Gas & Electric has asked state regulators to allow retail electricity customers to pay the \\$689mn cost of environmental updates at units 1 and 2 of the Sooner plant and units 4 and 5 at the Muskogee plant, as well as at three smaller units of the Seminole plant. The upgrades at the Sooner and Muskogee coal-fired units and the gas-fired Seminole plant are required for complying with the US Environmental Protection Agency's regional haze rule and mercury and air toxics standards.

Critics of the plan argued that the Oklahoma utility should shut down the coal plants affected by federal rules and instead increase its reliance on wind power and natural gas generation.

But administrative law judge Ben Jackson in a ruling released this week said the coal plant upgrades are prudent and cost-effective. Preserving fuel diversity in the utility's fleet "best spreads the risks associated with fuel price volatility and future environmental regulations," the ruling said.

Environmental groups argued before the Oklahoma commission that the federal Clean Power Plan proposal for limiting CO2 emissions from power plants will make coal plants uneconomical. But the commission judge said rate decisions cannot be based on future rules or congressional action. "Maintaining fuel diversity is important to protect the public against the risk of fuel price escalation," the ruling said.

But the ruling stopped short of backing the specific increase in retail rates requested by Oklahoma Gas & Electric. The judge recommended that the state regulator leave the cost recovery until the next general rate case.

The judge separately recommended against preapproving the proposal to replace the 463MW Mustang natural gas simple-cycle plant with a 400MW peaking plant. The judge noted uncertainty in costs and performance estimates for the project that could cost \\$400mn.

The state regulators will review the requests and the judge's ruling later this year.

The utility will complete upgrades at Sooner units 1 and 2 by January 2019. It wants to convert Muskogee units 4 and 5 to run on natural gas starting in January 2019 but has not begun the regulatory process for the fuel switch.

The units in the first quarter received supplies from the Antelope, Black Thunder and North Antelope Rochelle mines in Wyoming, Energy Information Administration data show.