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EPSA, Others Raise Red Flag at FERC Over Coal Delivery Woes

In a letter sent to FERC commissioners last week, top officials with associations representing public power, investor-owned utilities and rural electric cooperatives voiced concerns over railroad coal delivery problems and the possibility that those difficulties could have a negative impact on U.S. power grid reliability.

Also last week, the head of the Electric Power Supply Association (EPSA) sent a separate letter to FERC outlining EPSA's concerns related to the state of coal deliveries by rail.

"We are writing to call to your attention, and seek your help in addressing, a problem that we believe poses a serious challenge to the overall reliability of the interstate power grid in regions of the country heavily dependent on coal-fired generation," the heads of the American Public Power Association (APPA), the Edison Electric Institute (EEI) and the National Rural Electric Cooperative Association (NRECA) said in a joint letter sent on Monday to FERC Chairman Joseph Kelliher and Commissioners Nora Brownell and Suedeen Kelly.

"Each of us has received reports from our respective members with coal-fired generation regarding significant, sustained railroad coal delivery problems," the heads of APPA, NRECA and EEI wrote. "Specifically, for some coal-fired generators, rail coal delivery has not been keeping pace with coal use. Some existing onsite coal stockpiles are seriously depleted."

They also said that "the problems have existed for a long time with little, if any, improvement. We are concerned about the cost and reliability risks of operating under this reduced coal delivery situation. A minor railroad mishap or equipment failure at a coal mine -- events that would not cause any disruption in power generation when stockpiles are more robust -- could have serious consequences today."

The association executives also said that reduced deliveries of coal are already pushing some coal-fired generators to the point of curtailing generation, which could increase utility and consumer costs from more expensive power purchased on the wholesale market.

"The cost consequences of curtailments are obvious," they wrote. "If generation is curtailed, the owners of these power plants will be forced into the market in order to meet customer demand. Power purchased in the wholesale market may be more expensive than power from these coal-fired plants, pushing up rates for consumers; and power from the wholesale market is likely to be generated, at least in part, from natural gas."

The heads of APPA, EEI and NRECA are also concerned about the "adverse affect that generation curtailments could have on grid reliability. Large, baseload coal-fired power plants help support the overall reliability of the electric grid; and it is, therefore, important that these plants remain online."

The association officials asked FERC commissioners for an opportunity to meet to discuss these issues. They also asked FERC commissioners to consider the possibility of holding a public workshop to focus on railroad coal delivery challenges and their impact on electric reliability.

Signing the letter were Alan Richardson, CEO of APPA, Glenn English, CEO of NRECA, and Thomas Kuhn, president of EEI.

On Tuesday, John Shelk, CEO of EPSA, sent a letter to FERC "to underscore problems with coal deliveries as our members with coal-fired power generation have expressed concerns similar to those outlined in the letter you received yesterday."

He noted that competitive power suppliers account for nearly 40% of the installed generating capacity in the U.S. and about one-third of actual generation. "These suppliers collectively operate a fleet of power plants using a diverse mix of fuels -- coal, natural gas, nuclear, wind, geothermal and oil, among others. In fact, coal accounts for the largest market share among all fuels used by competitive suppliers."

Shelk therefore asked that EPSA be included "in any meetings convened by the Commission on this important subject."

In late April, NRECA's English told federal lawmakers that the railroad industry "should -- like electric utilities -- have an obligation to serve the national public interest. Without Congress mandating an obligation to serve by the railroads, the economy of this nation can not move forward." English made his comments at a hearing held by the U.S. House Committee on Transportation and Infrastructure's Subcommittee on Railroads.

State utility commissioners gathering in Washington, DC, earlier this year approved a resolution asking the U.S. Congress to pass legislation that would restore "a little bit more" regulatory supervision over railroads, as Arkansas Public Service Commission Chairwoman Sandy Hochstetter put it.

Meanwhile, individual utilities have started to take legal action related to coal delivery woes. Union Pacific (UP) was recently hit with separate legal actions by Wisconsin Electric Power Co. and Entergy, alleging UP failed to meet its coal delivery-related obligations (see NGI, May 1).

Last year, two separate railroad train derailments occurred in the Powder River Basin in northeast Wyoming, causing damage to heavily used joint railroad lines that supply coal to various generation facilities in the U.S.

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