May 5 Duke Energy Corp, the biggest U.S.
power company, filed a complaint on Monday with federal energy
regulators seeking recovery from its power grid operator of
monies spent to buy natural gas for a power plant on a brutally
cold day this winter.
This could be the first of many complaints filed by U.S.
generators seeking recovery for fuel bought at extremely high
cost to run power plants to meet grid operator demands to ensure
there was enough generation was available to keep the lights on
during some of the coldest days of the winter.
On Jan. 27, officials at PJM, the power grid operator for
the U.S. Mid Atlantic and Midwest regions, told Duke to buy gas
to fuel the company's 568-megawatt Lee power plant in Illinois
for the next day, Duke said in its complaint.
PJM expected extremely cold conditions on Jan. 28 and high
demand for power that could require load shedding and the
possible loss of customer service due to projected low reserves
needed to cover unexpected plant or transmission line outages,
PJM was not the only power grid operator that ordered
generators to buy fuel at extremely high prices for power plants
during this past cold winter. New York's grid operator did the
same thing and has also been dealing with some complaints from
its members since.
Most generators do not buy gas to fuel their power plants
under long-term contracts. Instead, they wait to buy the fuel
until a day or so before planning to run the unit, basing their
decision on whether they can make money buying the fuel for the
plant and selling the power produced.
Duke said the economics of paying an "extraordinarily high"
price to buy gas to run the Lee combustion turbines on Jan. 28
without a guarantee from PJM that the facility would actually
run "simply made no sense."
"It would be a money-losing proposition," Duke said.
PJM, however, ordered Duke and other generators to buy the
gas in case the plants were needed to run for reliability
Duke said it paid about $12.5 million to buy the gas, but
noted PJM did not call on the Lee plant to run that day.
Duke said it was able to recoup about $2.6 million of its
gas purchase costs through various mitigation efforts, leaving
the company with unrecovered gas costs of about $9.8 million.
Duke said the PJM tariff, the rules governing the PJM grid,
provides for compensation for the company's loss but PJM has
declined the requests.
PJM spokesman Ray Dotter, however, told Reuters the grid
operator has no authority under its tariff to compensate market
sellers for their unrecovered gas costs.
"If the market seller believes their gas costs should be
recovered, they have to file with FERC to receive a waiver of
the tariff," Dotter said.
(Reporting by Scott DiSavino; Editing by Bernard Orr)