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As Natural Gas Prices Soar, Oklahoma's Coal Power Looks Like a Bargain

Posted on: Monday, 3 October 2005, 21:00 CDT

By Janice Francis-Smith

The higher the price of natural gas, the more attractive coal- powered electricity generation gets - and the AES Shady Point plant in Panama, Okla., is looking pretty good right now, said Lundy Kiger, director of government and community relations for AES.

We really need to look at doing whatever we can to provide the lowest-cost power in the state of Oklahoma for our consumers, said Kiger, whose company has a 32-year contract with Oklahoma Gas and Electric Co. that comes up for renegotiation in 2007. The last 15 years of the contract are structured as three optional five-year extensions.

Over the last 15 years of our contract, we average approximately 3.9 cents a kilowatt, said Kiger. We're well over 50 percent cheaper than anything else that's out there that runs on natural gas at average efficiency levels, he said. Based on current gas prices, many natural gas-fired power plants are producing power at 8 cents to 12 cents a kilowatt, said Kiger.

The Shady Point plant was constructed in the late 1980s and began operation in 1991, using the best technology available at the time to produce power nearly as environmentally friendly as a natural gas- fired power plant could, said Kiger.

When you see our plant, we'll be running at full load and you will not see anything coming out of the stack, he said. We've got four boilers, and with this particular generation of boiler that we've got, we're able to fire at a lower temperature which reduces the (pollutants emitted) - We're also able to inject limestone - and thus we're able to pull the sulphur level down to numbers well below our federal and state permits.

Eighty-two people work at the plant, which is capable of generating 320 megawatts of power, he said. But considering that the plant uses about 1.2 million tons of coal each year, the plant has a hand in maintaining more than 1,500 jobs and an economic impact of more than $42 million on the state's economy, said Kiger.

AES entered into what Kiger called a front-loaded contract with OG&E in 1987, costing the utility more in the earlier years of the contract but continually dropping the cost of the power sold in later years. In 2005, the contract dropped by $1 million a year, said Kiger, and for the last decade the contract amount would continue to drop by $1.5 million each year.

But OG&E does have the option to end the contract when the next phase kicks in, in January 2008. AES officials, a few legislators and some business owners in eastern Oklahoma have asked OG&E to commit to extending the contract sooner than is required according to the terms of the contract, ensuring that Shady Point has time to plan if for some reason OG&E chooses not to extend the contract.

Brian Alford, spokesman for OG&E, said discussions continue between two companies.

We will continue to keep an open mind and open door, said Alford. But any discussions or any decisions are going to have to be made in the best interest of our customers, and to this point we don't believe that now's the right time to do that, unless we can reach an agreement that we believe is in our customers best interest.

But while the terms of the AES contract may be negotiated, both parties agree on the value of coal in keeping Oklahomans' electricity bills in check.

Coal is the fuel of choice in Oklahoma because of its low cost, said Alford, noting that OG&E has its own coal plants as well. Typically, the vast majority of our electricity is generated from coal-fired plants, said Alford. Seventy to 75 percent of our electricity is generated by coal each year.

Source: Journal Record - Oklahoma City

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