Using Powder River Basin coal from Wyoming for decades, the power plants have been a source of power in Louisiana under varying ownership, lately Cleco, and NRG, and Northern States Power Company before that.
Now, spurred by price hikes and the climate change-inspired push to retire carbon-heavy coal generation, the co-ops are leaving Cleco Cajun next year in favor of new power sources, including solar farms. Unfortunately, in its last months as the co-op’s power supplier, the Cleco’s coal generating assets have suddenly developed a “cost of coal price” (CCP) headache.
It turns out that last year’s severe drought in the Mississippi River watershed that caused near-panic over an incoming ‘salt-wedge’ has also curtailed barge deliveries of Wyoming coal to New Roads. Cleco is saying this is causing them to invoke steep “cost of coal price” hikes in their soon-to-expire co-op contracts. Another phrase that co-op members are learning besides CCP, is “force majeure.” The member-customers of Beauregard Electric Cooperative Inc. (BECI) at DeRidder are now hearing this French phrase.
From the Merriam-Webster Dictionary:
Force majeure translates literally from French as superior force … In business circles, "force majeure" describes those uncontrollable events (such as war, labor stoppages, or extreme weather) that are not the fault of any party and that make it difficult or impossible to carry out normal business.
According to a January 10 report on BECI in the Lake Charles American-Press, Cleco said the coal burned at New Roads to make electricity must be shipped by barge on the Mississippi River, which has “been adversely affected by drought conditions over the past year.” The utility says low water levels have impacted the barges’ ability to be fully loaded with coal, driving up the per-ton costs for delivered coal.
According to Cleco: “The barge company is unable to completely fulfill the terms of our delivery contract due to the low water levels, a circumstance beyond anyone’s control.” The American-Press article noted that a Cleco Cajun bill to BECI customers for electricity jumped $3.5 million in November alone. BECI in turn increased the “power cost” (or fuel adjustment) on member bills by an average of 26 percent for customers using 1,000 kilowatt-hours per month.
There are reportedly eight co-ops in Louisiana that are subject to this “cost of coal price” emergency. The two exceptions are Dixie Electric north of Baton Rouge and Northeast Louisiana Power based in Winnsboro. Among the eight, differing strategies are being employed to pass these coal costs on to member-customers until the crisis subsides as the river rises. Some, like BECI, are asking customers to “eat the whole mule,” at once as longtime LPSC member Foster Campbell might say. Others are opting to spread the costs over as long as 12 months.
We think the Commission should conduct an investigation into the decisions associated with this cost of coal price emergency, because we’re getting emails from frustrated co-op customers with bills that have doubled and tripled.
Stay tuned, tomorrow we’ll travel to DeSoto Parish for more “cost of coal price” blunders…