OG&E: Coal, cogen plant acquisitions to save customers millions by ending PURPA contracts

Dive Brief:

State regulators approved Oklahoma Gas & Electric's proposal to purchase 506 MW of generating capacity at two power plants. But other approvals are required for the deals to move forward.
The Oklahoma Corporation Commission on Monday approved a "preapproval application" for the utility to acquire the coal-fired AES Shady Point plant near Poteau, Oklahoma, and the gas-fueled Oklahoma Cogeneration facility in Oklahoma City.
OG&E announced last year it would not renew a five year power purchase agreement with the AES plant, which could have forced it to close. Both plants were operating under federally mandated power purchase agreements, officials said, under the Public Utility Regulatory Policies Act (PURPA).

Dive Insight:

Environmental activists say OG&E's purchase of the AES plant is a missed opportunity to clean up the state's generation, but utility officials say they conducted a request for proposals for the resources and the deals will save customers millions.

OG&E spokesman Brian Alford called the purchases a win-win for consumers. "Customers will save tens of millions of dollars by eliminating the federally mandated PURPA contracts," he told Utility Dive in an email.

The Shady Point plant is needed to help OG&E maintain grid stability as growth continues in eastern Oklahoma and western Arkansas and the cogen plant will help the utility support reliability and resiliency in the Oklahoma City-metro area, according to OG&E.

OG&E says the deals will also lead to a reduction in power plant air emissions, but activists say the company should have done more.

The deals are a "massive missed opportunity for not only OG&E, who could have accepted the fact that clean and renewable energy are our energy futures," but also for the Oklahoma Corporation Commission "to do right for the citizens of Oklahoma by eliminating one of the worst contaminants in our state," said Director of Sierra Club's Oklahoma chapter Johnson Grimm-Bridgwater.

The AES plant has long faced criticism over ash pollutants resulting from its generation.

OG&E says it has reduced power plant air emissions significantly, relative to 2005 levels, with carbon dioxide levels down about 40%. Sulfur emission levels are much lower as well, and the company expects to continue reducing CO2 emissions to 50% below 2005 levels by 2030.

OG&E announced last year it would not be extending power purchase agreements with the AES Shady Point plant, which has been operating since the early 1990s. That could have led to the plant's closure, but the utility says its deal will stave off community hardships.

The deal "also ensures many jobs will be preserved in an economically challenged region," Alford said.

Shady Point has a generation capacity of 360 MW, while the Oklahoma Cogeneration facility can produce 146 MW.

Alford said the company "conducted a thorough RFP process" that included 19 bidders with 94 different proposals. "These projects stood apart from the others," he added.

OG&E says it already has a conditional approval from the Arkansas Public Service Commission, but is still waiting on an approval from the Federal Energy Regulatory Commission to complete the purchases.