South Dakota plant cuts output because of slow rail deliveries

South Dakota plant cuts output because of slow rail deliveries

Washington (Platts)--22Mar2006

For the second time in less than a month, a coal-fired power plant, this one
in South Dakota, has had to scale back production to about 75% of capacity
because BNSF Railway isn't delivering the coal needed to run the plant.

"We want to be reliable. We want to be here when the system demands are
calling for power, and right now we just can't provide that because if we did,
at the end of this month or early into April we would be completely out of
coal," said Jeff Endrizzi, manager of the Big Stone power plant near Milbank,
South Dakota.

The plant normally has a 30-day, 200,000 short ton stockpile. But Fuel
Supervisor Keith Kelly said Tuesday it was down to a 10-day supply. Otter Tail
Energy owns 53.9% of the plant, NorthWestern Energy, 23.4%, and Montana-Dakota
Utilities, 22.7%.

Normally, coal from Peabody Energy's Cordero Rojo mine or Arch Coal's Black
Thunder mine arrives just over three times/week at the 460-MW plant that is
only about 900 miles from the Powder River Basin mines. The plant has also
bought coal from Foundation Coal's Eagle Butte mine. "Since March it's been
closer to two trains/week," Kelly told Platts. "It was better before [early
March] but not quite [what was needed]."

The plant has been supplementing deliveries from its stockpile. "But since
late February and early March, we've been aggressively going into stock,"
Kelly said. "We've gone out on the spot market to improve our turnaround
time."

The plant has bought "a couple trainloads on the open market in an effort to
keep things moving," but has a "favorable contract price" and higher costs
from purchasing on the open market are passed on to customers through the cost
of energy adjustment, Kelly said.

While the plant leases two train sets, that hasn't been a tremendous help
because of "general congestion in both the Gillette [Wyoming] area but also
the main line overall," Kelly said. "We've had pretty decent service from the
coal mines. [The problem] has really been on the delivery side."

Now the plant is trying to match production to coal deliveries, Kelly said,
with production averaging about 75% of normal. Last week, production was cut
to 80% during the day and 60% at night.

"We're rationing our coal so we don't deplete our pile completely so we can
still be there to provide our customers with as much of the power as we can to
try and hold their costs down," Kelly said.

Otter Tail has had to purchase power to supplement its own generation,
spokeswoman Cris Kling told Platts Tuesday. "We have had to do it fairly
regularly," she said, noting that higher costs for purchased power are passed
on through monthly fuel adjustments.

This is the second time this month a power plant has reported low stocks
because of slow BNSF deliveries. On March 6, Basin Electric Power Cooperative
said its Laramie River station stockpile in Wheatland, Wyoming, was down to a
six-day supply (PCT 3/7). It said it may have to curtail output if deliveries
don't pick up.

BNSF loadings up
BNSF, which services 125 US coal-fired power plants, did not return calls for
comment on the Big Stone plant.

However, in a letter to coal customers last week, it said through February 28
"total PRB rail-delivered coal was up 3.3 million tons, or 4.8%, compared with
the same period in 2005. During the first two months of this year, total daily
loadings for both BNSF and [Union Pacific] on the Joint Line have averaged
64.6 trains/day, a 1.9% increase compared with 63.4 trains/day for the same
period of 2005."

Loadings were down slightly in February. BNSF said Joint Line loadings
averaged 63.6 trains/day, down 2.9% from 65.5 trains/day in January and down
2.2 trains/day, or 3.3% compared with February 2005.

"February 2006 loadings were affected by winter storm conditions and severe
cold weather impacting both railroads and mines," BNSF said. "Total February
2006 Powder River Basin loadings (Northern and Southern PRB) were 81.9
trains/day versus 83.8 trains/day in January 2006 and 83.1 trains/day in
February 2005."

On BNSF alone, February 2006 PRB loadings were 46.8 trains/day, compared with
47.6 trains/day in January and 46.1 trains/day in February 2005. "Overall,
BNSF loaded 8.0% more PRB tons January-February 2006 than in the same period
in 2005," the railroad said.

-- Mark E. Heckathorn, mark_heckathorn@platts.com

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