Indiana’s consumer watchdog, the Office of Utility Consumer Counselor, had expressed concern about the contract termination, which affected Vectren South, Vectren’s electric utility subsidiary that serves about 140,000 customers in southwestern Indiana. OUCC Senior Utility Analyst Michael Eckert said the Foresight deal “would have provided approximately 15% of Vectren’s coal purchases for the next five years from an unaffiliated company.” Vectren also deferred to 2014 an unspecified amount of coal from Alliance Resource Partners, based in Tulsa, Okla.
With the Foresight cancellation and Alliance deferral in 2013, “Vectren South will now be purchasing 100% of its long-term contract coal from Vectren Fuels,” a Vectren affiliate that owns the Prosperity and Oaktown No. 1 underground mines in Pike and Knox counties, respectively, Eckert said. In 2014, he added, Vectren “will begin taking approximately 250,000 tons of coal from Alliance and the rest from Vectren Fuels.”
Vectren South’s “overreliance on its affiliate Vectren Fuels for coal is a concern, given Vectren South’s history of buying coal from Vectren Fuels at above-market prices,” the consumer agency said. The OUCC also warned the twin moves could cause coal suppliers to be reluctant to bid into future Vectren coal solicitations.
Emily Medine, a principal in Energy Ventures Analysis and a veteran coal industry analyst, testified in Vectren’s behalf it is not unusual for utilities to cancel contracts when coal specs are not met. She also said the Foresight/Alliance actions would not affect coal supplier participation in future Vectren requests for proposals.
The IURC concurred, noting Vectren’s coal procurement plan for 2013-14 “satisfies the requirements” of the agency’s fuel-adjustment charge. “Vectren South has opportunities to reopen price negotiations on two contracts and may supplement its contract purchases with spot coal purchases,” the commission said.