Oklahoma coal plant's future bleak amid cheaper power

POTEAU, Okla. (AP) — An independent coal-fired electricity generator and its about 100 employees in eastern Oklahoma face an uncertain future as the power market becomes more competitive.

The AES Shady Point plant in Le Flore County could close as soon as January, the Oklahoman reported

Shuttering the 360-megawatt plant may be the company's only option after being notified this month that Oklahoma Gas & Electric Co. won't proceed with another extension of its long-running power purchase agreement with AES Shady Point, Vice President Lundy Kiger said Tuesday.

"As an independent, it would be difficult for us to bid into the larger market as a power producer," Kiger said. "But we see ourselves as a hedge against an increase in prices for natural gas. In the next couple of years, we could see that happen, and if it does, that would put coal in a better situation."

OG&E entered into the power purchase agreement with AES as part of its compliance with the 1978 Public Utility Regulatory Policies Act, which promotes energy conservation.

The law requires utilities to consider buying electricity from cogeneration plants built by nonutility power producers.

At that time, costs for that power were cheaper than what the utility would have spent to build and run power production plants on its own.

AES had met the cogeneration requirement and the cost parameters for power.

But its cost to produce power for OG&E has become comparatively more expensive than other alternatives over time.

The utility notified AES it likely would seek proposals from other power providers to consider alternatives.

"We are more efficient, not in an energy crisis and natural gas prices are low," said OG&E spokesman Brian Alford. "We believe there are ample savings to be had by looking in the market."

Energy consultant Loyd Drain said he's not surprised the larger utility is considering other potential power sources because power production costs are low across the power grid that serves the Great Plains.

"That is happening all over the country," Drain said. "Renewable prices have gone down so much, a lot of these coal plants around the country have operated at a loss for consumers, because replacement power is cheaper."