The D.C. Public Service Commission yesterday said it will investigate the plans of Potomac Electric Power Co. to convert a power plant that burns oil to burn both oil and natural gas.
In light of falling oil prices, the PSC said it is raising questions about the $11.5 million conversion project at Pepco's Chalk Point Plant in Maryland. Pepco said it will save $10 million in fuel costs this year if the conversion is completed by July.
"The PSC wants to take a close look at Pepco's plan," Howard Davenport, PSC general counsel, said. "The PSC has an obligation to ensure that Pepco keeps its costs low and efficiency high. Construction expenses and fuel costs are important factors to examine."
The PSC has ordered the utility to explain what effect a further drop in oil prices would have on Pepco's investment, which ultimately will be paid for by the utility's 580,000 customers.
The price of natural gas purchased by electric utilities has fallen from a peak of $3.89 per 1,000 cubic feet in July 1984 to $3.49 in August 1985. Residual fuel oil peaked at 83 cents a gallon in 1984, fell to 75 cents a gallon in August 1985 and still is falling.
About 8.2 gallons of residual heating oil equal 1,000 cubic feet of gas for heating purposes, so by August 1985, residual fuel oil cost about $4.73 for the same heating power provided by $3.49 worth of natural gas.
"Conversion . . . will allow Pepco to obtain lower-priced fuel for these units in the near term and will allow long-term flexiblity for adjusting to fuel market conditions," Tom Welle, a Pepco spokesman, said. Fuel savings will be passed on to customers, he said.
"While oil prices have decreased, the price of natural gas has softened as well -- gas is still viewed to be a good buy at this point," he said.
Because the Chalk Point plant has not used natural gas in the past, Washington Gas Light Co. will have to build a five-mile-long pipeline to bring natural gas from the Columbia Gas Transmission Corp. pipeline to Chalk Point, Welle said. Washington Gas Light Co. has just received approval from the Maryland Public Service Commission for the project, according to the Office of the Maryland People's Counsel.
The Pepco project must be approved by the Maryland PSC. The D.C. PSC does not have to approve the project because it is not a new generating facility, Welle said. The D.C. PSC, however, is reviewing the project as part of its assessment of a productivity improvement plan the utility filed with the PSC in mid-January.