THE POTOMAC Electric Power Co. is facing an interesting business decision and one that will have repercussions for its customers: it is considering whether to make a last-minute switch in the design of an oil-burning power plant called Chalk Point 4. The switch would make the plant coal-burning and, the thinking goes, thereby save the company and its customers money, since coal is currently cheaper to burn than oil. At first glance, the logical decision would seem to be to make the change. Last month, a Public Service Commission hearing officer came to this conclusion and urged Pepco to do so. His recommendation has no official standing.
But the decision facing Pepco is not so simple as whether to burn cheap coal or expensive oil. With the plant already 70 percent complete (ready to be opened next year) and Pepco needing to replace plants that are scheduled for closing, there is the problem of delay. Another problem is the cost of making the change. Pepco estimates that a $700 million price tag would accompany any remodeling of the plant to allow it to handle coal. Is the price difference between coal and oil large enough to pay that debt and the interest on that investment?
Consider two points: Chalk Point 4 will not be used to satisfy the day-to-day electrical needs of the Washington area; it will be used only when there is a near peak-load situation requiring a temporary burst of energy. In addition, the current difference in the price of coal and oil is not nearly large enough to pay for the conversion of the plant to coal.
Whatever decision is made will be questioned. Before the oil embargo, oil was the preferred fuel for power plant boilers because it was cleaner to burn than coal. Now coal is preferred because of price. But it is utterly uncertain how much of a price advantage coal will hold in the future. Still, a decision must be made now. Considering that Pepco's facilities are already 80 percent coal-fired and that the cost of the conversion of Chalk Point 4 would lead Pepco into an uncertain bond market, it would seem questionable for Pepco to take the risk of doing anything but keeping Chalk Point 4 on oil.