Amid uncertain future, NH coal plant owner and its supplier square off in federal lawsuit
Merrimack Station in Bow is the last active coal plant remaining in New England. (Hadley Barndollar | New Hampshire Bulletin)
When a coal shipment arrived last year in New Hampshire with sulfur content allegedly too high to burn as is, the owner of Merrimack Station refused to pay for it or a subsequent shipment. It then proceeded to terminate a contract with its UK-based coal supplier.
Now, the supplier, Javelin Global Commodities, is suing Granite Shore Power in federal court alleging nonpayment in the millions and breach of contract.
Granite Shore Power is the investment group that owns the coal-fired Merrimack Station in Bow, as well as generating stations in Newington, Tamworth, and Northumberland. While the U.S. District Court lawsuit focuses primarily on two specific coal shipments and the aftermath, it also illustrates a relationship “fraught with conflict” between the owner of New England’s last active coal plant and its coal supplier.
The lawsuit proceedings come amidst an uncertain time for Merrimack Station, after the coal plant failed to obtain an obligation in regional grid operator ISO New England’s most recent forward capacity auction. At the annual auctions, energy capacity is secured to power the grid three years in advance.
That major development in the regional energy market signaled to many the potential end of coal in New England. But Granite Shore Power wasn’t among facilities this month that indicated to ISO New England they were exploring retirement.
In the federal lawsuit filed in February Javelin alleges GSP’s nonpayment and its subsequent “wrongful termination” of an agreement between both companies “leads to the inescapable conclusion that GSP is in a dire financial position and potentially insolvent.”
Javelin alleges GSP paid invoices on time “only once” over its last 15 shipments.
But GSP stands by its actions regarding the two coal shipments in question and in response to the lawsuit cited repeated performance issues with Javelin – including quantity, quality, and timeliness. Plus, it rejects attempts to conflate the lawsuit with its overall financial status.
“Javelin would have this Court believe that this case is about whether GSP can pay for nonconforming coal that Javelin shipped to GSP. But in reality, that issue is nothing more than smoke and mirrors,” attorneys for GSP wrote. “The real issue is Javelin’s failure to deliver the quantity and quality of coal that it was required to deliver to GSP under the contracts at issue.”
Merrimack Station doesn’t run often these days
Merrimack Station operates at less than 10 percent capacity these days; a “peaker” resource called on by ISO New England when the electric grid experiences peak demand on the hottest or coldest days of the year.
The station has two coal-fired steam units and two kerosene field combustion turbine units – all of which now serve peaking and seasonal roles. Coal’s place in New England’s fuel mix has declined significantly over the last two decades, synchronous with the move away from dirtier fossil fuels, and toward natural gas and renewables.
GSP says Merrimack Station has reduced its total carbon emissions by more than 95 percent since 2005, and today emits less than 1 percent of total carbon emissions produced by all ISO New England power generators annually. When the plant does run, though, its average emissions rate is more than twice that of a natural gas facility, according to the Environmental Protection Agency, producing 2,180 pounds of carbon dioxide per megawatt-hour.
Data from the Energy Information Administration shows Merrimack Station burned 146,526 tons of coal in 2022, generating 305,456 megawatt hours from coal exclusively. It didn’t burn any coal for five months of the year.
Merrimack Station has long been under fire by anti-coal groups as the last remaining active plant of its kind in the region. Activists have attempted to block trains carrying shipments of coal to the plant, and dozens of arrests have resulted from on-site protests over the years. They want to see the coal plant shuttered, but GSP claims doing so wouldn’t have any measurable effect on the climate.
Forward capacity auction signals uncertain future
Last month, Merrimack Station failed to qualify in ISO New England’s annual forward capacity auction that secures enough power to feed the electric grid three years in advance. It was the first time the coal plant didn’t obtain an obligation in the auction, which this year saw an influx of new renewable energy sources.
It represented a major financial loss for Granite State Power. In 2019, New Hampshire Business Review reported Merrimack Station was to receive more than $188 million from ISO New England between 2018 and 2023. Currently, Merrimack Station has forward capacity obligations in place through 2025.
“We already knew that coal was on the decline in New England, we already knew the days were numbered,” said Marla Marcum, a No Coal, No Gas activist and director of the Climate Disobedience Center.
GSP has given no indication that Merrimack Station is on its way toward closure, though. Dan Dolan, president of the New England Power Generators Association, said the coal plant isn’t on this year’s list of facilities seeking to retire ahead of the next forward capacity auction.
Dolan explained that when a power generator fails to secure a forward capacity obligation, one of two things could be true. In the past, some facilities that are “right on the margin” tend to toggle in and out – some years they’re selected, and others they’re not.
There are other instances when a plant doesn’t get selected “and that becomes an initial indication that retirement is in the near future,” Dolan said.
“It seems to me (Merrimack is) clearly going to seek another capacity obligation,” he added. “At least for now it does not appear to indicate any imminent closure or retirement of that plant.”
But Marcum contends the latest auction “really puts the financial vitality of that operation three years from now in question.”
GSP would not answer specific questions from the New Hampshire Bulletin about the future of Merrimack Station or the company’s overall financial health. But it did say the plant “will continue to be a vital resource when energy demands are at their highest for families and businesses who depend on reliable electricity generation.”
It also pointed fingers at anti-coal activists for allegedly elevating the Javelin lawsuit as part of a campaign that “falsely conflates a commercial dispute as an indication of financial insolvency, suggesting an imminent demise of Merrimack Station.”
“Any attempt to make such a connection is, unsurprisingly, wholly inaccurate and disingenuous,” it said.
What the federal lawsuit says
Javelin’s federal lawsuit, filed in the U.S. District Court for the Southern District of New York, details an agreement with GSP for approximately 303,000 tons of coal via multiple installments over a nearly four-year period.
The relationship between the two entities had been difficult for some time, the lawsuit alleges, but things got sticky in December and January when GSP didn’t pay for two shipments, after the first allegedly didn’t meet quality standards. What follows is a messy commercial dispute.
GSP says it has the right to withhold payment for coal shipments that do not meet the standards agreed upon by the contract with Javelin. The first delivery of 22,000 tons of coal “exceeded the target sulfur specifications and also exceeded the rejectable limit specified in the contract,” GSP wrote, meaning it could not be used for environmental and regulatory reasons.
Javelin denies the coal being “completely unusable as-is,” as claimed by GSP, and asserts that GSP never rejected the shipment within the time frame allowed by their agreement.
The parties are also at odds over a second shipment that GSP has refused to pay for – alleging late arrival and questions about its sulfur content.
GSP proceeded to terminate the parties’ contract, and now, both entities are seeking damages. GSP admits in the lawsuit that it owes Javelin approximately $8.5 million for the last two coal shipments, but claims “Javelin owes GSP much more than that based on its multiple breaches of contract dating back to 2021.”
Javelin counters that damages resulting from GSP’s “breaching conduct” total more than $25 million.
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