Utilities face coal bottleneck
Some bide time, some raise rates.

 

KANSAS CITY (AP) - As utility companies across the Midwest have updated investors about their operations over the past month, there’s been one constant - an eye toward slower shipments of coal used to fire up electric generators.

A pair of train derailments in May and subsequent repair work on the rail line coming out of the Powder River Basin of Wyoming, one of the nation’s prime sources of coal, has reduced shipments between 10 and 15 percent as a hot summer has pressured utilities to crank out more watts.

The reaction has ranged from some companies saying they have enough stockpiled coal and are merely monitoring the situation to others which are already increasing customers’ bills as they switch to more expensive natural gas or buy extra power on the open market.

"I’d say most utilities are in that first group," said Jason Cuevas, a spokesman for the Edison Electric Institute in Washington, D.C. "Their stockpiles are a little lower than they’d like but, realistically, it isn’t a concern."

For example, Columbus, Ohio-based American Electric Power Co., the nation’s largest purchaser of coal, said moving coal from eastern states flush with Appalachian coal and other methods have kept operations stable.

"Obviously it’s not ideal and creates more challenging coal management issues on our side, but we have been able to manage it," said spokeswoman Melissa McHenry.

But Cuevas said companies that are extremely dependent on Powder Basin coal, either because of geography or because of its lower polluting qualities, could be seeking higher rates for customers by the end of the summer.

"Not to use a cliche, but we’re looking at a ‘perfect storm’ scenario with the problems in rail use, a hot summer and demand for coal up across the board," he said.

Among the hardest hit are Alliant Energy Corp. and Xcel Energy Inc., both of which are looking to customers to help pay their higher operational costs.

Alliant, based in Madison, Wis., and serving 982,000 electric customers in three states, is asking state regulators in Wisconsin for permission to raise rates and recover between $14 million and $22 million in additional costs for its Wisconsin Power & Light subsidiary.

Xcel Energy, based in Minneapolis and serving 3 million customers in 10 states, said in its most recent quarterly filing that it was already buying power from third parties and increasing its use of natural gas to fuel its power plants, as well as reducing the amount of power it sells to other utilities.

The problems date back to May 14 and 15 when two coal trains derailed at different points on the rail line between Wright and Douglas, Wyo., which annually transports 370 million tons of coal, or almost a third of the nation’s supply.

The rail line is owned and operated jointly by Burlington Northern Santa Fe Corp. and Union Pacific Corp. The railroads have begun a series of repairs along a 100-mile length of the line, which are expected to be completed by November.

Arch Coal Inc., a St. Louis-based company that owns the largest mine in the area, said it shipped four million fewer tons of coal in the second quarter than it expected because of bottlenecks on the railroad.