Slow PRB coal shipments shrink stocks at Westar Energy Center

Slow PRB coal shipments shrink stocks at Westar Energy Center

Washington (Platts)--28Mar2006

Another power plant, this one in Kansas, said Monday that slow coal deliveries
have led to dwindling stockpiles.

The coal stockpile at Westar Energy's Lawrence Energy Center in Lawrence,
Kansas, is at 75% of its normal size -- about a 10-day supply -- Randy Rahm,
Westar's director of fuel services, told Platts Monday.

"It's below what we would like to see," Jerry Croaker, Westar's manager of
fuel services, told Platts. "We are managing our dispatch to match the coal we
receive."

Lawrence is the third power plant to report extremely low stockpiles of Powder
River Basin coal since the beginning of March. Basin Electric Power
Cooperative's Laramie River station in Wheatland, Wyoming, was the first to
say low coal shipments could cause it to curtail production. The plant's usual
30-day stockpile was down to six days.

Last week, Otter Tail Power's Big Stone plant in Milbank, South Dakota,
reported cutting back generation to 75% of normal (PCT 3/22). Its stockpile
had shrunken to a 10-day supply.

Delays and troubles along the railroad lines between Wyoming mines and the
power plants have caused stockpiles to shrink. It's an issue that has many
utility companies fearing they might have to turn to alternative fuels and
other costlier options, such as natural gas or buying coal or power on the
spot market, to keep the lights on.

The problems began last May when heavy snow and rain caused BNSF and Union
Pacific derailments, Rahm said. Repair work on the Joint Line operated by the
two railroads lasted into the second week of December. Other natural
disasters, including October flooding in northeast Kansas, have damaged
railroad lines and interrupted supply.

Lawrence gets its coal from Arch Coal's Black Thunder mine in Wyoming, Croaker
said.

"The nation is really in a pinch with this deal. We're not much different than
anyone else," Rahm said. "We're just working through it and managing our
supply."

Railroads don't deserve all the blame

But Rahm said blame doesn't lie solely with the railroad. Lawrence couldn't
take deliveries in April while it upgraded its train handling equipment. "Yet
by the end of 2005, we were gradually building [stocks] before Mother Nature
called." The PRB had extremely cold temperatures and a blizzard in January
2006.

Westar is looking to install a rotary unloading system at Lawrence that could
cut unloading time from the current 20 hours to about four hours, Rahm said.
He also noted that the plant has not had a scheduled outage that would allow
it to refill stocks.

"Our next outage is scheduled for the fall," Rahm said. "We have to hump it
through summer."

Normally, the plant receives 16 to 19 135-car train sets/month, Rahm said. The
company has five train sets for Lawrence, another nine sets for its Jeffrey
plant in St. Marys, Kansas, and expects delivery on two more sets soon.

As of Monday, deliveries were only running two trains behind for the first
three months of 2006, Rahm said. "We're working closely with BNSF. We just
haven't been able to recoup from last year. We're taking what we can get."

Weststar has gone to the spot market to buy electricity. "We're buying in the
shoulder months to conserve coal for peak demand," Rahm said.

PRB coal is in big demand because it can meet Clean Air Act requirements
relatively easily. But moving it is expensive -- transportation costs account
for more than half the price of coal purchases, Rahm said.

BNSF spokesman Pat Hiatte told Platts the increased demand for coal from the
PRB has the railroad working with utility companies on transportation issues.
Despite concerns about interruptions, he said the company shipped 8% more PRB
coal during January and February than during the same months in 2005.

"It's one of those things that is continuous, and you have to keep your eye on
all that and invest accordingly," Hiatte said.

Through capital improvements, BNSF is trying to ensure that its rail lines can
handle the nation's demand for coal, Hiatte said. This year, the company has
said it will spend $2.4 billion on capital improvements, including expanding
the rail yard in Lincoln, Nebraska, and adding about 50 miles of track on the
Joint Line in the PRB and Nebraska.

-- Mark E. Heckathorn, mark_heckathorn@platts.com

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