NEW YORK Oct. 8, 2008

As commodity prices have risen, coal has proven no exception. Even as U.S. power plants have been looking more to natural gas, alternative energy, and new technologies in anticipation of new environmental regulation, they've had to scramble to cope with greater price volatility for this once stable commodity, according to a report published today by Standard & Poor's Ratings Services titled "Return Of The King: Coal Markets From A Power Sector Perspective." The degree to which the power sectors strategies to adapt to rising coal prices succeed will have a real impact on their credit quality.

The U.S. power sector accounts for more than 90% of domestic coal consumption. At the same time, about 50% of the kilowatt-hours generated in the U.S. come from burning coal. Clearly, the domestic power industry's fortunes are intertwined with the vicissitudes of the historically stable coal industry.

"Power companies are implementing various fuel strategies to mitigate surging coal prices, and which ones they chose depend on their expectations of where coal prices are going," said Standard & Poor's credit analyst Aneesh Prabhu.

Some utilities are securing long-term supply availability by entering 10- to 15-year contracts that also lock in prices for three to four years before price reopeners. Others are drawing maximum deliverables on lower-priced existing contracts in the hope of entering into contracts at a later date when coal prices might be lower. More companies are blending cheaper western coal with eastern coal or Mid-Continent coal to lower costs. Still others are moving upstream and entering into mining joint ventures to secure a long-term supply.

The reports are available to subscribers of RatingsDirect, the real-time Web-based source for Standard & Poor's credit ratings, research, and risk analysis, at www.ratingsdirect.com. If you are not a RatingsDirect subscriber, you may purchase a copy of the report by calling (1) 212-438-9823 or sending an e-mail to research_request@standardandpoors.com. Ratings information can also be found on Standard & Poor's public Web site at www.standardandpoors.com; under Credit Ratings in the left navigation bar, select Find a Rating, then Credit Ratings Search. Members of the media may request copies of these reports by contacting the media representative provided.