Falling gas prices drive utilities to push coal aside

Printer-friendly versionPrinter-friendly versionSend by emailSend by email
Latest Oil and Gas News: 
April 13, 2012

(Wall Street Journal; April 10) - Plummeting natural gas prices are pushing U.S. industries into virgin terrain, even beginning to dislodge cheap Western coal from its once-untouchable perch as the nation's favorite fuel for power production. The shock wave for industry could intensify this summer because the U.S. is running out of room to store the glut of natural gas, which could drive gas prices down to lows not seen in decades.

The situation is "without question, unprecedented," said Fred Metzger, vice president of gas-storage engineering for pipeline giant Kinder Morgan. Cheap gas is stealing power-generation markets from coal, spreading gloom across the mining industry. The big winners are electricity consumers. In February, Boston utility NSTAR told its business customers it will cut their retail electricity rates 34% this spring, to 5.5 cents a kilowatt hour from 8.5 cents. In May, it expects to announce cuts for residential customers.

Southern Co., for many years one of the largest burners of coal in the U.S., has fallen for low gas prices. "We are in the transition in a big way" from coal to natural gas, says Tom Fanning, chief executive of Atlanta-based Southern. The company is building three gas plants as replacements for coal-fired units - and plans for more conversions. In 2008, when gas prices were high, Southern got almost 70% of its electricity from coal. Today, less than half as much power comes from its coal fleet. Gas plants now generate 46% of its electricity, up from 16% four years ago.

Syndicate content