Even gas-rich Texans discover advantages in use of coals

A coal yard in Texas? It seems out of place in a state know best for oil derricks and natural gas wells. But the San Antonio utility that operates this yard is betting it is the look of the 1980s.

City Public Service, the municipally owned utility here, was something of a leader nationally in the early 1970s in its push to find alternative boiler fuels to natural gas. It turned to coal well before the 1978 Power Plant and Industrial Fuel Use Act made coal conversion a major objective of national energy policy.

Today, San Antonio looks upon its somewhat costly fuel diversification program, of which coal is the central component, as a magnet that will draw industry this decade. Whereas cheap fuel once attracted northern companies to the Sunbelt, a sure supply of electricity not dependent on a single fuel source will lure them to San Antonio in the coming years, utility officials here figure.

"Our fuel mix is our big plus. there are risks in all types of fuels, but in our view oil and gas are becoming the most unreliable of them all," said Arthur von Rosenberg, manager of planning at City Public Service.

Still, San Antonio has found there are plenty of problems associated with coal conversion. A principal one for this city has been transportation of the fuel.

City Public Service has waged a continuous and still unsettled legal battle in recent years over the freight rates charged by Brulington Northern, which hauls the coal to Texas from Wyoming. Those freight rates, for example, soared 76 percent in one 18-month period, according to the utility.

City Public Service has argued it is a victim of predatory pricing since the railroad has a monopoly on the coal hauling route to Texas. Burlington concedes its rates have risen rapidly, but claims the rates are necessary to keep up with inflation, the cost of capital, and the unexpected wear and tear on its track beds from the steady icnrease in coal shipments.

Nonetheless, the bottom line for San Antonio utility customers is that although electricity rates have more than doubled since 1973, the increase is less than it would have been if the utility had continued to burn only natural gas.

The quest for a broader fuel mix began in 1973 when the utility, then totally dependent on natural gas, received curtailment orders from its gas supplier. Looking to the future, the utility decided the days of cheap and plentiful natural gas were over and embarked on a program of converting its boilers to burn heavy oil, and bringing on line new coal facilities and nuclear power.

The shift in fuel use has been dramatic. City Public Service burned no coal as recently as 1976, and now generates about 60 percent of its power from coal and the remainder from oil and gas. The utility claims it is burning enough coal to save the equivalent of 8.7 million barrels of oil this year.

Also, the utility is a partner in the South Texas Nuclear Project under construction in Bay City, Texas. San Antonio hopes to begin using nuclear power in 1985, assuming the project is built according to schedule. The Nuclear Regulatory Commission threatened a construction shutdown several months ago when it found shortcomings in the project's quality assurance program. But federal regulators recently lauded the project for improvements in those areas, and City Public Service expects construction to continue.

Too, the capital cost of thenuclear project has risen from an initial estimate of $1 billion to the current projection of $2.7 billion.

However, Mr. von Rosenberg says, "the economics of nuclear power still look good" in comparison with the cost of other fuel sources. One advantage, he said , is that lagging interest nationally in nuclear power is holding down the price of uranium, which will mean savings for those utilities that use nuclear power.

City Public Service has also invested in Texas lignite -- a low-heat-value coal. it owns 20 million tons of lignite and is looking for more to supply a new power plant it plans to operate in 1989.

Overall, these various fuel sources are expected to provide San Antonio with more than enough electricity for its growing economy. The city already claims 30 percent more generating capacity than it needs, above the standard reserve margin. And although officials here forecast the city's power needs will expand about 5.7 percent annually over the next 20 years, compared with one study's prediction of an average 3.5 percent annual growth for the US, no shortages in power supply are anticipated.