Enough coal on hand to keep US cool?

Utilities that rely on coal give cautious assurances they can meet electricity demand of a hot summer.

The United States is heading into what could be a hot summer with high power consumption, and a number of electric utilities are scrambling to make sure they have enough coal on hand.

With at least a few utilities unable to get enough coal shipped by rail, some are resorting to extreme measures - even importing it. One of the more striking recent examples of sending "coals to New Castle" may be CS Energy, a San Antonio-based power company. Struggling to shore up its reserves, it bought 150,000 tons of coal from Colombia, shipped it to Port Arthur, Texas, and then trucked it 140 miles.

It's more than a little ironic: Even though the US guzzles imported oil by the tanker load, it is often called the "Saudi Arabia of coal," with enough domestic reserves to last centuries. But getting America's abundant coal to where it is most needed is a growing challenge for power companies - and the railroads that supply them.

For one thing, rising natural-gas prices have caused power companies to burn cheaper coal far faster than expected. Derailments and other rail delivery problems have also contributed to dwindling coal stockpiles at power companies across the Midwest and South, analysts say.

"We are concerned about the cost and reliability risks of operating under this reduced coal delivery situation," wrote the chiefs of three power associations in a May 1 letter to the Federal Energy Regulatory Commission (FERC). "A minor railroad mishap or equipment failure at a coal mine - events that would not cause any disruption in power generation when stockpiles are more robust - could have serious consequences today," wrote the officials, whose member utilities supply most of the nation with electricity.

The Senate Energy and Natural Resources Committee is set to take up their concerns at a hearing Thursday, which will also include testimony from railroad representatives.

One signer of the letter to FERC is Alan Richardson, president of the American Public Power Association, representing 2,000 municipal utilities that supply 15 percent of the nation's power needs. "It's not a guaranteed problem, it's a potential problem," he says. "I'm hearing a lot of anecdotal information from our utilities, many of which are alarmed but don't want to say much."

Railroad officials say that if the power industry has problems this summer with coal shortages, it will be due mostly to its own policies.

"Electric utilities in the past couple of years have made the decision to reduce their inventories - coal stockpiles - as a cost-cutting measure," says Peggy Wilhide, spokeswoman for the Association of American Railroads in Washington, which represents the nation's railroads.

Rail shipments have rebounded, she says, noting recent record coal shipments and large railroad investments in track maintenance and repairs. Coal industry trade publications also paint a picture of utility stockpiles rebounding strongly in recent months.

Still, is the nation's electric grid at risk? Coal stockpiles for power companies are indeed below the five-year average, but they should meet summer demand, according to an assessment of the grid delivered by FERC last week.

"[Fuel] conditions faced by US electricity markets at the onset of the summer appear to be stronger than last year," the FERC report noted. "While worth watching, staff's view is that coal stockpiles are likely to continue building."

But the North American Electric Reliability Council - an organization that oversees electric-grid reliability - has a more nuanced assessment. Following a significant derailment a year ago in the Power River Basin area of Wyoming, deliveries of coal from there "are increasing, but not enough to restore coal inventories to pre- curtailment levels," its annual summer assessment of grid reliability reported earlier this month.

"If coal delivery problems worsen, the ability of some entities to continue to meet electricity demand might be reduced," the council reported. But it also said that coal delivery "limitations do not appear to present a reliability problem for this summer," even though some utilities might have to purchase power "or use alternate fuels to conserve coal."

Much of the current shortfall, power company officials say, can be traced back to the derailment last year on a central line leading out of the Powder River Basin. Repairs on the line continue to restrict coal deliveries, these officials say.

But some utilities acknowledge that the nation's rail lines are shipping as much coal as they can - and it's still not enough.

Getting coal from the Powder River Basin via the Union Pacific railroad is far cheaper than shipping coal from Colombia. But that's what CS Energy has done to build reserves. "We are hopeful that the railroad will be able to deliver the coal we need to serve our customers this summer," says Bob McCullough, a spokesman for CS Energy.

Concerns over coal stockpiles also run deep at Dairyland Power Cooperative in La Crosse, Wis., which has been scrimping since January to rebuild its coal pile for summer. At one point last winter, the co-op's coal reserves fell to just six days' supply - far below the normal 45-day supply.

"We've experienced severe deterioration in our rail service, but with all we've done we're cautiously optimistic we can meet summer demand," says Deb Mirasola, a Dairyland spokeswoman.