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March 19, 2008

Electric prices could soar starting next year

As if high gas prices aren’t bad enough, this certainly isn’t good news.

The cause? Most electric utilities have long-term coal contracts, similar to what some airlines have had on fuel. But in most cases, those contracts run out next year, and coal prices have skyrocketed in the past few years. The prices on the two most-mined American grades of coal are up 93 and 64 percent in the last year.
“Watch out, consumer,” said David M. Khani, a coal analyst at Friedman, Billings, Ramsey Group. “You’re probably going to see accelerating electricity prices in 2009, 2010 and 2011.”

And, some consumers are starting to feel a pinch now.
Appalachian Power and Wheeling Power, both American Electric Power subsidiaries, on Feb. 29 filed papers seeking approval in West Virginia for a 17 percent increase in revenues, mainly to pay for costlier coal. If the request is approved, a residential customer using 1,000 kilowatt hours a month would see his bill increase from $64.55 to $73.94, starting in July.

Coal is used for about half of American electric power production. It also is of importance in steel production, among other things.

And, coal exports are booming, as Big Coal licks its lips. “Bringing coals to Newcastle” no longer signifies an absurdity, but with British coal mostly tapped, instead means big business.

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