Coal costs surge boosts power rates, more hikes coming
This is an archived article that was published on sltrib.com in 2008, and information in the article may be outdated. It is provided only for personal research purposes and may not be reprinted.

NEW YORK - Consumers struggling with high gas prices, rising food costs and falling home values have something new to worry about - sharply rising electricity rates because of a surge in coal prices.

There is an abundance of coal in the United States, but like many other commodities, its price is increasingly dependent on events elsewhere in the world. Snowstorms this winter cut coal production in China and heavy rain flooded mines in Australia - the world's largest coal exporter. Demand for coal to generate electricity and make steel is rising almost everywhere, especially in fast-growing China and India.

That has increased the world's appetite for American coal, helping to push up the price of the fuel utilities burn to drive the steam turbines that generate half of the country's electricity. U.S. coal exports jumped 19.2 percent last year, according to the Energy Department, and are expected to rise another 15 percent this year.

Central Appalachian coal, a benchmark grade that's widely used by power plants, has jumped from around $40 a ton in early 2007 to almost $90 a ton. Coal from the Powder River Basin in Wyoming and Montana, which has about three-quarters the heat content of Central Appalachian coal, jumped from less than $10 a ton to almost $15 a ton over the same time period.

Utilities must burn more Powder River Basin coal to generate an equivalent amount of energy, and it must travel east by rail, which adds significantly to its final cost.

Facing such steep price increases, utilities nationwide are raising rates and are likely to push for even more dramatic increases in electric rates in the coming months.

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