West Virginia coal generation drops off

WEST VIRGINIA - West Virginia coal-fired power generation plummeted in the early part of this year.

Electricity made from coal in the state was down by almost a quarter January through April 2009 compared with 2008, according to figures released by the U.S. Energy Information Administration.

Coal-fired generation in the state fell almost 7,400 thousand megawatt-hours compared with the same period in 2008, a drop of more than 23 percent.

ItÂ’s much bigger than the slide that occurred nationwide.

Coal-fired power generation across the U.S. dropped 12.2 percent for the same period year over year, compared with a decline of 4.7 percent in electricity from all fuel sources combined.

Two conditions are coming together to force the drop in coal-fired generation in the region, according to American Electric Power spokesman Pat Hemlepp.

First is the general recession-induced drop in demand for goods.

“Large industrial customers have either shut their doors or curtailed manufacturing of whatever product they manufacture, so that reduces their demand for electricity,” Hemlepp said.

Year-to-date through April nationwide, residential and commercial demand, which make up nearly three-quarters of U.S. retail sales, fell by less than 1 percent compared with the previous year, about 8,400 thousand mwh.

But industrial demand, representing a quarter of retail sales, fell by nearly 13 percent — 41,500 thousand mwh.

The loss of industrial demand was led in West Virginia by the closure in February of the Century Aluminum smelter in Ravenswood. That single plant represented 11 percent of electricity demand for AEPÂ’s Appalachian Power.

Second, Hemlepp said, is the “extremely, extremely low” price of natural gas.

“Over the past couple years when natural gas had reached $12 to $14 per million Btu, coal was the obvious choice,” he said. “Natural gas is about $3.40 right now. At $3.40 it’s very competitive with coal.”

Allegheny Energy is experiencing a similar drop in demand.

Sales to AlleghenyÂ’s own customers were down 2.2 percent in the first quarter from the previous year, with industrial demand down almost 12 percent, according to the companyÂ’s first quarter filing on system-wide totals for generation and sales in and out of West Virginia.

But Allegheny also sells some of its power outside of its system.

Taken together, demand for AlleghenyÂ’s power was down nearly 20 percent in the first quarter.

“That’s clearly an outcome of what’s going on with the economy,” said Allegheny Energy spokesman Allen Staggers. Although neither Hemlepp nor Staggers have figures yet for the quarter ending June 30, Staggers offered some observations.

“One, the economy has not turned around,” he said. “And two, it seems from just a casual look that the weather so far this summer has been mild” — meaning low use of air conditioning.

Hemlepp noted that AEP does not anticipate layoffs at coal-fired plants.

To keep fuel expenditures in line with sales, the utilities are working with their suppliers to spread out deliveries where possible.

“These are the same coal suppliers that we worked with a year or so ago,” Hemlepp said.

“When coal prices were much higher and they had opportunities to sell elsewhere, we were able to adjust contracts to benefit them,” he said. “Now the issue is on the other side of the contract and we’re working with them to see what can be done.”

At Allegheny, “some of the contracts do have the ability for us to defer or change the delivery time frame of coal that is actually delivered to our stations,” Staggers said. “By utilizing that option in the contracts that have that option, we’ve been able to manage our coal inventories in spite of lower demand for electricity.”

Less Coal Burned, Needed Utilities not only in West Virginia but beyond the stateÂ’s borders as well may be burning less West Virginia coal.

Typically referred to as “half” the nation’s power supply — a number that ranges in recent years from around 48 to around 51 percent — coal has declined against other fuels, making up just 46 percent in the first four months of the year.

Among the states, only Georgia had a larger decrease in coal-fired generation than West Virginia from January through April, at almost 7,800 thousand mwh and 28 percent.

Georgia gets most of its coal from Kentucky and Wyoming, according to EIA data.

Most West Virginia coal sent to other states for power production goes to North Carolina and Ohio.

In those states, power production from coal is down 16 percent and 13 percent respectively for the first four months of 2009 over 2008.