Utilities come to terms with less coal

By Ben Berkowitz

NEW YORK (Reuters) - As they have for almost a year, electric utilities continue to complain that they are not getting enough coal -- but now, they seem to be accepting that lower supplies and smaller inventories are the new normal and will be for the foreseeable future.

In interviews this week at the Reuters Global Energy Summit, industry executives and regulators all agreed that the reality is coal shipments will not reach contracted levels any time soon and stockpiles will have to be smaller than they were before.

"If your coal deliveries are being reduced then you know there's a problem. Things have been levelized but we're not back to 60-day stockpiles, we're at 30-day stockpiles," said David Owens, executive vice president of the Edison Electric Institute, a key industry organization.

"I think it's a multiplicity of factors but I think the most significant factor is coal delivery," Owens said. "There have been some difficulties getting our stockpiles up to prior periods."

In some cases, stockpiles are falling even lower, to levels that are raising concern among regulators.

"It seems intuitive to me to say we've had this increased demand for coal that no one anticipated because we don't anticipate very well, and it's going to be a long-term issue," Nora Brownell, a commissioner of the Federal Energy Regulatory Commission, said at the summit. "Fourteen (days of inventory) might make me nervous."

MORE DEMAND, MORE TRACK

Many of the problems stem from heavy rains that caused a couple of train derailments last May on the track out of the vast Powder River Basin, a crucial source of coal. But it also has to do with a shift by the utilities to more coal, as the price of natural gas soared to records last year.  Continued...