Posted on Tue, Apr. 29, 2008

Rising power costs add misery to consumer life

UTILITIES CITE INCREASED PRICE OF COAL

By John Wilen

ASSOCIATED PRESS

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 due to a surge in coal prices over the past year.

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. Meanwhile, 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 an additional 15 percent this year.

"As more of the world develops and uses more energy, and supply tries to keep up with demand, we're going to have these pinch points," said Carol Pfeiffer, director of fuels for the United States for E.On AG, parent company of Kentucky Utilities and LG&E.

Central Appalachian coal, a benchmark grade widely used by power plants, has jumped from about $40 a ton in early 2007 to almost $90 a ton now.

Facing such steep price increases, utilities nationwide are raising electric rates and are likely to push for even more dramatic increases in the coming months. In parts of coal-dependent West Virginia, for instance, American Electric Power Co. rates will rise 15 percent this year. The company attributes the increase, one of the biggest in its history, largely to rising coal costs.

In Kentucky, which like West Virginia gets more than 90 percent of its electricity from coal, the four biggest utilities have raised rates an average of 12 percent over the past 12 months, according to the Kentucky Public Service Commission.

Pamela Earlywine, a single mother of two in Paris, Ky., said her monthly electric bill has risen about 20 percent since last year. "We'll just have to cut back even further," Earlywine said. "I'm already paying at least $30 more every month, so that changes my whole budget."

Utilities see coal prices dipping slightly in coming months and years as supply constraints in Australia and Asia ease, but think growing demand will prevent prices from ever going back to last year's levels.

That's bad news for consumers like Rodrigo Goines, 36, a disabled Lexington, Ky., resident whose government assistance checks barely cover his meager living expenses now.

"I'm not going to be able to afford it," Goines said. "If they keep raising these rates, I'm gonna be in trouble."