Southern boosts natgas use 40 pct, coal down 20 pct

HOUSTON, April 25 Wed Apr 25, 2012 5:33pm EDT

HOUSTON, April 25 (Reuters) - Southern Co utilities will burn 40 percent more natural gas this year than last to take advantage of the lowest gas prices in a decade, and pare coal use by 20 percent, executives said on Wednesday.

Southern Co Chief Executive Tom Fanning said the company's four utilities are projected to burn more than 600 billion cubic feet of gas this year, up from 430 bcf last year and nearly three times the amount used in 2007 when Southern's coal use was at its peak.

"Southern's gas purchases now account for more than 2 percent of all U.S. gas consumption, making us the third-largest user of natural gas among U.S. utilities," Fanning said on a call with analysts.

Coal burned this year will fall to about 45 million tons at Southern utilities, Fanning said, down from 56 million tons last year and the nearly 80 million tons burned in 2007.

Overall, gas is projected to account for 47 percent of Southern's fuel mix in 2012, while coal's share will likely slip to 35 percent and nuclear generation will hold steady at 18 percent, Fanning said.

That compares with a 16 percent share for gas in 2007 and a 70 percent share for coal, he said.

If gas prices remain low, Fanning said, the fuel could grow to 57 percent of Southern's fuel mix.

Southern has about 43,000 megawatts of generation across the Southeast.

The first of three new gas-fired units at Plant McDonough-Atkinson, rated at 840 MW, came online late last year, and two more units will begin commercial operation in April and November, Fanning said.

As the utilities reduce coal use, they will remain flexible should gas prices rise, Fanning said. The companies are working to match coal purchases to utility need, to maximize onsite and offsite coal storage, defer purchases and renegotiate coal and rail contracts when possible.

Fanning said cost and schedule targets "remain achievable" for the company's two major construction projects -- the $14 billion nuclear units at Plant Vogtle in Georgia and a $2.8 billion advanced-coal plant in Mississippi.

He said the Department of Energy has recently proposed new conditions for the $8.3 billion loan guarantee granted to the partners building Vogtle on a conditional basis two years ago.

"We still remain hopeful we'll have loan guarantees, but as a matter of course since Solyndra the DOE has proposed some new conditions that really relate to project finance conditions rather than corporate credit," Fanning said. "We are working through those issues and hope we will reach a successful conclusion."

Should the agency "ask us to do something that is not in the customers' interest, we won't go forward," Fanning added.

Mississippi regulators on Tuesday reissued a certificate to allow construction to continue at the integrated gasification combined-cycle power plant in Kemper County.

Southern reported first-quarter earnings of $368 million, or 42 cents per share, down from $422 million, or 50 cents a share, in the year-earlier quarter, due to a warmer-than-normal winter.

Revenue fell 10 percent to $3.6 billion from $4.01 billion as power sales fell 5 percent, according to the company.

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Comments (1)
ZBan wrote:
The situation with North American natural gas prices reminds me of the late 90′s, when most “experts” were worried that an oil glut was aproaching, which will push prices bellow $10 a barell for perhaps decades. Shale gas is overhyped, coal still has a bright long-term future.

Apr 26, 2012 2:01pm EDT  --  Report as abuse
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