U.S. utilities to burn more coal as natgas prices climb -traders

March 15 Fri Mar 15, 2013 7:57am EDT

March 15 (Reuters) - U.S. utilities will use more coal and less natural gas to generate power as coal becomes cheaper and gas more expensive, electricity traders said on Friday.

The relative price difference between NYMEX Central Appalachian coal and NYMEX Henry Hub gas is at its widest since June 2011 at almost $1.50 per million British thermal units (mmBtu), according to Reuters data.

Natural gas traded at $3.87 per mmBtu on Friday morning, while Eastern coal was selling at $2.40 per mmBtu.

Prices of Central Appalachian coal have slipped to their lowest levels since late January.

Meanwhile, natural gas prices climbed to their highest levels since November due to four straight weeks of larger-than-expected drawdowns from inventories.

Energy traders, however, said some coal plants remained more expensive than gas units by about 15 cents per mmBtu. Gas plants are about 25 percent more efficient than coal plants, they said, and it costs about $1 per mmBtu to transport coal from the mine to some plants by rail, but just a few cents to transport gas by pipeline.

In 2012, the price of gas, which has historically been more expensive than coal, dropped to a more than 10-year low due primarily to record production from shale.

Those weak gas prices depressed power prices to at least decade lows in most regions and led generators to switch from coal to gas plants in record numbers.

Since 2009, generators have announced plans to shut more than 45,000 megawatts of coal-fired capacity over the next several years as the weak power prices make it uneconomical for them to invest in emission control equipment needed to keep the older coal plants compliant with stricter environmental rules.

The biggest U.S. coal-fired power companies include units of American Electric Power Co Inc, Duke Energy Corp , Tennessee Valley Authority, Southern Co, Xcel Energy Inc, NRG Energy Inc and FirstEnergy Corp .