By Jeanine Prezioso
NEW YORK Oct 24 American Electric Power Co Inc
, which burns mostly coal to generate electricity, said
on Wednesday it has increased the use of natural gas-fired
electricity by 50 percent year-to-date as the cost of the fuel
has generally remained lower.
But a recent rise in gas prices above $3 has forced the
generator back to using coal in the near-term, indicating the
precarious and narrow ledge the two fuels share until more
gas-fired capacity is built as coal units are expected to
"The coal capacity is picking back up," said Nick Akins, AEP
president and chief executive, during the company's third
quarter earnings conference call on Wednesday. "For us, you get
into the gas price of $3 to $3.25 per (million British thermal
units) and you will start the switch back to coal."
U.S. power generators have switched to using natural gas
more consistently beginning in 2009 when production peaked and
prices began to drop.
But on a fuel cost basis, gas has become more expensive to
burn since September when coal prices slipped to their lowest
level in more than two years.
Natural gas prices had dropped to a 10-year low in April
just below $2, which prompted some switching in the months
following, but forecasts for a colder winter this year that will
increase demand for the fuel to heat homes have provided a
Gas futures prices have steadily and sharply risen above $3
per mmBtu since Sept. 24.
In addition, production that has somewhat flattened,
relative to giant leaps seen between 2009 and 2011, has aided
market perception that the balance between supply and demand is
tighter, helping to boost prices.
AEP owns and operates some 80 power generating stations in
the United States, totaling about 38,000 megawatts. About
two-thirds of that is coal-fired generation, it says on its
The company's coal mines are located close to its power
plants and it has favorable contracts for the fuel that help to
keep the cost of switching back to burning coal lower, Akins
said during the call.