* Gas displacing record amount of coal-fired power
* Lakeland uses gas plant for baseload power, not coal
* Lakeland sells coal to avoid railroad penalties
By Scott DiSavino
Feb 10 The City of Lakeland in Florida
agreed to sell surplus coal not needed to fuel one of its
coal-fired power plants to a cement company as weak natural gas
prices have made it uneconomic to continue burning the coal.
The 345-megawatt coal-fired Unit 3 at the McIntosh power
plant has traditionally provided the city's baseload power.
But recently with gas prices so cheap, the municipal utility
is using the newer combined-cycle, natural gas-fired 369-MW
McIntosh 5 to provide the city's around-the-clock power needs,
Lakeland Electric spokesman Kevin Cook told Reuters.
McIntosh 3 entered service in 1982, while the units at
McIntosh 5 entered service in 2001 and 2002.
Natural gas-fired power plants are displacing coal-fired
generation in record numbers across the country because gas
prices are near a 10-year low due to record production
from shale gas, making gas the cheaper fuel.
Cook said the sale of about 69,000 tons of coal from its
McIntosh 3 coal plant to a local cement company would help the
municipal utility avoid a penalty of more than $1 million.
The utility has a five-year contract with railroad CSX
to take 700,000 tons of coal per year but only expects
to need about 500,000 tons this year. The railroad
transportation contract, which was negotiated when coal was much
cheaper than natural gas, runs through the end of 2013.
The contract allows CSX to impose a fine of $12 per ton for
every ton below 700,000 that Lakeland takes.
Lakeland is not the only utility dealing with coal
transportation issues due to the weak natural gas prices. Energy
analysts say power companies up and down the East Coast and in
the Midwest are also burning more gas and less coal and dealing
with coal transportation contracts.
Lakeland has not paid any fines yet, but said it is running
out of space to store the extra coal. So the contract to sell
some of the coal to the cement company, American Cement Co, will
help the utility meet its minimum coal tonnage obligations with
American Cement uses the coal to produce cement.
Lakeland buys its coal from the Illinois basin for about $68
a ton and also from the Central Appalachia region for a bit
more. The utility also pays about another $35 a ton to CSX for
Lakeland said on its website it would sell the cement
company about 69,000 tons of Illinois basin coal for $90 a ton
and expects to generate a one-time revenue of about $100,000.