War on Coal

There is no doubt that the coal industry has problems. Prices are lower than they were a few years ago. At the same time less coal is being used for generating electricity. The over-dramatic term ‘War on Coal’ has been used to describe this situation. If there is a war, there is an enemy – and coal’s enemy is natural gas.  In Ohio, about 85% of coal’s loss of tonnage supplied to power plants is due to natural gas. Renewables provide less two percent of Ohio’s electricity and they hardly consist of a threat.

Notes:

COAL PRICE: After rising to a high above $80 per ton in 2011, coal prices have mostly been between $50 and $60 for the past two years (infomine.com).

ELECTRICITY GENERATION BY COAL: NATIONAL – Use of coal by electric power plants has decreased by almost 20% over the past ten years (LLL, Estimated U.S. Energy Use, issued annually). OHIO – the percentage loss is almost as great over the past five years (EIA, Electric Power Monthly, February issue each year).

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WHERE ARE THE BENEFITS OF OHIO’S NATURAL GAS BOOM?

Over the last ten Years residential electric rates in Ohio have increased by almost fifty percent, while the prices paid by electric utilities for natural gas have decreased by about the same percentage. Over the same period prices of natural gas for home heating and cooking have only decreased by about twenty percent.

In 2013 Ohioans spent about $375 more per household on electricity than they did in 2005 but saved about $240 per household on natural gas over 2005 rates.

So the natural gas boom is costing us about $135 per year.

Sources: EIA: Electric Power Monthly and Natural Gas Monthly (Feb. issue each year) plus Census Bureau

Ohio electric Utilities Financials

I have examined some financial data for the parent companies of Ohio’s ‘Big Four’ electric utilities (a).

2013 vs. 2012  In 2013 combined profits of the four companies increased by 61 percent. Of the four, only FE had lowered earnings. Combined dividend payments to shareholders of the four companies increased by $ 215 million (b).

Stock Performance Since Ohio’s green energy law (127-SB221) took effect FE stock price has declined about 1/3. Stocks of the other companies have increased by fifty percent or more.

Consumer Electric Bills Monthly residential electric bills were higher in 2013 than in 2012 by an average of $2.25 (c), leading to an added cost to consumers of $122 million last year (d). Monthly costs to consumers are now $18 higher than they were at the end of 2008, just before 127-SB221 took effect (c). Each household is now paying $216 more annually for electricity than it was before 127-SB221 took effect. Only a small fraction of this is a result of 127-SB221 (e).

Notes

(a)   AEP, AES, Duke (Stock symbol DUK), and First Energy (Stock symbol FE)

(b)   Data from http://finance.yahoo.com/. Click on a stock symbol in the box on upper left. A stock performance chart will appear. Click on ‘Income Statement’ and ‘Cash Flow’ to obtain the numbers cited in the text.

(c)   Residential rates are reported in Electric Power Monthly. http://www.eia.gov/electricity/monthly/ Annual rates for the previous year are given in Table 5.6.B of the February issue.

(d)   The average Ohio home uses about 900 kWh of electricity per month according to the U.S. Energy Information Administration http://www.eia.gov/tools/faqs/faq.cfm?id=97&t=3. Ohio has 4.5 million households according to the Census Bureau http://quickfacts.census.gov/qfd/states/39000.html

(e) Alan R. Rosenfield, Testimony on SB 310 before the House Public Utilities Committee, May 14, 2014

http://www.lwvohio.org/site.cfm/Advocacy/Lobbyist-Testimony.cfm