06 October 2005

Maybe You Should Turn Off The Lights.

I previously explained why oil and gas prices should not have a huge effect on electricity prices, thus making energy conservation through turning off the lights a bad idea.

Well, Xcel Energy disagrees:

Xcel asked state regulators to approve a 30 percent increase in monthly electric bills, effective Nov. 1. For the average residential customer, monthly electric costs would rise $16 a month, from the current $53 to $69. The price hike is a direct pass- through to consumers as a result of increased costs to Xcel. . . . Xcel said the proposed $116 million hike in electric rates stems from higher prices for coal and natural gas - the utility's two main fuels used for generating electricity.

According to the Grand Junction Daily Sentinel in 2004:

Colorado produces 85 percent of its electricity by burning coal to produce steam to turn steam turbines, compared to 52 percent nationwide, Sanderson said.

Strangely enough, Colorado utilities don’t burn much Colorado coal; low-sulfur Colorado coal is expensive because it is mined underground, but it is in demand in Tennessee, Mississippi and Kentucky where the Clean Air Act is forcing utilities to burn lower-sulfur coal blends. Colorado utilities mostly buy cheaper surface-mined coal from the strip mines in the Powder River Basin of Wyoming.

Natural gas prices are going up, but they aren't tripling, which is what it should take to make it necessary to increase electricity prices by 30%, if the natural gas prices alone were responsible.

I have no idea why coal prices are going up. The Casper, Wyoming paper this summer reported that coal prices did surge by 16% this summer, but was thin on providing convincing reasons for a hike of more than a few weeks, suggesting train derailments and a hot summer as the main price drivers. Are power companies now substituting it for natural gas or something, creating a surge in demand? There haven't been any hurricanes or earthquakes in Wyoming or West Virginia the last time I heard.

Natural gas prices are up about 50% from a year ago. The October rate is up 16% from the September rate.

The last time Xcel announced a change in its electricty rates was last spring when it announced that it would shift, on a revenue neutral basis, from a flat annual rate, to a higher rate during the peak demand summer and a lower rate during the winter.

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