Electricity rates are on the rise

Fuel costs will boost retail electric rates 69 percent by 2015, an analyst predicts.

NEW YORK (AP) — Consumers struggling with high gas prices, rising food costs and falling home values have something new to worry about: Sharply rising electricity rates due to a surge in coal prices over the past year.

There is an abundance of coal in the United States, but like many other commodities its price is increasingly dependent on events elsewhere in the world. Snowstorms this winter cut coal production in China and heavy rain flooded mines in Australia — the world’s largest coal exporter. Meanwhile, demand for coal to generate electricity and make steel is rising almost everywhere, especially in fast-growing China and India.

That has increased the world’s appetite for American coal, helping to push up the price of the fuel utilities burn to drive the steam turbines that generate half of the country’s electricity. U.S. coal exports jumped 19.2 percent last year, according to the Energy Department, and are expected to rise another 15 percent this year.

“As more of the world develops and uses more energy, and supply tries to keep up with demand, we’re going to have these pinch points,” said Carol Pfeiffer, director of fuels for the U.S. for utility giant E.On AG.

Central Appalachian coal, a benchmark grade that’s widely used by power plants, has jumped from around $40 a ton in early 2007 to almost $90 a ton now. Coal from the Powder River Basin in Wyoming and Montana, which has about three-quarters the heat content of Central Appalachian coal, jumped from less than $10 a ton to almost $15 a ton over the same time period.

Utilities must burn more Powder River Basin coal to generate an equivalent amount of energy, and it must travel east by rail, which adds significantly to its final cost. Utilities such as Columbus, Ohio-based American Electric Power Co., for instance, mostly burn Appalachian coal in their eastern plants, but rely on cheaper Powder River Basin coal in the west. Some American Electric plants are designed to burn only the types of coal they’re near.

Facing such steep price increases, utilities nationwide are raising rates and are likely to push for even more dramatic increases in electric rates in the coming months. In parts of coal-dependent West Virginia, for instance, electricity rates will rise 15 percent this year. That’s one of the biggest increases in American Electric’s history, a rate hike the company attributes largely to rising coal costs.

West Virginia is far from alone. In Kentucky, which like West Virginia gets more than 90 percent of its electricity from coal, the four biggest utilities have raised rates an average of 12 percent over the past 12 months.