Buckle up: This winter could be a bumpy one for the electric sector due to coal stockpiles falling to an all-time low. Several electric cooperative statewide managers, largely in the Midwest, are worried as coal supplies at power plants dwindle to 20 days or less.
How did we get here, and how can we reverse course?
Emily Regis, fuel service manager for Benson-based Arizona G&T Cooperatives, is uniquely qualified to provide perspective on how co-ops may be impacted. Regis is a member of the Surface Transportation Board’s Rail Energy Transportation Advisory Committee, vice president of the Freight Rail Customer Alliance and president of the National Coal Transportation Association.
What is your understanding of the status of low coal stockpiles that serve electric co-ops across the country?
Regis: I don’t have a clear number. In my leadership roles in NTCA and FRCA, we’ve been polling members and asking for information that can be shared with RETAC and with all STB board members. We’ve been reaching out to members, some of which are co-ops, to get information on their stockpile situations, delivery times and what their inventory looks like. We got responses back from about 15 utilities. It’s a little tough for people to open up about the size of their stockpiles.
But round-trip train cycles have been slowing down for many utilities. [Cycles are when a rail car is loaded with coal, sent back to the power plant to be unloaded and returned to the mine to be loaded again.] Many utilities have seen slow cycle times all summer. The railroads are parking trainsets to relieve congestion. That’s a big issue—how many trainsets are parked. How is that helping the fluidity of the system?
Are these historically low coal stockpiles?
Regis: For many utilities, their stockpiles are below target and historically low. Many utilities and co-ops have been practicing coal unit curtailment efforts since last summer when they saw what was happening. Co-ops may be taking a hit with natural gas prices being higher now and, industry-wide, the co-ops are trying to be prepared without going into winter with dangerously low stockpiles.
By curtailing generation at coal units, utilities have been switching to natural gas or looking at other options, such as purchasing more power—anything to conserve their inventory. You don’t want your stockpile to drop below target as a general rule, but many are at target or closer to target than they have ever been. A lot of data I’ve looked at showed historically low inventories.
What are potential impacts of low coal stockpiles? Could we see outages this winter?
Regis: The risk of grid reliability is a big concern for those utilities that don’t have many options, and as an industry we will work to avoid that. No utility wants to compromise its ability to generate power, and no utility wants to see brownouts or blackouts happening. However, it is possible in some areas, especially if they don’t have the option of burning natural gas. Utilities in the Midwest can’t burn natural gas at six or seven plants.
It also could result in higher electricity prices at some point. We have no ability to really do anything about natural gas prices. All we can do is try to communicate our needs and be as transparent as possible with the railroads about our situation and what our fuel needs are. We try to work with them as much as we can.
A MISO report said they were seeing coal curtailment efforts at some plants and concern about reliability this winter. That should get somebody’s attention. [MISO, the Midcontinent Independent System Operator, is responsible for operating the grid across 15 U.S. states and the Canadian province of Manitoba.]
How has the COVID-19 pandemic impacted coal deliveries?
Regis: It may be that the railroads were not as well prepared for coming out of the pandemic. Everything impacting coal stockpiles this year all points to labor—lack of enough labor, lack of enough trained staff at the railroads. The railroads let so many people go during the pandemic and it may be that they were not anticipating bringing so many people back. There were also a lot of furloughs of employees during the pandemic.
How can the issue of low coal stockpiles be addressed as we head into winter?
Regis: As a coal shipper, we raised our concerns to the STB. I think they heard us. We hope they do something. Really, they are the only agency we can appeal to for help.
Many utilities did not have in their forecasts that so much coal would be burned throughout the year. But we started seeing natural gas prices rising and those prices have not really come down.
Could we see extreme power bills brought on by excessive use of natural gas?
Regis: That is a possibility. As member-owned cooperatives, the industry tries to protect its members from that as much as possible and tries to spread out costs. When paying for fuel, money flows in and out, there’s always a lag. Most co-ops will try to spread it out over the long term so as not to impact their consumer-members all at once.
What solutions do you see ahead?
Regis: Coal shippers are hoping to see improved cycle times or faster trains. We’ve seen some of our cycle times double. When you lose time, you don’t get it back. They’ve parked a lot of trains and restricted adding more cars.
The STB chair sent a strong letter to CSX and the NS [Norfolk Southern Corp.] after getting so many complaints about the railroad company’s service. STB is the only agency we can appeal to for help to get more attention for shippers on the delivery of coal.