GRU has an oversupply of coal because of cheap natural gas

GRU's coal pile at the Deerhaven Generating Station Thursday, January 26, 2012.

Doug Finger/The Gainesville Sun
Published: Thursday, February 21, 2013 at 2:25 p.m.
Last Modified: Thursday, February 21, 2013 at 3:49 p.m.

Gainesville Regional Utilities is sitting on a big pile of coal.

The city’s current stockpile is some 316,000 tons — evident by the tall black hill standing at the Deerhaven Generating Station property on U.S. 441.

The decline in natural gas prices has made it a cheaper option than coal.

The utility estimates that fuel dispatch costs are now in the range of $42 a megawatt for coal and around $28 a megawatt for natural gas. Fuel dispatch costs are based on the price of a fuel, the amount of energy a power plant uses to generate electricity combined with operating and maintenance costs.

The difference in costs has GRU using its 110-megawatt natural gas-fired Kelly Plant more often and burning half as much coal as its historical average, John Stanton, the assistant general manager for energy supply, said at Tuesday’s Regional Utilities Committee meeting.

Now, the utility has what City Commissioner Lauren Poe, who is also chair of the Regional Utilities Committee, described as a “huge surplus of coal.”

In response, the utility has delayed some shipments and will not enter annual contracts for coal purchases after the last of the three current agreements expires in March.

Instead, GRU will burn through its existing stockpile as usage rises in the summer months and buy coal on the spot market.

When the utility entered the annual contracts, the market price for coal was around $90 a ton and the city locked in prices about $20 below that, said Thomas Foxx, fuels manager for GRU. The market price has now dropped to $60 a ton, which is less than what the city pays under the terms of the contracts, according to Foxx.

At the RUC meeting, GRU staff said the utility typically burns 550,000 to 600,000 tons of coal a year but entered contracts to purchase less than that — 420,000 to 450,000 tons — because of lower natural gas prices.

The utility bought less but still ended up with a surplus as it used more natural gas and less coal.

In addition to burning through the current stockpile, GRU is also seeking to sell off coal. The utility has already sold 8,000 tons for $815,000 and is in negotiations to try to sell off up to 120,000 additional tons.

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