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Utility fuel strategy: Don't run out

Using different kinds of fuel can make a difference for power companies when they are in short supply.

By LOUIS HAU
Published September 9, 2005


Electric utilities try to vary their fuel sources for the same reason savvy investors diversify their investments: Not keeping all your eggs in one basket can help minimize risk.

The havoc wreaked by Hurricane Katrina in the Gulf of Mexico served to highlight the importance of this strategy for Florida's investor-owned utilities.

Tampa Electric, especially, relies heavily on fuel - mostly coal and gas used to run its power plants - that originates from or travels through the gulf.

Katrina closed oil rigs, shuttered refineries and damaged other parts of the gulf's fuel-production infrastructure.

Diversity of fuel supplies is "going to be an increasingly big issue moving forward," said David Dismukes, associate director of the Center for Energy Studies at Louisiana State University in Baton Rouge.

"I think Katrina has shown us our vulnerabilities."

Coal accounts for about 54 percent of Tampa Electric's power-generation needs, with natural gas making up about 33 percent and oil less than 1 percent.

Wholesale electricity bought from other power producers accounts for the remainder.

That means Tampa Electric's relatively narrow fuel diversity and supply mix could leave it more vulnerable to supply disruptions and sharp increases in the price of coal and natural gas than other Florida investor-owned utilities.

For instance, Progress Energy Florida of St. Petersburg generates about 16 percent of its power from nuclear power, 16 percent from natural gas and 16 percent from oil. Coal accounts for about 32 percent of Progress' power needs, but its supplies are split between barge shipments across the gulf and rail shipments.

The Florida Reliability Coordinating Council, which oversees the reliability of most of the state's power grid, on Thursday lifted its previous electricity conservation alerts related to Katrina.

Florida utilities appear to have enough fuel to maintain reliable power generation, it said.

But some fuel-processing locations in the gulf are out of commission.

One of them is a Davant, La., bulk-shipping terminal operated by TECO Transport, Tampa Electric's subsidiary. All of Tampa Electric's coal is processed there.

The Davant terminal, which isn't expected to reopen for 30 to 45 days, receives coal shipped down the Mississippi River and from foreign sources and prepares the coal for shipment across the Gulf to Tampa.

TECO Transport said this week that it resumed coal shipments to Tampa Electric from an alternate location along the Mississippi.

Nuclear power, which is virtually immune to supply disruptions and volatile fuel prices, is an important element in the generation portfolio at Florida Power & Light of Juno Beach. At the state's largest utility, nuclear plants generate about a fifth of its power, with natural gas accounting for 38 percent, oil 18 percent and coal 6 percent.

As part of its fuel-diversity efforts, FPL renewed a long-term purchased-power contract this year with Southern Co., which enables the company to buy power from out-of-state generating plants that may be less likely to be affected by severe weather. Progress has a similar pact with Southern.

Some of FPL's older natural-gas plants can burn oil instead when supplies are tight, while its newer gas plants can burn distillate, or "light oil," for short periods of time, FPL spokeswoman Kathy Scott said.

Meanwhile, Gulf Power of Pensacola relies even more heavily on coal than Tampa Electric, with the fuel accounting for more than three-quarters of its power generation.

But while most of Gulf's coal is shipped from a terminal in Mobile, Ala., 500 megawatts of the company's 2,700-megawatt generation portfolio stems from a southern Mississippi coal-fired power plant that receives its fuel via rail shipments. The company's power grid is also connected to its sister utility subsidiaries of parent Southern Co. of Atlanta, which can easily sell power to Gulf.

Tampa Electric spokesman Ross Bannister argued that the company's mix of fuel sources does not leave it unusually vulnerable, noting that some of its gas-fired plants are also capable of operating on oil in emergencies.

Bannister added that the company has about a month's supply of coal stockpiled onsite at its various coal-fired plants. That, combined with resumed coal shipments by TECO Transport, will be more than enough to tide the company over until the Davant terminal reopens, he said.

"It was a major hurricane that disrupted fuel supplies and we were able to deliver (sufficient) coal throughout," he said.

Louis Hau can be reached at hau@sptimes.com or 813 226-3404.

THE FUELS

Tampa Electric relies heavily on coal to run its generating plants.

TAMPA ELECTRIC:

Coal 53.6 percent

Natural gas 33.3 percent

Oil 0.7 percent

Purchased power 12.4 percent

PROGRESS ENERGY FLORIDA

Coal 32 percent

Natural gas 16 percent

Oil 16 percent

Nuclear 16 percent

Purchased power 20 percent

Source: the companies

[Last modified September 9, 2005, 01:18:20]


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