In its last Resource Plan Xcel predicted that its coal prices would stay relatively flat–increasing about 2% a year for the next several decades. Historical prices back to 1998 can be seen in LWG 1-4, part (b). Until Xcel’s long term coal contracts began expiring in 2005, the average price paid for coal was under $1/MMBTU (million BTUs).
Once the long term coal contracts expired, Xcel’s coal costs have been mounting significantly-averaging over 10%/year. In 2009, Xcel paid over $1.50/MMBTU. In Xcel’s 2009 Annual 10-k report submitted to the Securities and Exchange Commission, Xcel reported paying $1.52/MMBTU for its coal in Colorado. (See page 21 for Xcel’s Colorado coal costs.) In response to the Discovery Question LWG 5-3 (Docket 09A-772E), Xcel provided a 2009 coal cost of $1.61/MMBTU. The reason for the discrepancy is not clear–but either way this is a 50% increase in price in four years–way beyond the 2% per year price increase that was predicted in the last Xcel Resource Plan.
With a coal price in excess of $1.50/MMBTU in 2009, Xcel paid a price for coal in 2009 that it didn’t expect to pay until 2035. Ooops!
A careful assessment of production statistics and the geology of existing coal mines and an analysis of future constraints on coal production indicate that future price increases for coal are likely. While all fossil fuels are subject to complex forces of supply and demand and their price is volatile, the fact that coal is a solid, makes it difficult to work around the very real geologic constraints that exist on economically accessible coal.
More information on coal supplies is available in the extensive Clean Energy Action report issued in February 2009 entitled, “Coal–Cheap and Abundant–Or Is It?”