Getting railroaded? 

Springs Utilities faces price hikes in renewing train contracts for its primary power-plant fuel — coal

Colorado Springs Utilities' decade-old coal-hauling contracts expire next year, so it's time to make a new deal. And the negotiations, which began recently, are sure to bring higher costs, says Utilities energy supply general manager Drew Rankin.

That's because East Coast utilities have elbowed their way in at the same mines Colorado Springs buys from: Powder River Basin in Wyoming and mines in northwestern Colorado. Eastern utilities want the coal because it has a lower sulfur content and burns cleaner. That's crucial as the government looks to force power generators to cut carbon dioxide pollution and to add expensive emissions control equipment.

The city projects that rail charges will increase by about a third by 2012, from around $10 per ton in 2008 to an estimated $15 per ton, or $30 million annually. The price of coal itself will go up even more, doubling from 2008 to 2012 to roughly $27 per ton, or $54 million a year, city forecasts show. The increases definitely will impact rates, although it's too soon to estimate how significantly.

All that is a reminder of how dependent on coal the city, and nation, still are, despite efforts to diversify. Roughly half of the nation's energy comes from coal. In Colorado Springs, it's 72 percent, with the balance provided by gas and tiny amounts of renewable energy.

To demonstrate how small those portions are, consider that even when the city ups the amount of wind it buys by 50 times in the next year or two, that power will replace only 40,000 tons of coal a year, or 3.3 trainloads. That's about 2 percent of all the coal the city buys annually. The solar and hydro contributions will be more minuscule.

That doesn't impress Jerry Unruh, a retired chemist who lives in a Manitou Springs home heated with the sun and powered by photovoltaic batteries. A member of Utilities' Citizen Advisory Board, Unruh says the city is more conservative than most utilities in moving toward renewables.

"To be fair to them, you just can't displace coal and natural gas overnight," he acknowledges, but he thinks the city views renewables as add-ons rather than as integral parts of the power system. He notes the citizen group came up with a proposed energy portfolio that leaned heavily on renewables, reduced carbon emissions by up to 80 percent, and cost roughly 52 cents more per month for the typical homeowner.

"Other utilities are doing things very differently," Unruh says. "Texas is a conservative state, but just surpassed California in the amount of wind they've installed."

Rankin says the city wants more renewable sources. In fact, it's already received two dozen bids from firms looking to sell the city biomass — wood chips, tree limbs, sawdust — which could be twice as effective as wind in reducing coal use, if Utilities' existing boilers can safely burn it. But, Rankin notes, Utilities must stick to the city's long-standing mission to produce a power supply that is reliable, low-cost and environmentally responsible, in that order.

Rankin thinks the city may try locking into a contract for five years instead of 10. That would allow leaders to wait and see how alternative fuels impact our future need for coal — though it would also put Utilities, and ratepayers, at risk if prices leap five years from now.

"It's a pretty cloudy crystal ball at this point," Rankin says.



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