Posted on Mon, April 10, 2006
By Susan Brown

Coal - A Bad Investment?

KCP&L and Aquila are proposing a coal-burning power plant near Weston. BPU has announced plans for a new plant in Wyandotte County. Westar is looking for a site in Southeast Kansas. Kansas City business leaders need to pay attention to a huge problem with the economics of using more coal for electricity. Increased demand and environmental requirements are pushing the price of coal through the roof with no end in sight. Coal is a bad investment for our businesses and our future economy.

There are over 130 new coal plants being planned for the United States. Remember what happened when utilities built large numbers of natural gas plants? The price skyrocketed. Spot prices for Wyoming Power River Basin (PRB) coal have tripled from $7 to $22 per ton over the last year. Utilities need low-sulfur PRB coal due to new EPA regulations. And more regulations are coming to control mercury, particulate matter and carbon. KCP&L is already asking for an 11.5% rate increase, mostly for currently "rising fuel costs." Customers will pay almost 20% on top of that to build the new coal plant.

Global warming is becoming more of an investment/business concern. States are proposing carbon taxes and caps on large producers of carbon dioxide. The proposed Weston plant will emit an estimated 8 million tons each year and their old-fashioned pulverized coal design can't be retrofitted to capture carbon cost effectively. Using this design is like GM building SUV plants when other companies invested in hybrids. A large group of institutional investors is forcing KCPL and other utilities to disclose information about the cost of meeting carbon regulations in the future. They see this as a huge investment risk. It also is a problem for businesses since KCPL will increase rates to cover these costs.

A better investment would be energy efficiency and renewables. Investing in energy efficiency to use less electricity creates local jobs for people retrofitting homes and businesses. Renewable energy sources like wind can safely make up 20% of a utilitiy's portfolio and are a hedge against rising fuel costs. These measures can be used to reduce our dependency on fossil fuels and as a bridge to the newest coal technology-coal gasification. Other cities are making these choices now. They will have lower future energy costs and be more economically competitive. Business leaders need to step up and make sure Kansas City's electricity providers aren't "mining" their bottom lines along with coal.

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