Widening Uncertainties In The Utility Fuel Outlook

Many utility fuel choices 1990-95 defied expectations, with utility decisions and coal market developments ever more closely linked. The Central Appalachian coal boom never occurred; clean-enough coal was developed in the hard-hit Midwest; Colorado-Utah coal surged; Pittsburgh seam production strengthened; utilities embraced Powder River Basin coal; and emission allowance prices collapsed. Competition drove productivity gains, but the future is not a simple repeat. Phase 2 brings fewer viable compliance options. Mega-railroad pricing has become a key risk factor --will this be countermanded by merging utilities and power market competition? Revenue losses from vintage contracts are problematic. Uncertainty also plagues natural gas, in spite of unanimity across major forecasts, since recent experience has been so heavily influenced by the gas bubble.