Electric Utililties Cope With Impact of Higher Coal Prices

As a coal-producing state, West Virginia gets nearly all of its electricity from coal.

That electricity has been cheap: second cheapest in the nation in January 2007, according to the federal Energy Information Administration, and fourth cheapest in January 2008.

But coal hasn't been so cheap lately. Appalachian coal that sold around $20 per ten at the beginning of this decade rose some over the period and then started shooting up last October.

Both central and northern Appalachian coals sold for more than $115 per ton in the spot market in early July.

"We're seeing prices double what we thought were record prices two years ago," said Terry Eads, regulatory services director at American Electric Power subsidiary Appalachian Power. "Basically it's a world market and the coal companies are going to look to where they can get the most value for their product - and that puts tremendous pressure on us."

So what happens to rates for coal-fueled electricity when the price of coal goes up ... and up ... and up."