March 27, 2001, 9:20PM

After natural gas price surge, cost of coal now about double Bloomberg Business News

NEW YORK -- A surge in U.S. prices for coal, used to fuel power plants that produce half the nation's electricity, may boost utility bills forhomeowners already reeling from record natural gas costs.

Mines haven't kept up with rising coal demand, and that has sent utility stockpiles to a 26-year low and caused coal prices to double in the past year. The Tennessee Valley Authority and other electricity suppliers may pay more for coal when they sign new contracts with mining companies that supply the $22 billion of coal used by U.S. power plants.

"Any time you see the market go up like this, it's going to affect our cost of power," said Richard Rea, who manages $1.3 billion in coal purchases for the TVA, which buys more coal -- 46 million tons last year -- than any other U.S. utility.

Shares of Arch Coal, the second-largest U.S. coal producer, have doubled in the past year in anticipation that the company will get better prices for coal from its customers, which include Texas Utilities Corp., TVA and American Electric Power Co.

St. Louis-based Arch soon will start negotiations with utilities for 2002 supplies, company officials said.

Gas prices skyrocketed last year, boosting costs for home heating and electricity. Many utilities ramped up production at their coal-burning plants as a cheaper alternative to natural gas. A gas-fired power plant now is about three times more costly to operate than one that uses coal.

Prices for Appalachian and western coal have climbed in the past year to their highest levels since at least 1989, according to Bloomberg Energy Service.

At the Big Sandy shipping terminal in Huntington Beach, W.Va., where coal is loaded onto Ohio River barges, prices reached $42 a ton this week, up from $22 a year ago. Coal from Wyoming's Powder River Basin reached $10 a ton, more than double the year-ago price.

Most states that rely heavily on coal-generated power, including Texas, Indiana and Pennsylvania, allow utilities to pass their fuel costs on to customers. http://www.chron.com/cs/CDA/story.hts/business/861655

-- Carl Jenkins (somewherepress@aol.com), March 28, 2001