This graph never anticipated the drop in the price of petroleum today. So we got the natural gas miracle and the drop in the price of petroleum. This is national map...I would think the drop would be more severe in Louisiana. I call the drop in the price of electricity as 50% during the last big drop in the price of petroleum.Already since the beginning of the drop in the price of petroleum natural gas from is peak this year has decline 40%?
Any dummy would say with the cheap natural gas...why isn't Entergy building natural gas plants out the ying yang. They would drive down cost of electricity? Are we talking about the fear of stranded assets? The top three suppliers of electricity are natural gas, coal and then nuclear power.
What happens to the demand and price of electricity if the price of petroleum goes down to $30 per barrel?
Pg 310: The Boom and Bust in Louisiana and Oklahoma
Although the multifaceted debacle in Texas was the major story in the Southwest, the collapse of the energy and real estate markets and the accompanying agricultural problems also had devastating effects on the economies of Louisiana and Oklahoma as well as on the banks in those states. Between 1980 and 1994 there were 70 bank failures in Louisiana. 22.4 percent of the state’s banks. Oklahoma endured 122 bank failures.22.0 percent of its banks.61 During the same period, assets of failed banks at the time of failure amounted to $4.1 billion in Louisiana and $5.8 billion in Oklahoma.
In the mid-1980s, the state economies of Louisiana and Oklahoma (as well as Texas) were five times more dependent on energy production than the nation as a whole.62 In 1986, for example, nearly 40 percent of Louisiana’s state revenues came from oil and natural gas production, and in 1985 depressed energy prices held economic growth to under 1 percent (in Oklahoma as well). In June of that year, Louisiana’s unemployment rate was 11.5 percent, the second-highest in the nation. In addition, residential building permits issued in the state in 1985 declined by more than 25 percent from levels a year earlier.
Heads up, Entergy customers: Your bill is likely to increase because Louisiana needs more power
by mark ballard| mballard@theadvocate.com
Dec. 30, 2014
That likely means building power plants for about $1 billion a pop, which the 1 million customers of Entergy Corp.’s Louisiana companies will be expected to pay.
The privately owned utility bought a plant in Arkansas to make electricity, mostly for Louisiana, and a new unit in Westwego will go online by New Year’s Day. Entergy is spending a couple of billion dollars over the next few years to move huge amounts of electricity to where the new manufacturing facilities will be located and also is asking for bids to buy power from elsewhere.
“All that will help, but ultimately we’re going to need to build new generation,” said Phillip R. May, the head of Entergy’s Louisiana operations. “It has to be new steel in the ground to meet all of this new load. … We’re on the front end of a pretty steep curve in growth.”
Attracted largely by cheap natural gas and some of the nation’s lowest utility rates, corporations from around the world are investing about $59.2 billion in Louisiana operations — for things like steel, chemicals, wood pulp, liquid natural gas exports — that are well underway or already completed, mostly along the Mississippi River between Baton Rouge and New Orleans and in the Lake Charles region. Another $60.1 billion in projects are in the permitting stage.
The boom will be great for the state’s economy and will create thousands of jobs.
But not everyone is happy with Entergy’s plans, which have not been officially submitted, for providing power to all these new operations.
Existing manufacturers are asking if there is a better, cheaper way to make the needed power.
Jennifer Vosburg, who heads Louisiana’s units of NRG Inc. and supplies cooperative utility companies across the state with electricity, suggests looking at a wider array of alternatives. One is lessening the regulatory burdens that keep industries from making electricity to meet their own needs, called cogeneration, rather than have Entergy provide all the power.
“With so many sophisticated companies developing in Louisiana, this is a time to promote industrial cogeneration of electricity on plant sites to meet the industrial-specific needs,” Vosburg said.
Consumer groups are questioning whether residential and commercial customers should be paying at all.
“We support bringing industry back into the United States. We don’t feel it’s fair that residential and commercial customers should have to foot the bill (for power) that will be needed primarily by the large industrial sector,” said Casey DeMoss Roberts, who heads the New Orleans-based consumer advocacy group Alliance for Affordable Energy. “The industrial customers should have a special rider to pay for it.”
Meeting power needs will be the subject of much debate in the coming year, particularly at the Louisiana Public Service Commission, which oversees how much the private utility company can charge customers.
Monthly bills will not be dramatically affected, said May, who is president and CEO of Entergy Louisiana and Entergy Gulf States Louisiana, the two companies that service about half the customers in the state. Entergy New Orleans covers that city and is regulated by the City Council rather than the PSC.
It’s a matter of mathematics, May said.
Rates are determined by how much it costs to make and distribute electricity divided by the number of customers using it. May said other utility companies around the country are seeing their sales grow by about 1 percent. Louisiana’s sales are growing at about 3.5 percent, largely driven by the large industrial projects locating here.
“We’re adding a lot of new customers,” May noted, saying that will help keep down the already low prices.
The situation also opens the opportunity for Entergy to build plants using newer, more efficient technology that will keep costs lower in the long run, May argues.
Also in the mix is the fact that some of Entergy’s contracts to buy electricity are nearing their end. Plus, the average age of the fleet of generating plants in Louisiana is about 35 years.
“We have to decide whether it’s more cost-effective to continue to maintain the old plant, build a new plant or enter into a contract to buy power,” May said.
The New Orleans-based Entergy Corp., which delivers power to 2.8 million customers in Arkansas, Louisiana, Mississippi and Texas, reports it can make about 22,000 megawatts of electricity. It expects to need to add 5,000 to 7,000 megawatts of electricity during the next five years, largely to supply new industrial projects in Louisiana and Texas and to replace older units. Louisiana alone accounts for 2,000 to 3,000 megawatts of that amount.PSC Commissioner Clyde Holloway, whose district includes Lake Charles, said time is of the essence.
“I’m confident we can handle it, but we have to get started,” he said. “We have to have a plan, and they keep telling us they’ll have a plan, but I haven’t seen it.”
It takes about three years to build a new power plant.
One of the big questions for PSC Commissioner Foster Campbell, of Bossier Parish, is how long the price of natural gas will stay low. Industry is attracted to Louisiana because the cost of natural gas is about a third of what it is in Europe, Asia and South America.
But history has shown how quickly the energy market can change.
Shortly after Hurricane Katrina in 2005, the price of natural gas was so high that regulators pressured Entergy to build plants that would be fueled by anything but natural gas. Then came fracking, or hydraulic fracturing, a drilling method that breaks up underground rock layers to release natural gas. Fracking created an abundant supply of gas, and the price of the commodity dropped four-fold. That could change.
“I need some economists to tell what is going to be happening,” Campbell said.
Entergy looked at sites to build another nuclear power plant, a hugely expensive enterprise that provides customers with very inexpensive power.
But the costs of building natural gas facilities are more predictable than for the more technologically encumbered nuclear plants. And the price of natural gas is now so low, and likely to stay that way for a while, that building a plant that uses any other kind of fuel doesn’t make economic sense, May said.
“They have built dozens of them. They have built this exact plant all over the world,” he said. “You don’t want a lot of construction risks associated with this. You don’t want a lot of technology risks associated with this.”
PSC Chairman Eric Skrmetta, of Metairie, said he’s heard discussions about the need for new generating plants, perhaps as many as five.
“We’re monitoring it very close,” he said. “We want to make sure there’s a mechanism, that there’s a portion in this transaction that is fairly borne and that Louisiana consumers pay only their fair share.”
Follow Mark Ballard on Twitter, @MarkBallardCNB. For more coverage of government and politics, follow our Politics Blog at http://blogs.theadvocate.com/politicsblog.
You notice the shortage of rail capacity jacks up the price of transportation , coal and electricity...or artificially supports the price of these commodities. Why and how have we created a world of price spikes and artificial shortage. Remember propane, natural gas and electricity shortages and prices spikes last year during the cold snap. A lot of these guys are making a lot money without doing no work what-so-ever?
Wasn't the rail industry implicated in the propane shortages and issues with petroleum shipments and grain shipment overwhelming the rail capacity.
Posted December 18, 2014 - 11:51pm
By MARIO PARKER
Bloomberg News
CHICAGO — Electricity costs are poised to reach the highest level since 1999 because railroads are too clogged to deliver enough coal to power plants.
While the United States has the world’s biggest coal reserves, utilities are forecast by the government to end the year with the lowest stockpiles since 2005. With carriers including BNSF Railway jammed with record shipments of oil and grains, Xcel Energy Inc. and other power producers say they can’t get the coal they need.
The rail delays mean utilities haven’t rebuilt inventories that fell to a seven-year low last winter. Power producers filed 10 notices this year warning regulators that stocks were low enough to threaten generation, compared with two filings in 2013. Utilities have been obliged to rely more on natural gas, increasing costs for consumers.
“There’s plenty of coal,” Jim Thompson, a director of coal for IHS, an Englewood, Colorado-based energy and industrial analytics company, said by phone Dec. 2. “The problem is the coal transportation system.”
Utilities got as much as 25 million short tons (22.7 million metric tons) less coal than they needed from mines in Wyoming’s Powder River Basin this year, Peabody Energy Corp., the biggest U.S. producer of the fuel, said in October. Utilities will burn 868.5 million tons in 2014, generating 39 percent of U.S. electricity.
Power companies are on pace to end the year with 129.2 million tons of inventories, 32 percent less than the record 189.5 million tons reached in 2009, U.S. Energy Information Administration data show.
Utilities have used natural gas to preserve coal stocks, even though it’s 22 percent more profitable for a power plant in the Midwest to burn coal, data compiled by Bloomberg show.
Average U.S. power costs will rise 1.8 percent to $12.69 per megawatt hour in 2015, the most expensive in records going back to 1999, the EIA said in a report Dec. 9.
The shale oil boom has also sent wages for welders and pipefitters in Louisiana above $100 per hour, causing cost overruns for chemical projects.
The strengthening economy, record shipments from the shale- oil boom and expanding grain crops have overwhelmed the rail network, said Lee Klaskow, an analyst at Bloomberg Intelligence in Princeton, New Jersey.
West Texas Intermediate oil has slumped more than 40 percent this year as U.S. production has risen to the highest in more than three decades.
Average rail speeds plunged 6.4 percent in the past year while dwell times, a measure of how long cars sit in a rail yard, increased 8.7 percent, data compiled by Bloomberg show.
BNSF, owned by Berkshire Hathaway Inc., had the biggest increase in commodity carload traffic this year, with a gain of more than 22 percent, Bloomberg Intelligence data show. The company has boosted personnel, added tracks and locomotives and sought to unplug bottlenecks, George Duggan, group vice president for coal business, said at a conference Dec. 9.
U.S. coal imports increased 37 percent to 12.2 million tons this year, led by purchases from Colombia, EIA data show.
“The transportation constraints gave utilities a need to diversify supply,” Ted O’Brien, chief executive officer of Doyle Trading Consultants, a Grand Junction, Colorado-based coal analysis company, said by phone Dec. 11. That’s made foreign coal more competitive than U.S.-mined fuel, he said.
The Tennessee Valley Authority has cut generation this year to preserve coal stocks, Ben Jones, the company’s manager of coal origination, said at a conference in New York this month.
“Our main concern has been — can we get the coal we’ve bought into our system,” he said. “We started trucking coal to the plants.”
Xcel Energy’s stockpiles are “significantly low,” Craig Romer, the Minneapolis-based company’s director of fuel supply operations, said by phone Oct. 28.
“Normally in the fall we try to build up those inventories in anticipation of weather events,” he said. “Right now, we’re just not getting the service to build those winter stockpiles.’
Utilities may be forced to navigate low inventories through next year and this ”could create challenges in the summer of 2015,” Alan Haymes, an economist at the Federal Energy Regulatory Commission, said at the agency’s monthly meeting in Washington Thursday.
Powder River Basin coal prices increased 5 percent to $12.65 a ton in the past year. They would be even higher if utilities had confidence it could be delivered, according to IHS’s Thompson.
“Some railroads are now saying it will probably be 2016 before we get a full resolution to the problem,” Emily Medine, a principal at Energy Ventures Analysis, an Arlington, Virginia- based energy consultant, said Dec. 9 in New York. “There is pent-up demand. A price spike in PRB could happen depending on the performance of the railroads.”
Why wouldn't you just build a new 2000 MW gas fired electric plant to add the regional grid instead of purchasing a old plant...it is a blocking deal for new entrance.
How big is it, stranded assets...from the massive decline of the price of natural gas. It the market being flooded with inexpensive natural gas electric plants based on the financing with expensive natural gas.
Entegra Power seeks prepackaged Chapter 11 reorganization
08/07/2014By Barry Cassell
However, the company has struggled recently as a result of a sharp decline in wholesale electricity prices and the competitive nature of the energy industry in the US. The expansion of natural gas production has had a negative impact on energy prices. New extraction techniques and the discovery of an abundance of fresh shale deposits across the US have helped to drive down wholesale market prices.
Entergy to buy 1,980 MW Union Power Station
December 9, 2014
Entergy Corporation (NYSE: ETR) announced today that its subsidiaries, Entergy Arkansas, Inc., Entergy Gulf States Louisiana, L.L.C. and Entergy Texas, Inc. have signed an agreement to acquire the Union Power Station near El Dorado, Arkansas. The Union Power Station is a highly efficient, natural gas-fired 1,980-megawatt (summer-rated) generating facility. The station is owned by Union Power Partners, L.P., an independent power producer and wholly-owned by Entegra TC LLC.
"Our service territory is at the heart of an industrial renaissance that is built on competitive energy costs, low electricity prices and smart economic growth policies of our state governments," said Leo Denault, Entergy's chairman and chief executive officer. "The acquisition of these highly efficient units at a price favorable to our customers will help us meet the increased demand and be a significant step in the ongoing modernization of our generating fleet."
In the U.S. Energy Information Administration's most recent regional rankings of retail electricity prices, the West South Central Region – which includes Arkansas, Louisiana, Texas and Oklahoma – had the lowest industrial rates of any region in the country.
Low electricity prices are one reason that more than 85 projects involving over $65 billion of investment and projected to create tens of thousands of new jobs and the potential addition of approximately 1,700 MW in new industrial load by 2016 have been announced, signed or are under development in Entergy's service area.
The Union Power Station, which entered commercial service in 2003, consists of four combined-cycle gas-fired generating units, or CCGTs, each rated at 495 MW. Under the Asset Purchase Agreement, Entergy Arkansas and Entergy Texas have each agreed to acquire one unit and Entergy Gulf States Louisiana has agreed to acquire two units. Entergy New Orleans will receive 20 percent of the output from the Entergy Gulf States Louisiana units via an at-cost purchase power agreement, subject to City Council of New Orleans approval.
The plant purchase price is $948.0 million ($479/kW), or $237.0 million per unit, subject to adjustments. The purchase price is approximately half the cost to build a comparable new CCGT facility.
The purchase is contingent upon, among other things, obtaining necessary approvals, including acceptable cost recovery, from the various federal and state regulatory authorities and the expiration of the waiting period under the Hart-Scott-Rodino antitrust law. The targeted closing date is late 2015.
The total investment associated with this proposed plant acquisition, including the amounts associated with the purchase price, transaction costs, contingency and future investment in the plant and transmission upgrades, was generically included in the previously disclosed preliminary 2015 through 2017 capital plan for Entergy and the affected subsidiaries. In addition, the estimated earnings implications were reflected in the financial outlook of approximately 5 to 7 percent compound annual average net income growth through 2017 (off 2013 base year) for the Utility business.
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