By Tennille Tracy, Of DOW JONES NEWSWIRES
WASHINGTON -(Dow Jones)- Power companies are likely to build more units that use cheap natural gas to generate electricity, but relying too heavily on one type of fuel "isn't smart" for the safety of the power grid, American Electric Power Co. (AEP) Chief Executive Nick Akins said Thursday.
To reduce the risks, Akins said federal regulators and lawmakers should promote other types of fuels--coal, nuclear and renewables--even when low prices make natural gas the most cost-effective fuel to use at this time.
"Absent an energy policy supporting diversity in the fuel supply, it will be difficult to build any other type of electric generation," besides natural gas, Akins said.
Speaking at the U.S. Chamber of Commerce Thursday, Akins said Ohio-based AEP is in the process of transitioning from coal to natural gas. Only half of its fleet will be using coal by 2020, whereas 65% of the fleet that uses coal today.
AEP has already announced that it will be shutting down nearly 5,000 megawatts of coal-fired generation in the next three years.
The decline in coal use is due in large part to low natural gas prices and to environmental regulations that make it more costly to pursue coal-fired generation.
At the same time, the industry's increasing reliance on natural gas presents risks, Akins said. Environmental concerns over natural-gas drilling techniques could slow production and natural gas prices could become more volatile.
"Betting on just one fuel to power our energy future isn't smart," he said.
-By Tennille Tracy, Dow Jones Newswires; 202-862-6619; tennille.tracy@dowjones.com