Utility president warns of natural-gas price volatility

News
April 26, 2012
By Andrew Restuccia
 
American Electric Power President Nick Akins warned Thursday against over-reliance on natural gas and blasted pending Environmental Protection Agency regulations, arguing they “make absolutely no sense.”
 
“If directional drilling and ‘fracking’ are the game-changers that everyone predicts, our nation may be flush with plentiful and inexpensive domestic natural gas,” he said.
 
“If that long-term price holds, it will mean significantly more dependence on natural gas to generate electricity. Absent energy policy supporting a diverse fuel supply, it will be difficult to build any other type of electric generation.”
 
But Akins warned that natural-gas prices, which are hovering around $2 per 1,000 cubic feet, could surge, undercutting the economic rationale behind increased reliance on natural gas.
 
“Betting on just one fuel to power our energy fuel isn’t smart,” Akins said during a speech at the U.S. Chamber of Commerce, pointing to past volatility in the price of natural gas.
 
“Whether that volatility has changed permanently remains to be seen,” he added.
 
Akins said natural-gas prices could spike if major environmental issues emerge with hydraulic fracturing, or “fracking,” the natural-gas drilling method that has enabled the shale production boom.
 
He also said natural-gas prices are vulnerable to volatile weather conditions, adding that they could increase as export and import facilities for liquefied natural gas are constructed.
 
Coal makes up a major portion of American Electric Power's (AEP) generating capacity, but low natural-gas prices and new EPA air pollution regulations have driven the Ohio-based company to diversify its fuel mix. 
 
AEP has said it will retire more than 5,000 megawatts of coal-fired power, switching to natural gas and other fuel sources.
 
“By 2020, only 50 percent of our generation fleet will burn coal,” Akins said during his remarks Thursday. 
 
Akins took aim at pending EPA air pollution regulations, arguing they will “will unnecessarily increase electricity prices and put the reliability of the grid at risk in several parts of the country.” AEP has been very critical of EPA in the past.
 
The regulations “make absolutely no sense” amid the Obama administration’s efforts to boost the economy and create jobs, he said.
 
Akins touted legislation authored by Sens. Joe Manchin (D-W.Va.) and Dan Coats (R-Ind.) to delay the compliance period for EPA’s Cross-State Air Pollution and Utility MACT (maximum available control technology) rules.
 
The cross-state rule aims to limit air pollution that crosses state lines. The Utility MACT requires power plants to limit the release of mercury and other air toxics.