IAMU Informer
Follow IAMU!
  • Informer News Feed
  • IAMU Website

Backordered Deliveries

11/24/2014

1 Comment

 
by Jim Wolfe, IAMU Electric Services Coordinator

The season of shipping woes is creeping upon us. One of the Christmas gifts that you ordered online has inevitably been added to the list of backordered items. Will it get to you on time or will you have to hand someone a gift box with an IOU inside? How would you like to be a business owner than needs a commodity to do business, but can’t get delivery?  Many of the nation’s coal fired power plants are dealing with shipping woes when it comes to coal delivery.
Picture
I hadn’t really thought about the issue until I had a conversation with someone last month. I was told that coal fired plants in Upper Michigan had only received 40% of their coal supply for the winter months. This was alarming due to the fact that winter feels like it’s here already. Could this be true? What about all of the plant retirements? Shouldn’t that help shipping demand? Not exactly true. Coal is forecast to continue to be the single largest source of generation through 2034 according to the Energy Information Administration or EIA.

The coal industry ships two thirds of its product by rail to plants across the nation. Problems with shipping were evident last year as rail companies’ bumped coal for crude oil and grain shipments. With the very cold winter that followed, demand for energy increased. The weather hampered efforts to ship needed coal to plants and many were left with shrinking reserves. This condition has continued through the spring and summer causing some generator operators to shut down in order to conserve fuel and as a result, force them to purchase power off of the open market. It is true that coal can be shipped by water or truck, but the location of the plant and the size of shipments can make both of these methods unsuitable.

Public Power Magazine reported that North Dakota- based Basin Electric Power Cooperative was forced to find alternatives to supply fuel to one of their plants.  Basin was forced to ship lignite coal to its Leland Olds Station for 30 days in January due to weather and competition with oil deliveries. Basin has since worked on building stockpiles and working with rail owners to try to avoid this situation.

Rail delivery isn’t only affecting power plants. Coal companies lose money when their product can’t be delivered. Peabody Energy, a large coal processor in the Powder River Basin estimated that 15 million tons of coal shipments were missed in the first half of the year due to poor rail service and customer conservation measures. This has also affected numerous other commodities and caused several trade organizations to join forces to seek reform.

Many people are mentioning the word “monopoly.” A large amount of product has to be shipped to these locations and there are few modes of transport that can accomplish this. Most rail customers only have one choice, so there is no competition. Costs incurred by shippers have increased 90% from 2005 to 2011, even if carload volume has decreased 1.1% during the period. Escalation Consultants, a rail and energy advising company, gathered these numbers for Consumers United for Rail Equity, a coalition of freight shippers. Does this at all sound familiar?

Railway reform took place in the late 1800’s to stop rail monopolization. Rail was the only game in town. As the US built west, rail service eliminated the need for settlements in the west to become self-sufficient because products could be shipped from the east by rail. Rail companies saw this as a golden opportunity and filled their pockets with huge profits by charging farmers and producers to ship their products. As regulations were created to correct the problem, they also crushed most of the rail companies in the 1970’s. Of the 26 rail carriers that existed in the 1970’s, only 7 remain today. BNSF Railway is the product of over 400 rail lines that have been consolidated.

Many groups including APPA, NRECA, and EEI are urging FERC to examine railroad coal delivery. Rail carriers indicated to the Surface Transportation Board which provides regulatory oversight, earlier this year that most of the issues would be resolved in 2014. BNSF Railway indicated in September that problems will continue at least through 2015. These groups are urging the STB to require rail companies to submit plans to correct coal delivery problems and prevent generation disruption. Rail companies have responded with investments in capital improvements and plans to hire additional employees to address the issues. We will have to wait and see if this plan works or be forced into conservation mode again this winter. By the way, less than 30 days til’ Christmas!

Works Cited

Wood, Elisa. "Trains Late: So Much Coal, But so Hard to Get." N.p., n.d. Web.


1 Comment
Framingham Independent Massage link
2/4/2025 05:19:30 am

Hi nice reading yoour post

Reply



Leave a Reply.

    Subscribe to The Informer!

    * indicates required

    Archives

    April 2025
    March 2025
    February 2025
    January 2025
    December 2024
    November 2024
    October 2024
    September 2024
    August 2024
    July 2024
    June 2024
    May 2024
    April 2024
    March 2024
    February 2024
    January 2024
    December 2023
    November 2023
    October 2023
    September 2023
    August 2023
    July 2023
    June 2023
    May 2023
    April 2023
    March 2023
    February 2023
    January 2023
    November 2022
    October 2022
    September 2022
    August 2022
    July 2022
    June 2022
    May 2022
    April 2022
    March 2022
    February 2022
    January 2022
    December 2021
    November 2021
    October 2021
    September 2021
    August 2021
    July 2021
    June 2021
    May 2021
    April 2021
    March 2021
    February 2021
    January 2021
    December 2020
    November 2020
    October 2020
    September 2020
    August 2020
    July 2020
    June 2020
    May 2020
    April 2020
    March 2020
    February 2020
    January 2020
    December 2019
    November 2019
    October 2019
    September 2019
    August 2019
    July 2019
    June 2019
    May 2019
    April 2019
    March 2019
    February 2019
    January 2019
    December 2018
    November 2018
    October 2018
    September 2018
    August 2018
    July 2018
    June 2018
    May 2018
    April 2018
    March 2018
    February 2018
    January 2018
    December 2017
    November 2017
    October 2017
    September 2017
    August 2017
    July 2017
    June 2017
    May 2017
    April 2017
    March 2017
    February 2017
    January 2017
    December 2016
    November 2016
    October 2016
    September 2016
    August 2016
    July 2016
    June 2016
    May 2016
    April 2016
    March 2016
    February 2016
    January 2016
    December 2015
    November 2015
    October 2015
    September 2015
    August 2015
    July 2015
    June 2015
    May 2015
    April 2015
    March 2015
    February 2015
    January 2015
    December 2014
    November 2014
    October 2014
    September 2014
    August 2014

    RSS Feed

Picture

Copyright 2025 Iowa Association of Municipal Utilities