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To: Douglas V. Fant who wrote (18505)	4/8/1998 7:37:00 PM
From: Shelia Jones	Read Replies (1) \| Respond to of 95453

Wednesday April 8, 3:45 pm Eastern Time UP delays seen boosting gas use for power By Chris Reese NEW YORK, April 8 (Reuters) - Southern and central U.S. electricity producers will likely boost natural gas use this spring because of coal shipping problems on the Union Pacific Railroad, industry experts said. ''In the short term, people are going to husband coal, and it will show up in (natural gas) prices, let me assure you,'' said Allan Stewart, managing director of the electric power group of New York-based PIRA Energy Group. Stewart estimates 2,000 to 3,000 megawatts of power generation may come from natural gas-fired plants in early May to replace coal-fired production, as producers save current coal stocks for summer when power demand peaks. The switch could mean about 500 million cubic feet per day of extra gas demand in the south and central U.S. during the period, he said. ''Coal inventories in the south/central area were down about 40 percent on a year on year basis, based on data from December,'' the analyst said. A huge backlog of railcars waiting to pass through the key U.S. rail gateway to Mexico at Laredo, Texas, has caused Union Pacific to embargo all southbound traffic to Laredo, including coal shipments. Railroads account for nearly two-thirds of the nation's coal deliveries. Shippers say the logjam in railroad shipments has cost them millions of dollars since Union Pacific began carrying out its multibillion dollar 1996 merger with Southern Pacific Railroad. Iowa-based MidAmerican Energy Co has said the Union Pacific slowdown has hurt its energy sales to other utilities, and Louisiana-based Entergy Corp (ETR - news) has launched a lawsuit against Union Pacific, claiming the railroad has failed to fulfill contractual obligations. The delay in shipments came to a head last fall, and Union Pacific said last year it expected to ease backlogs in deliveries by earlier this year. Despite this, the embargo on southern shipments went into effect in March, with no date set for a resumption of southern movements. ''We've seen some buying from the utilities on the gas side,'' said one Midwestern electricity trader who did not wish to be identified. ''The utilities are trying to keep all of the coal on the ground they can.'' PIRA's Stewart said he expects replacement of coal-fired generation with more expensive gas-fueled power will likely ease in late May, when power demand increases due to rising air-conditioning load. ''We don't think people are going to want to husband coal once we get out of the shoulder months,'' Stewart said, ''although that is based on the assumption that Union Pacific will slowly get their act together and that the weather will continue to be fairly mild.'' Sources have said that Union Pacific deliveries have improved from the autumn shortages. ''In general the situation has improved, although deliveries are still below what is needed,'' said Entergy spokesman Joe Holwager, who declined to comment on how many days of coal supply Entergy currently had on hand. ''All of the utilities are looking at this fairly closely but it looks like they are out of the weeds, out of danger right now,'' said another Texas electricity trader. The situation could worsen significantly however if Union Pacific is not able to increase deliveries this summer and coal shortages remain into winter, the sources said. ''It could really put a strain on things,'' Stewart said. ''Utilities could burn residual fuel oil or import coal, but it would be a logistical nightmare, and things could get out of control.''