Coal No Longer King as Southern Speeds Switch to Gas-Fired Power

Southern Co. (NSC), one of the largest U.S. consumers of coal, expects to generate 57 percent of its power from natural gas by 2020 if low prices and new environmental rules remain in effect.

Southern, based in Atlanta, Georgia, burned more gas than coal during the first quarter as collapsing prices made gas the cheapest fossil fuel in the utility’s four-state region of the southeastern U.S., Thomas Fanning, Southern’s chairman and CEO, said during an interview today.

“We think with this change in energy production, we will be the third-largest gas consumer in our industry,” Fanning said.

The rapid switch away from coal by Southern and other large U.S. power companies is expected to dent gas inventories that ballooned as production expanded and a warm winter tempered demand. Gas futures in New York rose for the third time in four days after Goldman Sachs Group Inc. (GS) said prices may rebound to $4 per million British thermal units “relatively quickly.”

Natural gas for May delivery increased 9.3 cents to $2.068 per million British thermal units at the close on the New York Mercantile Exchange.

Southern, whose energy output matches that of the country of Australia, has halved its coal use to about 35 percent of energy sales since 2007, Fanning said. The company’s gas-fired generation rose threefold to 47 percent.

Fanning and his team accelerated the transition to gas last year as prices began to tumble and the U.S. Environmental Protection Agency announced stricter curbs on common coal-fired plant pollutants.

Southern is monitoring stockpiles and renegotiating mine and rail contracts as its coal burn drops to 45 million tons this year from 56 million tons in 2011, Fanning said during a quarterly conference call.

Southern fell 0.9 percent to $45.48 at the close in New York.

To contact the reporter on this story: Julie Johnsson in Chicago at jjohnsson@bloomberg.net

To contact the editor responsible for this story: Susan Warren at susanwarren@bloomberg.net

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