Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

FirstEnergy Corp. (FE): Coal Power Generation Is Being Cut. Will Natural Gas Be Next?

The old saying used to be: “If you can’t beat them, join them.” It turns out that it doesn’t quite work out that way all the time. At least that’s the case for FirstEnergy Corp. (NYSE:FE), which is shutting down two coal-fired power plants due to low natural gas prices. The problem is it can’t economically justify replacing those plants with natural-gas-powered units.

Hatfield Ferry coal power plant. Photo credit: Flickr/

It’s also not for lack of trying as the utility has twice proposed converting these aging coal plants to natural gas. Both times the company has had to abandon the idea because the price simply wasn’t right. As it turns out, natural gas would have to plunge by 30% and stay that way for a long, long time in order to justify the investment. That leaves FirstEnergy Corp. (NYSE:FE) in a bit of a bind because it can’t open a new coal-fired power plant either, because of current and likely future environmental regulations.

FirstEnergy Corp. (NYSE:FE)

The two plants in question, Hatfield Ferry and Mitchell, have total capacity of 2,080 megawatts or about 10% of the company’s total generating capacity. However, the two plants represent about 30% of the company’s $925 million estimated costs of complying with the EPA’s Mercury and Air Toxics Standards. That’s just too high a cost to keep the two plants operational.

Over the past year, FirstEnergy Corp. (NYSE:FE) has announced the deactivation of 11 power plants within its portfolio. These two most recent plants being deactivated, both located in Pennsylvania, will result in the loss of about 380 jobs in the state. It’s really just the latest in a string of coal-related jobs disappearing in the region.

At least the region is blessed with abundant natural gas reserves thanks to the Marcellus Shale. The development of that shale play continues to bring jobs to the region even as coal jobs disappear. One company in which this is most clearly seen is CONSOL Energy Inc. (NYSE:CNX). The gas and coal producer has really been switching its growth objectives toward gas. Once the company’s BMX Mine comes on line, it’s not expecting to spend capital to grow its coal business any further. Instead, it’s looking to grow its gas production by double digits in order to fuel the increased consumption of that resource by utilities that are switching from coal to natural gas.

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
This is a FREE report from Insider Monkey. Credit Card is NOT required.