With current wholesale natural gas prices continuing to soar, owners of both efficient and less efficient coal-fired electric generation plants are profiting, according to a wholesale power market survey by Fitch Ratings released Monday. Fitch’s latest wholesale power market “special report” focused on the ongoing impact of the volatile wholesale gas market.

Fitch modeling assumes that wholesale gas prices in the $4-6.50/MMBtu range will remain the “norm” for several years, offering coal operators the prospects for strong cash flows during that time. Fitch has established a “high gas price scenario” in its North American wholesale power market model, and has two other scenarios operating under that model — a base case and a low gas price scenario.

“Higher gas prices and market volatility likely will be the norm for several years,” said Ellen Lapson, Fitch’s managing director, global power. Her report confirms that merchant coal plants are producing “favorable cash flow” in the current high-priced gas environment.

“While owners of both efficient and less efficient coal plants are currently profiting from high market clearing prices, the less efficient units would be at a competitive disadvantage relative to natural gas if prices fall to the level in the Fitch base case,” the report said. “Fitch’s models demonstrate that the cash flows of less efficient coal units fluctuate more profoundly than those of efficient coal-fired generation with fluctuations in gas prices.”

Fitch’s report also covers recent developments in the regional power markets in Texas, the Northeast and Midwest, along with a review of asset sales transactions in the Southeast and Texas and possible effects of the new Federal Energy Regulatory Commission market power screens on the Southeastern wholesale power market.

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