First quarter therm sales at Peoples Gas also reflected the mild weather in January and February and lower sales to residential and commercial customers. Unfortunately, Peoples does not benefit from cooling degree days, so the weather impact was more pronounced on the gas company, resulting in net income lower than last year. Peoples did benefit from higher throughput for power generation customers, as gas-fired units ran more in response to the low natural gas prices. Peoples Gas also continues to experience steady customer growth, with an increase of 0.9% this quarter.
Earnings at TECO Coal were higher this quarter, the result of margin expansion of $4 per ton. Sales volumes were lower than last year, as we projected they would be in January when we reduced our volume expectations in response to market condition. The average selling price for the quarter rose to $96 per ton. This reflects met coal prices contracted when the market was stronger and higher average steam coal prices, following the expiration of a below-market contract at the end of last year. The contract to replace those tons was signed in the middle of 2011 in a more favorable pricing environment.
The all-in cost of production was almost $87 per ton, which is at the high end of our cost guidance range. The reason Q1 is at the high end is that January included costs associated with idling a facility and other actions we took to reduce production early this year. Compared to last year, production costs are higher because of: higher royalty and severance fees, which are a function of selling prices; the effective spreading fixed costs over fewer tons; and higher cost to move coal and overburden further to work around the lack of new service mining permits.