Regulatory win for coal could cost consumers, hurt renewables
President Donald Trump can claim a victory for his friends in the coal industry after his hand-picked energy regulators changed the rules in the biggest U.S. power market.
The Federal Energy Regulatory Commission ordered an overhaul of a massive electricity auction that power generators count on for more than $9 billion a year in payments. Under the new rules, coal plants that have struggled to compete with low-cost gas and renewable energy may now claim more of that money. That’s a boon for fossil-fuel plant owners Calpine Corp., Vistra Energy Corp. and NRG Energy Inc.
But the change could suppress new development of renewable generation and would raise costs for consumers in an already oversupplied market. It also hurts subsidized nuclear plants run by Exelon Corp., Public Service Enterprise Group Inc. and FirstEnergy Corp.
“In no way is this meant to promote one fuel source over another,” commission Chairman Neil Chatterjee told reporters. The change, he said, will level the playing field for generators that don’t receive state subsidies such as renewable energy credits.
Exelon, the biggest operator of nuclear plants and a recipient of state zero-emission subsidies, said the changes would raise consumer electricity bills by $2.4 billion a year and result in thousands of job losses.
“By granting the request of fossil generators, this order completely undermines state clean and renewable energy programs,” said company spokesman Paul Adams.
The commission ordered the changes Thursday as a condition of allowing grid operator PJM Interconnection LLC to move forward with its power auction. The sale has already been postponed twice this year as federal regulators debated the future of America’s power mix.
PJM has 90 days to respond to the changes and submit a new timetable for the sale, which the grid operator uses to secure capacity three years in advance for more than 65 million people in 13 states and the District of Columbia.
The unprecedented delay of the auction showed how heated the fight has become over where the U.S. should get its electricity. States including New York and Illinois are promoting renewable energy and subsidizing zero-emissions nuclear power. Others are fighting to preserve coal and natural gas generators.
Commissioner Richard Glick, the only Democrat at the energy commission, criticized the ruling as a handout to coal plants that comes at the expense of consumers. “This is a bailout, pure and simple,” he said.
The Electric Power Supply Association, which represent fossil-fuel companies including NRG and Calpine, applauded the order, saying it will “help bring us closer to building a durable and sustainable market design that meets the needs of the 21st century.”
Two states that offer subsidies for zero-emission power, Illinois and New Jersey, have threatened to pull out of PJM’s power market over past proposals to raise prices for fossil-fuel plants.
(Michael Bloomberg, the founder and majority owner of Bloomberg LP, the parent company of Bloomberg News, has committed $500 million to launch Beyond Carbon, a campaign aimed at closing the remaining coal-powered plants in the U.S. by 2030 and slowing the construction of new gas plants.)