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Tuesday, 08 September 2015 19:23

Regulators Should Let the Free Market Kill Coal

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Coal-fired electricity is becoming ever less profitable.

That's the good news -- or it should be, since it gives power companies greater incentive to embrace cleaner and cheaper sources of energy.

But not every energy company is content to let the market guide its decision-making. In a role reversal, at least one energy company is asking regulators to intervene to keep coal profitable for a while longer.

In Ohio, the Public Utilities Commission is considering a request from the Akron company FirstEnergy to have consumers cover the higher cost of electricity from three aging coal plants. (One of these just underwent a $1.8 billion pollution- control upgrade to comply with federal law.) The aim is to keep the plants open for another 15 years. Under this plan, FirstEnergy ratepayers could spend $3 billion more than necessary for electricity, according to the Office of the Ohio Consumers' Counsel, a state agency.

The strategy is similar to one FirstEnergy followed in West Virginia, when it got state approval to sell a coal-fired plant to its regulated subsidiaries, so that when the price of coal power became uncompetitive, the subsidiaries could secure an officially sanctioned rate increase. Earlier this month, they asked for a 12.5 percent rate rise.

Other energy companies aren't so shortsighted. In Iowa, for example, MidAmerican Energy is investing $900 million in new wind farms that will enable the company to draw more power from wind than from coal. Iowans can look forward to years of low, stable electricity prices.

The declining profitability of coal is an opportunity to save consumers money and reduce reliance on a dirty power source. Coal-fired power plants spew more than atmosphere- warming carbon dioxide. They also pollute the air with mercury and other toxins, as well as fine particles that contribute to bronchitis, asthma and heart disease, killing some 7,500 Americans a year.

The transition away from coal won't happen all at once. Renewable energy cannot yet supply the steady volume of power that coal has long been able to provide. Even refitting a plant to burn natural gas rather than coal takes time and money.

But make no mistake: As an energy source, coal is in decline. By acquiescing to requests to delay this inevitability, regulators aren't helping energy companies, their customers or the environment.

©2015 Bloomberg View
The Editors: Mary Duenwald and Michael Newman

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