November 7, 2017 Read More →

U.S. Coal Bailout Plant Would Benefit a Select Few: Murray Energy, FirstEnergy, NRG

Politico:

“Customers get less than nothing while a few companies and their investors get a whole lot of something,” Nora Mead Brownell, a Republican former electricity regulator, said of Perry’s plan, noting the high cost estimates. “Money that gets spent there doesn’t get invested in doing what you really need to do, which is upgrading the grid.”

Meanwhile, Bob Murray’s company has publicly acknowledged that its future depends on whether Perry’s plan flies.

At those meetings in the summer, Murray urged Trump to declare a power grid emergency and force coal-fired power plants owned by one financially troubled company, FirstEnergy Solutions, to stay open even if the company sank into bankruptcy. Those plants bought about two-thirds of their coal from Murray in 2015, according to POLITICO’s analysis of U.S. Energy Information Administration data.

At DOE’s urging, the White House ultimately declined to declare the emergency. But Perry’s new proposed rule would accomplish the same result by requiring the power markets to cover the costs to run the economically ailing plants, enabling them to keep producing power.

Ohio-based Murray Energy, the No. 5 U.S. coal producer, is the largest supplier to the dwindling number of coal-fired power plants in one stretch of the Rust Belt and Appalachia, overseen by an electricity market called the PJM Interconnection. The power plants in PJM account for roughly 44 percent of Murray’s sales, according to POLITICO’s analysis.

Murray’s nearest competitor, industry leader Peabody Energy Corp., sold about 9 percent of its coal in that market. In total, Murray sold 24 million tons of coal to PJM merchant coal plants in 2015, far more than Peabody’s 15 million tons.

“Murray is by far the largest player in the Northern Appalachian basin and de facto one of the biggest gainers if FERC acts on the DOE [proposal],” said Joe Aldina, director of coal research for the analytics and data company S&P Global.

The DOE proposal calls for power market operators to guarantee payments to power plants that keep 90 days of fuel on site. That requirement would be virtually impossible for natural gas-fired power plants to meet — they get their fuel via pipelines — and would totally exclude wind or solar plants.

By requiring 90 days of on-site fuel, the measure would create incentives for most coal-fired power plants to increase their fuel supplies, providing a quick boost for miners.

One recent analysis by consulting firm ICF said the proposal could cost nearly $4 billion a year, while another study by Energy Innovation, a nonprofit firm that analyzes climate and energy policies, said the figure could be as high as $10.6 billion annually. Perry has dismissed concerns over the costs, asking “What’s the cost of freedom?” when pressed by lawmakers.

“It’s about the coal producers, frankly,” said Kit Konolige, a senior utilities analyst with Bloomberg Intelligence. The rule might affect individual power producers differently, he added, but “you can certainly say it would definitely be a plus for coal miners.”

Players in the power business say the rule appears to focus on the PJM market, because it would only apply to electricity generators in certain types of regional power markets. It would exclude those in regions where state regulators oversee the economics of power companies.

The rule was “certainly targeted at the PJM region,” said Andy Ott, CEO of PJM, which oversees all or parts of Delaware, Illinois, Indiana, Kentucky, Maryland, Michigan, New Jersey, North Carolina, Ohio, Pennsylvania, Tennessee, Virginia, West Virginia and the District of Columbia.

Among the nation’s roughly 280,000 megawatts of coal-fired power, Perry’s rule is tightly written to affect only about 40,000 megawatts, according to POLITICO’s analysis. Power capacity from plants owned by the companies FirstEnergy and NRG account for nearly 40 percent of that slice, according to EIA data for 2015, the most recent year for which the information is complete. Murray provided two-thirds of the coal FirstEnergy bought for its competitive plants, and only 2 percent of NRG’s.

Among those plants that would benefit from the plan are four coal power generating units at FirstEnergy’s Murray-supplied Sammis plant in Ohio that are set to retire within the next three years. FirstEnergy, the parent of the troubled FirstEnergy Solutions subsidiary, could see its plants sell an additional $500 million in electricity a year if Perry’s plan is enacted.

DOE’s proposal has attracted vociferous opposition from power producers and trade groups representing wind, solar and natural gas energy, and has been criticized by five former FERC chairs from both parties. Dynegy and NRG Energy, two of the power companies likely to see the biggest benefits from the plan — and which have big investments in PJM competitive coal plants — also oppose the proposal as too expensive and a distortion of the market.

DOE’s plan would also provide a lifeline to money-losing nuclear plants owned by Exelon Corp., NextEra Energy and FirstEnergy. But the coal industry says its situation is the more dire.

More: Trump coal backer wins big under Perry’s power plan

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