October 25, 2017 Read More →

U.S. Coal Industry Bailout Plan Would Cost Customers as Much as $288 Billion

SNL:

The U.S. Department of Energy’s proposal to prop up financially struggling coal and nuclear plants by ensuring they can recover all their costs would carry a big price tag for consumers, according to the PJM Interconnection’s independent market monitor and other stakeholders.

Many market participants already have voiced strong opinions, and costs are a key point of criticism. Monitoring Analytics LLC, PJM’s independent market monitor, said the DOE proposal would increase costs to customers by between $18 billion and $288 billion over ten years, depending on what percentage of replacement costs are paid to coal and nuclear units not currently subject to cost-of-service regulation.

Monitoring Analytics therefore said the proposal “does not serve the public interest” and urged FERC to reject the DOE’s request. Among other complaints, the market monitor said the proposal would “impose significant costs on customers” by requiring regional transmission organizations and independent system operators to allow plants with at least 90 days of fuel on-site — chiefly coal and nuclear plants — to fully recover their costs.

“Approving the DOE proposal would replace regulation through competition with an unworkable hybrid of competitive markets and cost-of-service regulation,” Monitoring Analytics said. “The eventual result would be the demise of competitive markets in the PJM region.”

In addition to direct costs, the market monitor said the DOE directive would impose major opportunity costs by undermining incentives to build new, more efficient resources “that are at the heart of existing competitive markets.”

“The artificial retention of uneconomic resources will crowd out economic resources and weaken or eliminate the incentives for competitive new entry,” Monitoring Analytics said. “It would be ironic if cost-of-service regulation were reintroduced in order to preserve nuclear and coal power plants that have been demonstrated by the market to be uneconomic.”

More ($): Market monitor: DOE proposal could cost up to $288B over 10 years

Comments are closed.