Latest coal plant subsidy proposal could hit electricity bills in the West

By Joe Smyth | [email protected] | @joesmyth

The Trump administration's latest proposal to subsidize coal and nuclear power plants is more expansive than earlier efforts, and a key change could impact utilities and ratepayers in the Western United States. That change follows a recommendation by Tri-State Generation and Transmission Association to expand coal plant subsidies to the Western region.

Tri-State's Escalante coal plant in New Mexico

Bloomberg News published a memo on Friday that offered new details about the steps the Trump administration is considering to provide subsidies to coal and nuclear plants, which are struggling to compete with lower cost renewable energy and natural gas power plants. Analysts and former regulators detailed how the “Soviet-style” proposal, if pursued, could upend electricity markets and lead to higher electricity rates.

Under the Trump administration’s earlier proposal, coal and nuclear plants in certain wholesale electricity markets would have received additional payments. That plan would have mostly impacted power plants and electricity consumers in the Midwest and Northeast, and provide a bailout for coal mining executive and Trump donor Bob Murray, whose company sells coal to utilities in those regions.

FERC unanimously rejected that plan, with commissioners dismissing it is an unneeded “multi-billion dollar bailout targeted at coal and nuclear generating facilities” that would “freeze yesterday’s resources in place indefinitely, rather than adapting resilience to the resources that the market is selecting today or toward which it is trending in the future.”

But the latest proposal could go well beyond that earlier plan, by keeping coal plants online that are outside of organized electricity markets, known as Regional Transmission Organizations (RTOs) and Independent System Operators (ISOs). Page three of the memo states:

DOE also is directing SGFs ("Subject generation facilities") outside of the RTO/ISO territories to continue generation and delivery of electric energy according to their existing or recent contractual arrangements with Load-Serving Entities.

As the map above shows, regions “outside of the RTO/ISO territories” include most of the Southeast and Western United States.

So the memo suggests that certain coal and nuclear plants - “Subject generation facilities” - in the West and Southeast could be ordered to continue operating, even if they are unable to deliver power at competitive rates.

Expanding coal plant subsidies to include the Western US was one of two key changes to the original proposal that Tri-State Generation and Transmission Association sought. In it comments to FERC, Tri-State said it supported the plan, and requested that it be expanded to apply to generation and transmission associations, and that it be extended to coal plants outside of organized electricity markets:

During the Colorado Rural Electric Association Energy Innovations Summit in October, Colorado Public Utilities Commissioner Frances Koncilja questioned a Tri-State official about their proposal to expand coal plant subsidies, and how that would work with the organized electricity market that Tri-State and other utilities in the West are considering joining, the Southwest Power Pool (SPP).

Commissioner Frances Koncilja:
Tri-State submitted comments to FERC last week to support the DOE proposal, and request that it be expanded to include cooperatives. How would Tri-State’s proposal work with the competitive markets fundamental to the way RTOs work, and how, to the extent there’s a disagreement now between Tri-State and SPP at FERC, how do you accommodate those differences?
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Mary Anne Zehr, Senior Manager, Transmission Contracts, Rates & Policy, Tri-State:
Well we believe, Tri-State believes that moving into SPP from both a transmission and a market perspective is going to provide benefits to Tri-State. As mentioned, markets allow generation sources to be used at the most cost effective manner. My experience and our experience at Tri-State, working with SPP has been that they- the stakeholder body is a lively one, you get to get engaged. And that’s in fact important about SPP, you have to be present and engaged, and speaking up, and that’s important in order to make sure your voice is heard, and to be able to help drive the change that you feel is important. And our experience in SPP today has proven that that has been an effective process, so the extent us, as a member of SPP, Tri-State as a member of SPP, feels like something SPP is embarking on differs in the direction that Tri-State wants to take, we’ll be present, we’ll be telling them about it.