Coal and nuclear seeking second helping of subsidies
Battle lines are drawn for an epic battle next year over Secretary of Energy Rick Perry’s plan to grant coal and nuclear power plants another trip to the government trough.
The independent Federal Energy Regulatory Commission must decide whether to bow to Trump administration pressure or respect the majority of the nation’s electric companies and sustain the competitive electricity market in 17 states. The Perry plan could cost millions of electricity customers $10.6 billion a year, according to a study financed by the Climate Policy Initiative and Energy Innovation, two nonpartisan groups that research climate and energy issues.
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The most misleading argument for new subsidies is that coal and nuclear plants deserve help competing with wind and solar facilities that earn tax credits. But that ignores more than 70 years of subsidies granted to coal and nuclear power.
Governments began guaranteeing profits for privately owned electric utilities in the 1900s. City councils and state public utility commissions granted monopolies to investor-owned utilities and set rates guaranteeing a fair rate of return. Price-fixing is the ultimate subsidy, and most states still operate this way.
Graduate Kaitly McKenzie pauses for a photo with Lone Star College-Montgomery President Rebecca Riley after receiving her diploma during the Lone Star College-Montgomery commencement ceremony on Friday, May 12, 2017, at Woodlands Church. McKenzie is part of the first graduating class of iSchool High, a public charter school located on the LSC-Montgomery campus, and is one of three students graduating with their associates degrees before their high school degrees. Texas lagging badly in educating workforce Cooling towers emit steam at Pennsylvania’s Three Mile Island nuclear plant. Natural gas has a cost advantage over nuclear. Coal and nuclear seeking second helping of subsidies Rep. Kevin Brady (R-Texas) during an event marking the passage of the Republican tax bill at the White House in Washington, Dec. 20, 2017. The House, forced to vote a second time on the $1.5 trillion tax bill, moved swiftly to pass the final version on Wednesday, clearing the way for President Trump to sign into law the most sweeping tax overhaul in decades. (Al Drago/The New York Times) Tax plan is Congress’ Christmas gift to accountants and lawyers
Last week, Georgia’s Public Service Commission guaranteed that customers will pay higher-than-market rates for electricity from the Vogtle Nuclear Project, which is five years behind schedule and $9 billion over budget. Natural gas plants would have been cheaper, the commission’s staff reported, but finishing the only new nuclear reactors in the country is a political priority.
Perry is doing his bit, guaranteeing $3.7 billion in loans to finance the two reactors. Georgia’s Public Service Commission is also asking Congress to approve $800 million in additional subsidies.
None of this is unusual. Most nuclear and coal power plants received such subsidies, especially after the energy crisis in the mid-1970s, when the federal government ordered utilities to switch to coal and nuclear power from natural gas, which experts thought was running out. To subsidize new coal and nuclear plant construction, public utility commissions sent electricity prices skyrocketing.
The industry began to change in 1996, when California, Pennsylvania, Ohio and Rhode Island began experimenting with competitive wholesale electricity markets.
Instead of state commissions setting prices, companies began competing to generate electricity at the lowest price. Grid operators, such as the Electric Reliablity Council of Texas, or ERCOT, buy the cheapest electricity first and then buy more until they have all the electricity they need. All producers earn the last, highest price.
The ERCOT grid in Texas, which is not federally regulated because it doesn’t send power to other states, switched to a deregulated market in 2002. And like the 17 federally regulated states that moved to competitive markets, the Texas Legislature convinced generators to accept the end of guaranteed profits by offering one-time payouts to plants that might have difficulty competing without continued subsidy.
Over the last 20 years, independent power companies have built tens of thousands of kilowatts at new power plants in deregulated markets, most of them natural gas, as well as a significant number of wind turbines financed with federal tax credits for electricity production. Wholesale electricity prices in deregulated markets are now the lowest in the nation.
