The Proposed Bailout for Ohio's Coal Plants: A Bad Idea Any Way You Look at It

November 24, 2014
Sam Gomberg
Senior Analyst

Ohio’s three biggest electricity providers are asking the state to approve a bailout plan that would force Ohioans to pay hundreds of millions of dollars in extra charges to keep some of the nation’s oldest, dirtiest, and least efficient power plants operating. If the proposals are approved, electricity costs for Ohioans will rise as consumers are forced to pay extra to maintain the Buckeye State’s risky over-reliance on coal.

Smokestack at coal burning power plant in Conesville, Ohio

If Ohio’s largest electricity providers get their way, Ohioans will be paying extra to continue the state’s risky over-reliance on its old, inefficient and dirty coal-fired power plants.

The proposals started popping up this summer as each of Ohio’s three largest electricity providers — FirstEnergy, AEP, and Duke — submitted separate plans to the Public Utilities Commission of Ohio (PUCO) for approval. While each proposal differs in the details, they offer the same basic structure: force ratepayers to pay surcharges on their electricity bills so that FirstEnergy, AEP, and Duke can reap guaranteed profits from coal-fired power plants that can’t compete in today’s electricity markets.

Locking consumers into higher costs and greater risk

The proposals lock consumers into mandated fixed-rate contracts for the electricity generated at these coal burning plants for the next several years. When the market price of electricity is below the electricity rate specified in the contracts, consumers will be forced to pay extra. If market prices are higher in the future, as utilities claim they may be, then consumers would in theory get a rebate.

The catch is that all parties to the proceeding — even the utilities — acknowledge that the market price for electricity will almost certainly remain lower than the proposed contract price for at least the next three years, costing consumers hundreds of millions of dollars. After that, market prices may or may not rise, but if they do, the proposals provide numerous caveats that will either allow utilities to get out of the contract or impose additional costs on the consumers to keep the plants operational. PUCO’s own staff has raised serious doubt that consumers will ever benefit from the proposals, concluding that the proposals will raise electricity costs in the near term and provide no clear benefit for consumers in the long term.

Ignoring coal’s impact on Ohio’s economy, public health, and environment

FirstEnergy, AEP, and Duke also argue that without a bailout, these power plants may shut down, costing Ohio jobs and negatively impacts the state’s economy. What they fail to mention is the impact these plants have already had on Ohio’s economy, public health, and the environment. For example, Ohio spent $1.2 billion in 2012 to import coal from out-of-state. This is money that could have been invested in Ohio instead of going to coal producers in other states.

Further, these plants account for significant emissions of harmful air pollutants that impose public health costs on Ohioans and contribute to climate change. It’s no surprise that the climate change denying CEO of Murray Energy, a major carbon producer, has jumped into the debate by falsely claiming that the retirement of outdated, dirty, and uneconomical coal-fired power plants has “no environmental benefit.”

Nearly every stakeholder participating in the PUCO cases has aggressively opposed the proposal with the exception of the Ohio Energy Group (that represents large industrial energy users). Instead of opposing the utilities that give them sweetheart deals on electricity rates, they are requesting the ability to opt-out of paying the proposed charges.

Ohio Statehouse - Columbus

Governor Kasich and the Ohio legislature have remained silent about the proposed bailout for Ohio’s coal plants even after dismantling the state’s clean energy standards because they supposedly went against “free-market” principles.  (Photo source: The Ohio Channel)

The definition of hypocrisy

The requests come on the heels of Ohio’s dismantling of its renewable energy and energy efficiency standards that would have helped the state transition away from its aging coal fleet toward a cleaner energy future. The primary lobbyists for dismantling these standards were none other than FirstEnergy and AEP, which are now asking for the bailout.

It’s the definition of hypocrisy — pushing for the repeal of Ohio’s clean energy policies on the premise that “free market” economics should dictate, then coming back and asking for a handout from Ohio consumers because their coal plants can’t compete in the free market.

And while the Ohio legislature and Kasich administration were more than willing to go along with utility requests to get rid of Ohio’s energy efficiency and renewable energy standards — suppressing government reports that show the economic benefits of clean energy and waging a campaign against clean energy in Ohio — they have remained silent on the proposed bailouts for Ohio’s old coal plants.

Let’s get on to building a cleaner energy future

It’s time that Ohio embraced its potential for a cleaner energy future instead of clinging to its past as one the nation’s leaders in dirty air and greenhouse gas emissions. The PUCO should reject the bailout proposals and let these coal plants close if they can’t compete economically with cleaner and more efficient sources of energy. Then let’s get on to the business of investing in Ohio’s energy efficiency and renewable energy resource and start building a cleaner, more sustainable, and more affordable energy future for the Buckeye State.