Dallas-based Luminant, the electricity generation arm of Energy Future Holdings, and a number of other utilities that own coal-fired fleets are attempting to head off an EPA rule that would curb the amount of nervous system-disrupting mercury, cancer-causing dioxin, arsenic and lead emitted from their smokestacks.
At a time when the bottom line of the coal-fired electric generator is strained by low natural gas prices and weak consumer demand, reducing pollution is simply bad for business. Just not for the reasons the coal lobby gives.
So they've joined lawsuits and used industry organizations like the American Coalition for Clean Coal Electricity to push for a congressional resolution blocking the rule, spearheaded by Senator James Inhofe, an Oklahoma Republican. "The (ACCCE) today urged U.S. senators to support a resolution to overturn another new EPA regulation that would drive up energy costs unnecessarily and destroy American jobs," the group, which counts Luminant as a member, said in a release Tuesday.
The Senate will take up a vote today. If it passes, they'll kick it over to the House, which will no doubt adopt it enthusiastically. But President Obama has already vowed to veto it, rendering this effort little more than election-year political theater.
But with all this back and forth, the average Texas ratepayer can be forgiven for his or her befuddlement over the prospect of rolling blackouts and claims that the EPA is to blame. Analysis Group, a large, privately held consulting firm, gave the industry an up-and-down and told it to turn its head and cough. This is what they found:
The industry has plenty of time to scrub the prodigious mercury and other toxins billowing from its smokestacks. The deadline for compliance is April 2015, but it is possible to get extensions to 2016 and even 2017. Owners of half of the nation's coal-fired fleet, from Calpine to NRG, agreed the implementation was "manageable."
Since timing isn't really an issue, the argument against cleaning emissions becomes one of expense and grid reliability.
But PJM, the world's largest wholesale electricity market serving some 14 states, said that despite the expected retirements of some older, inefficient coal-fired power plants, it had enough gas-fired capacity slated for construction to more than cover the region's electric reliability requirements.
Indeed, coal is losing market share in electricity generation all over the country, and it has almost nothing to do with the EPA. Southern Co., one of the largest utilities in the country, says its generation mix went from 17 percent gas-fired capacity in 2007 to 47 percent this year. The reason is low natural gas prices, fueled by the expansion of shale gas in North Texas' Barnett Shale and elsewhere. Gas is cheap and abundant, and gas-fired plants, by far more efficient and cleaner burning, have entered their heyday.
You'd think that low natural gas prices would be a cause for relief at a time when we could all use a break. In 2011, gas prices drove wholesale electricity prices down across the country. Everywhere, that is, except in Texas, where regulators view low gas prices as such a huge threat to grid reliability that they're considering tripling the price of wholesale electricity during times when the grid is stressed. In this regard, Texas is an outlier in its free-market idyll.
Our deregulated, energy-only market, where a generator's only incentive to build new power plants comes from the wholesale price of electricity, turns a low commodity price into a grid crisis. The industry refrain these days is poverty: They aren't making enough money to drive new steel into the ground.
The conundrum of the Texas generator has little to do with the EPA. The coal-fired business model -- a moneymaker when gas prices hit $12 per million BTUs -- just doesn't make much sense these days. Add an energy-only market that has so far failed to keep pace with the demands of a growing state, and you have a recipe for failed market design, not regulatory overreach.
