A Threat or A Promise? Southern Co. May Announce Coal Retirements

Plant Yates, Southern Company's oldest regularly opearating coal plant, began operation in 1950

Plant Yates, Southern Company's oldest regularly operating coal plant, began operation in 1950

Coal utilities like American Electric Power (AEP) and Southern Company are making big threats. They threaten to protect our air, our water and our health. They threaten to provide us with a more stable and diverse portfolio of energy generation, and they threaten to make good business decisions by closing down the oldest and least efficient coal plants that cost them—and their ratepayers—the most to operate.

If these sound more like promises than threats, you will have to take that up with the utilities. When the Tennessee Valley Authority (TVA) or Duke Energy Carolinas made real commitments to move away from dirty and expensive coal power, they couched their decisions in terms of long-term planning and environmental stewardship. But when AEP and Southern Company talk about as yet uncertain coal retirements and environmental upgrades they act as if the extraordinarily beneficial choice will wreak havoc on ratepayers and employees.

On June 9th, AEP made a broad announcement that it would retire at least 6,000 MW of coal-fired power plants and then upgrade or install new emission reduction technology on another 10,100 MW.  AEP said that the catalyst for the move was new rules proposed by the Environmental Protection Agency (EPA) related to clean air and clean water. In their announcement AEP threatened that the move would cost untold sums of money and hundreds of jobs.

There are now rumblings that Southern Company, the Southeast’s largest utility, will use the same tactic to scare EPA into shirking its duty to protect human health and the environment.  Southern Company is hinting that it will make projections about which plants it would shut down, which plants it would clean up, how much the changes would cost, and what impact this would have on jobs.

Southern Company and AEP see these projections as a repudiation of EPA’s efforts to carry out the Clean Air Act, an extremely popular, 40 year old, bi-partisan law. In fact, their projections of rising rates and job loses are attributable more to their own poor planning than the Clean Air Act. Take for example the following quote from AEP’s press release: “We have worked for months to develop a compliance plan that will mitigate the cost of these rules for our customers…”

For months they’ve been working! What they fail to mention is that the environmental safeguards they are blaming for their new direction have been in the making for at least the past 20 years. If Southern Company and AEP had been running their businesses more responsibly, they would have prepared for this years, if not decades, in advance. With that level of proactive management they wouldn’t have to threaten us with their perceived doom and gloom.

There are utilities even in this heavily coal-dependent region that have prepared and are positioned to affordably implement any new EPA safeguards. Jim Rogers, for example, President and CEO of Duke Energy has stated that EPA activity and the need to clean the air “has long been part of our business plan.” As any good business would, Duke planned in advance and committed to retiring their oldest, dirtiest and least efficient plants in North and South Carolina. According to Jim Rogers, as reported on PoliticoPro.com (password required), this planning “really mitigated a lot of the risk and the cost associated with [EPA rule-making] because of the early steps that we took.”

Duke Energy planned ahead for a drawdown in coal generation

Duke Energy planned ahead for a drawdown in coal generation

Some will criticize the government for poor planning and inefficiencies, but TVA, the nations largest publicly-owned utility, has also planned well for the changing energy landscape and is in a better position than utilities like Southern Company. TVA recently announced that it will retire 18 of its most expensive and dirtiest coal units and that the remaining units will be outfitted with advanced environmental controls or retired themselves. TVA’s effort, the culmination of a detailed and publicly accessible resource planning process, will put TVA, like Duke, in a position to more easily comply with any regulatory or economic changes.

Part of what stubborn corporations like AEP and Southern Company fail to mention in their threats is that their frustrating situations are not brought about just by EPA. Rather, these companies have been unwilling to broadly diversify and expand into clean energy options like energy efficiency and renewables.  Heavy reliance on an aging coal fleet (58% of Southern Company’s total capacity) is simply poor planning as these coal units are reaching the end of their lives regardless of EPA involvement. Shortly after their initial announcement, Charles Patton, President an AEP subsidiary admitted that “most of [the retiring coal plants] are in excess of 50 years old. These plants are nearing the end of their useful life. This is more of managing the transition.”

Southern Company argues completely disingenuously that regulatory changes are a surprise. In fact, they have been delaying and fighting these changes for decades, but even if not for EPA’s efforts, Southern Company still faces the costs and risks inherent in operating a fleet of coal plants that, in some instances, are over 60 years old.  Southern Company cannot blame EPA for its aging plants that become less economical to operate as the years go by.

If Southern Company’s threats come true, they will be doing everybody a favor. They will take their least efficient plants offline, preventing millions of tons of pollution and saving rate-payers from subsidizing these expensive old plants. Southern Company will then look to their more efficient and economical units and will add advanced environmental controls, again protecting human health and the environment by removing millions more tons of pollution from the air.

Despite what people like Southern Company executive Chris Hobson say, EPA is not taking “coal off the table as an energy supply in this county.” If that were the case, Southern Company would not complain about merely upgrading their coal plants. In fact, what this all means is that the coal we do use will be somewhat cleaner and our electricity will be more diversified, possibly protecting us from significant price swings in the future.

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2 Comments

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Wow! At first reading this I was happy the government for once was taking charge of shutting down coal plants but when I thought about it more they are doing the opposite of what they have promised for years…making jobs! By shutting down 18 coal plants ( that provide reliable electric power sources )that puts thousands of people out of work and while it helps reduce our carbon foot print it does little to help our struggling economy. Coal is our number 1 energy production in the US but we sell most of it to China when it be cheaper to just keep it here and use it ourselves as an electric power sources. It costs us less that 5 cents to run a microwave for 1 hour off coal power but we’d rather send the coal to China for the money they offer.It doesn’t make since to close plants when your opening new ones like the surry coal plant right by my house of all places. Good article with knowledge and facts but disappointing for those losing their jobs and a safe electric power sources even though it will help out the environment.


Comment by Joey Williams on June 20, 2011 3:08 pm


Mr. Williams,

Thank you for the comment, but you miss an important point of this post: The government is not shutting down coal plants. AEP and Southern Company are shuttering old coal facilities largely because the plants have reached the end of their lives. Many of the coal plants in Southern Company’s system are over 50 years old and some are over 60. As plants get older they become more expensive to operate and they produce energy less efficiently, which means even more pollution. It can be more affordable for the companies and the ratepayers if utilities rely on sources other than half-century old coal plants.

Of course you are right that it is disappointing when people lose their jobs. However, utilities can actively work out ways to reduce job loses from coal plant retirements. Since most plants are not closing immediately there is an opportunity to soften the impact through attrition and worker retirements. Perhaps most importantly, reduced reliance on coal means investment in other areas of the energy sector, including energy efficiency. Energy efficiency is a growing field with significant job opportunities and as we reduce our over-reliance on coal, we will create even more jobs around this and other alternative energy options.

Josh


Comment by Josh Galperin, Esq. on June 20, 2011 5:10 pm


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