Millions of Americans are Unknowingly Bailing out Coal-Fired Power Plants

Electricity customers in four competitive power markets paid at least $1 billion per year more than they needed to pay for their electricity over each of the last three years because utilities sold them power from their own coal-fired plants instead of from cheaper power sources on the grid, according to a study released today by the Union of Concerned Scientists (UCS).

"Every month, millions of consumers are unwittingly bailing out coal-fired power plants," said Joe Daniel, study author and senior energy analyst at UCS, who will present his findings today at the United States Association for Energy Economics annual conference. "When utilities started selling power on the open market, they did so voluntarily. In fact, some had to jump through hoops to do so. But now they seem unwilling to take advantage of the low prices in the markets they joined."

Market rules are generally designed to reduce risk and financial burden for customers. In addition, these utilities often have a "least cost" obligation, meaning they are supposed to provide electricity to retail customers at the lowest reasonable price.

"If energy on the market can be purchased at a lower cost than operating the coal plants they own then they should buy that power and resell it to their customers," said Daniel. "But what my analysis found was that utilities are often depriving ratepayers of access to the lower cost, often cleaner power. Instead, they are selling customers electricity from their own, more expensive coal plants instead."

Daniel's study looked at the electricity that was provided on an hourly basis over a three-year period, from 2015 through 2017 in four markets that span from New Jersey to North Dakota and from Texas to Virginia. The markets studied include: the Electricity Reliability Council of Texas (ERCOT), the Midcontinent Independent System Operator (MISO), PJM, and the Southwest Power Pool (SPP).

He found that electricity providers without captive customers were more likely to operate in a more economically rational manner by providing their customers with the lowest-cost electricity available. But providers that did have captive customers, or ratepayers forced to use their service, behaved markedly differently. (To see the top 15 worst power plants, see Daniel's blog "The Coal Bailout Nobody is Talking About.")

"This practice is unacceptable and should not be tolerated," said Daniel. "Customers are being ripped off while cleaner and cheaper sources of energy are being crowded out because utilities are forcing customers to subsidize coal plants. What this study shows is that, in essence, customers are paying extra to put more global warming emissions into the atmosphere."