Cleaner air in U.S. could mean higher electricity bills

Electricity prices are probably on their way up across the U.S. as coal-fired plants, the dominant source of cheap power, shut down in response to environmental regulations and economic forces.
By JONATHAN FAHEY, Associated Press Published: May 22, 2014
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— Electricity prices are probably on their way up across much of the U.S. as coal-fired plants, the dominant source of cheap power, shut down in response to environmental regulations and economic forces.

New and tighter pollution rules and tough competition from cleaner sources such as natural gas, wind and solar will lead to the closings of dozens of coal-burning plants across 20 states over the next three years. And many of those that stay open will need expensive retrofits.

Because of these and other factors, the Energy Department predicts retail power prices will rise 4 percent on average this year, the biggest increase since 2008. By 2020, prices are expected to climb an additional 13 percent, a forecast that does not include the costs of coming environmental rules.

The Obama administration, state governments and industry are struggling to balance this push for a cleaner environment with the need to keep the grid reliable and prevent prices from rocketing too much higher.

“We’re facing a set of questions that are new to the industry,” says Clair Moeller, who oversees transmission and technology for the Midcontinent Independent System Operator, which coordinates much of the electric grid between Minnesota and Louisiana.

Coal is the workhorse of the U.S. power system. It is used to produce 40 percent of the nation’s electricity, more than any other fuel. Because it is cheap and abundant and can be stored on power plant grounds, it helps keep prices stable and power flowing even when demand spikes.

Power prices soar

Natural gas, which accounts for 26 percent of the nation’s electricity, has dropped in price and become more plentiful because of the fracking boom. But its price is on the rise again, and it is still generally more expensive to produce electricity with gas than with coal. Also, gas isn’t stored at power plants because the cost is prohibitive. That means it is subject to shortages and soaring prices.

During the brutally cold and snowy winter that just ended, utilities in several states struggled to secure natural gas because so much was also needed to heat homes. Some utilities couldn’t run gas-fired plants at all, and power prices soared 1,000 percent in some regions.

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Oklahoma has more than 20 coal-fired power plants, according to the U.S. Environmental Protection Agency, but only Tulsa-based Public Service Co. of Oklahoma has announced plans to shutter any of them. PSO plans to phase its state coal plants out of operation by 2026 to meet federal emissions regulations, while Oklahoma Gas and Electric Co. – the state’s largest utility – hopes to continue burning coal with lower sulfur content. OG&E has said it expects power plant upgrades, modifications or retirements to address environmental regulations to cost at least $1 billion, with ratepayers likely to bear the burden of paying for those improvements.

Improvements may cost $1 billion

Oklahoma has more than 20 coal-fired power plants, according to the U.S. Environmental Protection Agency, but only Tulsa-based Public Service Co. of Oklahoma has announced plans to shutter any of them. PSO plans to phase its state coal plants out of operation by 2026 to meet federal emissions regulations, while Oklahoma Gas and Electric Co. – the state’s largest utility – hopes to continue burning coal with lower sulfur content. OG&E has said it expects power plant upgrades, modifications or retirements to address environmental regulations to cost at least $1 billion, with ratepayers likely to bear the burden of paying for those improvements.

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