As large energy consumers, we oppose power plant bailouts
On the one hand, the plan would pay a small number of generators to stay in business long after the market would otherwise have told them they’re not needed. Good for them, and their fuel suppliers.
On the other hand, it would harm every other business and consumer in the country, including the nation’s largest manufacturers and energy users, by raising electricity costs and completely disrupting electricity markets. In other words: Bad for the rest of us.
If the administration sides with the interests of a handful of uneconomic and outdated power plants, it will turn its back on the affordable and reliable electricity that is the lifeblood of the economy and a competitive advantage for American businesses — businesses like those who are members of our organizations. This decision would increase the cost of doing business here at home by tens of billions of dollars annually.
The administration argues that bailing out uneconomic power plants is necessary to protect national security. But it has failed to provide any evidence to back that claim. Every organization charged with keeping the lights on, from regional grid operators to utilities to even the administration’s own grid regulators, agrees that markets are doing their job and that bailouts aren’t needed. Grid operators, market participants, state and federal regulators, and even customers are taking action to improve the reliability and resilience of electric power service. If direct government intervention into the markets were needed to address upcoming threats, these groups would be calling for solutions. Instead, regulators, grid analysts, and consumers are unanimous in opposing the administration’s proposed actions.
Even if the grid were facing a reliability or resilience emergency, bailing out old and inefficient power plants (which, in some cases, were built during the Eisenhower administration) in the name of creating a Strategic Electric Generation Reserve is not cost-effective, logical, or in the best interests of businesses and citizens.
For one, we already have a strategic reserve of electricity. It’s called a reserve margin — extra capacity for electricity generation kept at the ready in case some power plants are unavailable to meet anticipated demand. In most U.S. markets today, the reserve margin exceeds the level grid operators say they need to maintain reliability. Adding an extra reserve would be like upgrading to a higher cellular data plan for your phone when you never even use half of your existing plan — it costs more and delivers no benefit.
Second, the proposed bailout would mandate the use of higher-cost energy through command-and-control regulation rather than allowing the competitive market to deliver the electricity we need at lower cost. This action would reverse decades of federal policy supporting fair market competition and American innovation in energy, injecting risk and uncertainty into investment decisions for energy companies that are bringing new, more affordable energy options to the grid. That mistrust of competitive market principles in and of itself is worrying for businesses.
At the end of the day, the administration’s plan is one that would benefit a small number of favored businesses at the expense of the rest of the economy. It would take an illogical and misguided command-and-control approach to managing the energy we use instead of putting faith in competitive markets – all in the name of solving a problem that experts say does not exist.
As representatives of some of the largest energy-users in the U.S. economy, we find this appalling. If the administration goes forward with this plan, choosing to side with a few well-connected interests that want protection against market realities instead of consumers large and small, we will not sit on the sidelines.
Image credit: Lee Yiu Tung