The energy sphere is a buzz this month with plant closures and job losses due to newly implemented EPA emission standards, specifically the Mercury and Air Toxic Standards (Utility MACT) and Cross State Air Pollution Rule or (CSAPR). In all, 33 gigawatts or about 10 percent of United States coal energy capacity is being retired.
Plant closures are a result of the short implementation time period, combined with the high cost of retrofits. First Energy is closing nine plants in Ohio, Pennsylvania and Maryland, including the Albright Power Station, the Willow Island Power Station, and the Rivesville Power Station managed by subsidiary Mon Power; Bay Shore Plant, Eastlake Plant, Ashtabula Plant, and Lake Shore Plant in Ohio; Armstrong Power Station in Pennsylvania, and R. Paul Smith Power Station in Maryland. Collectively the plants are capable of generating 3,350 MW.
All of these plants are coal fired generation units that run primarily during peak periods, or when the demand for electricity is very high. The highest peak periods are usually during the dog-days of summer when everyone cranks up their air conditioning. The National Electrical Reliability Council has expressed concern that the reliability of electricity could be threatened by the large amount of near simultaneous plant closures.
What does this all mean for electricity consumers shopping for the lowest price? In most cases it means higher rates. With less supply available in eastern Ohio and western Pennsylvania, electricity prices in the First Energy territory are expected to nearly double at a power auctions in May. Analysts predict rates will rise from $126 for every megawatt available per day to $200 or even $500.
In states without electric competition, utilities can pass on the costs of installing new equipment to meet to ratepayers- increasing rates. If state regulators refuse to allow utilities to pass on the cost of the upgrades, more plants will close leaving even less power available to meet demand.
All this sounds like bad news but the Ohio Republic points out there is a silver lining . . . for utility companies. First Energy and other companies divesting large amounts of coal-fired generation could see record profits from capacity auctions.
Apart from selling power, generators in a state with electric competition can make money by selling capacity or making power plants available for use during peak periods.
With fewer generation plants operating, prices for capacity will rise. Until electric companies can build new, cleaner generating capacity, consumer in the First Energy footprint should brace themselves for higher rates.