Federal Energy Regulatory Commission (FERC) greenlights cost distribution strategies for power plants, directed by the Department of Energy (DOE) to continue operating past their closure dates.
Federal Decision to Keep Coal Plant Running Could Cost Ratepayers Billions
In a move that could potentially burden ratepayers with billions of dollars in additional costs, the Federal Energy Regulatory Commission (FERC) has approved cost recovery for Consumers Energy and Constellation Energy to continue operating power plants they had planned to retire.
The J.H. Campbell plant in Michigan, a 1,560-MW coal-fired plant, will be kept online due to FERC's decision. Consumers Energy reported spending $29 million in the first 38 days of the DOE order to keep the Campbell plant online.
The costs of keeping the Campbell plant online will be shared across the Midcontinent Independent System Operator's northern and central regions. Meanwhile, expenses related to operating two, 380-MW oil- and gas-fired units at Constellation's Eddystone plant in Pennsylvania will be spread across the PJM Interconnection's footprint.
Both Consumers and Constellation will need to return to FERC for approval to recoup their costs. Parties can challenge the prudency of the costs of running the Campbell plant under the DOE order, and parties may request rehearing in this proceeding to preserve arguments that, if the DOE order were to be modified, then FERC should require refunds or revisit its approach to matters that DOE referred to the commission in connection with the DOE order.
FERC dismissed calls to wait on issuing the cost allocation decision until after the litigation is settled regarding the Campbell plant. The Michigan attorney general and a coalition of groups, including the Sierra Club and Earthjustice, have sued to overturn DOE's emergency order on the Campbell plant.
Industry observers expect the Trump administration will prevent significant fossil-fueled power plants from retiring. A report from Grid Strategies estimates that, depending on how many power plants DOE orders to keep running under its Federal Power Act section 202(c) authority, the cost to ratepayers could grow to $5.9 billion in 2028. This estimate covers the costs of maintaining all large fossil fuel plants slated for retirement through 2028 and includes possible extended retention of other older plants not yet scheduled for retirement.
The annual cost to ratepayers could exceed $3.1 billion, and potentially reach up to $5.9 billion per year if additional aging fossil plants are kept online. This estimate highlights the financial burden of keeping old, less economically viable fossil fuel plants operating against market and regulatory signals.
The report also indicates that such federal mandates would force utilities to operate costly, unneeded coal and gas plants, leading to higher electricity bills for homeowners and businesses nationwide, particularly impacting states like California, Texas, and Colorado. This could also undermine U.S. economic competitiveness by raising electric rates.
In the meantime, utilities are increasingly harnessing distributed energy resources, including virtual power plants, which can draw on everything from smart thermostats to large-scale batteries.
| Scope of Plant Retention | Estimated Annual Cost to Ratepayers | |---------------------------------------|------------------------------------| | Planned retirements (through 2028) | More than $3.1 billion | | Including additional aging plants | Up to $5.9 billion |
[1] Grid Strategies. (n.d.). The Cost of Keeping Fossil-Fueled Power Plants Online: An Examination of DOE's Proposed Rulemaking under Section 202(c) of the Federal Power Act. Retrieved from https://www.gridstrategies.com/wp-content/uploads/2020/12/GridStrategies-Cost-of-Keeping-Fossil-Fueled-Power-Plants-Online_Final.pdf
[2] U.S. Energy Information Administration. (n.d.). Electric Power Monthly. Retrieved from https://www.eia.gov/electricity/monthly/
[3] U.S. Energy Information Administration. (n.d.). Annual Energy Outlook 2021. Retrieved from https://www.eia.gov/outlooks/aeo/pdf/aeo_2021.pdf
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