EPA war on coal will raise utility rates

January 24, 2013

Some Oklahomans are concerned that a deal struck between Public Service Company of Oklahoma and the Environmental Protection Agency could lead to a dramatic increase in home energy prices.

A watchdog group, Oklahoma Industrial Energy Consumers, is upset about a settlement between PSO and the EPA that could raise electricity rates in Tulsa residences by 25 percent.

The EPA is trying to eliminate coal as a source for generation of electricity and two PSO plants, both in Oologah, have been targets. Sources say that under this new agreement, PSO would close both of those plants and then petition the Oklahoma Corporation Commission for huge rate increases to build one or more new natural-gas powered plants.

OIEC, an association of large consumers of energy in Oklahoma, said those giant rate increases could damage industry, including paper mills, cement factories, glass plants, plastic manufacturers, food processors and a host of other firms that employ thousands of state workers.

One of the motivations for eliminating coal-fired plants in Oklahoma is the EPA’s Regional Haze Rule. In June, the 10th Circuit Court of Appeals issued an order for a stay in enforcing the rule in OG&E’s four electric plants in other parts of the state pending a hearing on the OG&E’s attempt to keep the coal-fired plants.

The EPA Haze rule is supposed to reduce pollution from coal-fired plants and industry to “improve visibility” at wilderness areas, such as the 59,000-acre Wichita Mountain Wildlife Refuge near Lawton.

Without the Regional Haze Rule in place, PSO would be in compliance with its coal-fired plants and would not be justified in a forced switch to natural gas.

In April, U.S. Sen. Jim Inhofe criticized the settlement and the “EPA’s war on affordable energy.”

The deal drew the praise of the Sierra Club, an extremist environmentalist group.

According to a Sierra Club press release, “The (Oologah) plant’s retirement is a major victory for public health in Oklahoma.” It is the 107th coal-fired plant to be closed since the Sierra Club launched a campaign to stop the use of coal.

OIEC calls PSO’s deal “bad public policy” because it eliminates “fuel diversity” and leaves PSO completely dependent on natural gas to generate electricity.

Replacing the Oologah plants unnecessarily will cost almost $2 billion, according to OIEC.

According to a letter from OIEC, “This adverse effect of this settlement is unwise, especially here, where PSO’s Northeastern generating units have a long remaining useful life and can utilize abundant, low-cost, low-sulphur coal to keep electricity costs low for Oklahoma ratepayers.”

PSO would have to go to the Oklahoma Corporation Commission for any rate hikes but being “forced” by EPA to abandon two working plants to build two new plants would probably leave commissioners no choice but to OK new rates. If commissioners deny the hikes, PSO could go to court and would probably win.

The terms of the PSO-EPA settlement include:

• Retiring one of its Northeastern Oklahoma coal-fired plant in 2016.

• Retrofitting the other plant at a cost of $256 million and then retiring it by 2026.

• Limiting the output of the remaining plant to 50-70 percent by 2021.

The EPA wants full depreciation of all capital investments at the coal plants by 2026.

According to an analysis by PSO, the EPA natural gas plan will be $2 billion more costly than using coal. That assumes a “carbon tax disadvantage” of $1.1 billion for the coal retrofit option.

PSO estimates that if the settlement is enacted, it will cost their customers about $164 million a year beginning in 2016 or about a 15.5 percent increase in rates. And rates will go up later as less and less coal is used for electricity.

Coal Hard Facts

• Coal generates 42 percent of the world’s electricity.

• The Top 5 coal producers:

1. China, 2. United States, 3. India, 4. Australia, 5. Indonesia

• There are 1,004 billion tons of coal reserves in the world – 130 years worth at the rate of output in 2011.

• America produces 45 percent of its electricity with coal. China produces 79 percent with coal.

• The United States ranks fourth behind Indonesia, Australia and Russia in coal exports.

• China is the No. 1 importer of coal.

Source: World Coal Association