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Shogren: What does the market say? Coal bailout bill will impose a hidden tax on families and workers

Shogren: What does the market say? Coal bailout bill will impose a hidden tax on families and workers

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People in Wyoming typically like more market competition, minimal government interference and low taxes. We also like the jobs and revenues generated by our natural resource base. So what happens when the market speaks and Wyoming legislators do not listen? We end up with Senate File 159 — a coal bailout bill that could force Wyoming families and businesses to pay hundreds of millions of dollars in higher electricity costs. The bill does not solve the problem; it simply shifts the burden of free market forces to consumers from energy producers.

Let me explain. The energy market has changed and no one person or legislature can change it back. Energy markets are telling us that coal is no longer king when it comes to being the cost-minimizing source of energy. In Kentucky, Tennessee, Indiana and Colorado, electric utilities have calculated that retiring coal plants will save customers money. Here in Wyoming, Rocky Mountain Power has compared the costs to operate its coal units to see how they compare to other available energy sources. Rocky Mountain Power’s analysis suggests that retiring the Naughton plant in Kemmerer by 2022 and replacing its output with cheaper market purchases, including Wyoming wind power, could save customers $175 million. Rocky Mountain Power’s parent company, PacifiCorp, has also stressed that over 60 percent of its coal units are now more expensive to run than alternatives.

This coal bailout bill would make Rocky Mountain Power find an outside buyer to operate uneconomic coal plants, and then require the utility to buy back high-cost power from the new owner. Bill proponents claim that any such coal contract would need to be less expensive than other sources to be approved. But Rocky Mountain Power has already done the math! Unless a new owner intends to cut corners on environmental cleanup or slash worker benefits, it’s hard to see how someone else could run these aging coal plants more cheaply and effectively than Rocky Mountain Power.

For the Naughton plant, this implies $175 million in extra electricity costs over the next decade, 100 percent of which would be passed on to Wyoming families and businesses through higher bills — a hidden tax. These plants are too expensive for Rocky Mountain Power when the operating costs are being shared by all of its customers in Utah, Idaho, and Wyoming. How expensive will they be when they’re only spread across Wyoming?

The open question then becomes: Is this bill the best method to support our state’s coal-dependent communities that must compete within a global energy market over the long run? The market is silent on this question, however — it does not worry that the prospect of retiring coal plants will upset the communities of Kemmerer, Diamondville and others whose local economies are tied to coal. Mine workers are already seeing their pensions and health benefits axed while corporate executives get bonuses, as bankrupt Westmoreland sells off its mines.

To me, the market is saying we need to all slow down and think harder about passing bailout bills like Senate File 159 that will commit Wyoming families and businesses to spend hundreds of millions in higher energy prices to prop up uneconomical coal plants. Perhaps Wyoming citizens will be glad to pay higher energy bills if it means coal jobs for their friends and neighbors — perhaps not. But they should have the choice and they should know the true costs of bills that take on the market. But this bill is being rushed through the Legislature so fast that the state has yet to complete a fiscal note that would give the public a clearer picture of the financial risk they are taking on to extend the life of these expensive coal plants. Bill payers in Wyoming should ask our legislators to step back and be transparent about this new hidden tax imposed by this bill.

The electricity industry is undergoing fundamental and permanent changes, and Wyoming’s coal communities need and deserve help. That means embracing our state’s immense potential to generate wind and solar power, finding ways to use coal for profitable materials, and providing transition funding for displaced workers But a bill that claims to “save coal” by charging energy customers more, slashing worker benefits, and preventing cleanup of Wyoming’s land and water is not the answer.

The market is talking and it is telling us that this bill will not reverse the decline of the coal industry, and that it will only delay critical conversations we all need to be having about how to help Wyoming’s coal-dependent communities benefit from the inevitable transition to a cleaner energy future.

Since 1995 Shogren is the Stroock Chair of Natural Resource Conservation and Management in the Department of Economics at the University of Wyoming, his alma mater, and he also served on WY’s Environmental Quality Council (2000-04).


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