As consumers brace for considerably higher electric bills in the coming weeks, the Pennsylvania Coal Alliance called for legislative hearings to investigate the reasons for the supply shortages that are causing prices to spike.

Last week PJM Interconnection, which operates the regional power grid, asked the Federal Energy Regulatory Commission for emergency approval to exceed a $1,000 per megawatt-hour price cap on the suddenly needed purchased power.  The average wholesale price in the PJM region last year was $42 per megawatt-hour, according to the Energy Information Administration (EIA).

PJM this week has asked consumers to curtail their use of electricity during high-demand portions of the day.

Although PJM did not provide an estimate of the effect that higher wholesale prices would have on consumers, EIA estimated in January that some may see home heating bills rise by more than 23 percent for the season, compared with the previous heating season.  That was before our second visit from the polar vortex, which is causing an extreme drop in temperatures currently.

John Pippy, Coal Alliance CEO, noted that PJM's dilemma follows the closing of three Pennsylvania coal-fired power plants last year.  Others are also slated to close, in large part due to proposed federal emission standards.

"Extreme weather can cause energy prices to become volatile, but coal-fired electricity is much less likely to be subject to severe price swings," Pippy said.  "Coal as an energy source brings a strong element of stability to the power supply and, therefore, to wholesale power prices."

After expressing concerns initially, PJM signed off on the closing of the three power plants last year, contending that their closing would not have a negative impact on the reliability of the region's power supply.

"Obviously, we are having power supply problems, which will cause electric bills to skyrocket in the next couple of months," he said.  "Surely there are some lessons that we can learn from this, and we believe that legislative hearings are a good way to do that."

PJM purchases the cheapest power first, and more expensive generation is added as it is needed.

"The problem is, there wasn't enough reasonably priced power available during this extreme cold snap, and that's due in part to federal emission regulations that have forced the premature closing of coal-fired power plants," Pippy said.  "Federal regulators want to impose standards that are not achievable with current technology.

"We've made great strides in reducing emissions of sulfur, nitrogen, particulates and even carbon.  More advances are on the horizon that would reduce emissions even further, but the proposed standards remove the incentives to continue their development."

Pippy said the affordability, reliability and abundance of coal make it an essential part of the energy mix, to the benefit of manufacturers, retailers and consumers.  Unilaterally taking coal out of the mix would put this country at a competitive disadvantage against developing countries such as India and China, which are increasing their reliance on coal.

"No energy source is perfect, but the higher electric bills consumers will be receiving in the near future show that there are unintended, negative consequences to short-sighted environmental and energy policies," he said.  "We don't need to choose between affordable, reliable energy and a clean environment.  We can have both with a collaborative effort between federal regulators and all energy stakeholders."

For more information, visit the Pennsylvania Coal Alliance website.

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2/3/2014