Coal company to EPA: Regulate me, please

Michael Giberson

It looks like a “man bites dog” headline in the New York Times: “A Coal-Fired Plant That Is Eager for U.S. Rules.”

As operators of coal-fired power plants around the country welcome a court-ordered delay on tighter pollution rules, the owner of a retrofitted plant here says that the rules cannot come too soon.

The company, Constellation Energy, says it is an issue of fairness. A little more than two years ago, it completed an $885 million installation that has vastly reduced emissions from two giant coal-burning units at its Brandon Shores plant here, within view of the city’s downtown office towers.

But the slightest effort at reading between the lines reveals that profits, not fairness, are motivating Constellation’s embrace of federal environmental regulations. (Not that there is anything wrong with that.)

The story is pretty simple, and most of the pieces are explained in Matthew Wald’s Times article:

  • A few years ago the state of Maryland passed stricter environmental rules that induced Constellation to spend $885 million on additional pollution control equipment;
  • That spending puts Constellation at a disadvantage relative to other coal-fired power plants competing in the regional power market;
  • The federal rule wouldn’t impose additional costs on Constellation, but would impose costs on its competitors; some competitors will shut down older plants rather than retrofit;
  • A federal regulation will produce slightly higher power prices but no additional costs for Constellation;
  • In short, profits.

It also doesn’t hurt that about 75 percent of the Constellation generation fleet is fueled by something other than coal. So file this regulatory economics story under “raising rivals costs,” not under “bootlegger gets religion.”

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One thought on “Coal company to EPA: Regulate me, please

  1. Michael – I’m not sure that profits and fairness are so easily distinguishable in this case.

    What Constellation wants is a level playing field in the sense that all EGUs must comply with similar SO2, NOx, and Hg regulations. The current situation, as I’m sure you know, allows competitors with units constructed prior to the advent of the Clean Air Act to operate with absolutely no controls (so long as they are in upwind states that can pass their pollution on to downwind states like Maryland). Assuming competition between these units, this “unfair” situation puts Constellation units at a disadvantage in the loading order and so lowers profits. Unless you want to defend the grandfathering of old coal units in upwind states under the CAA as well as all of the rigamarole associated with NSR “major modification” determinations, as opposed to the flexibility of a market based approach as under the CSAPR, I can’t see why you think Constellation is so crazy.

    How much better would it have been for all states to be subject to CASPR or CAIR or Clear Skies rather than have individual states enforcing technology mandates that inefficiently distort the electricity market while providing less environmental quality at higher costs.

    It is possible for interested parties to make self-interested arguments that are also correct from a policy perspective.

    -Michael

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