Government overregulation recently caused American Electric Power (AEP) to shut down several coal plants—including one of Ohio’s largest generators—in May. Even more power plant retirements are looming due to the Environmental Protection Agency’s (EPA) imminent “Clean Power Plan” for carbon dioxide emissions. Power outages, price increases, and other economic damage will likely occur as these onerous regulations force more coal plants to close prematurely.
The latest closures are tied to the EPA’s Mercury and Air Toxics Standards (MATS) for coal power plants, which is the major cause of over 61,000 megawatts (MW) of coal plant early retirements nationally. National Economic Research Associates estimated the total compliance costs of the regulation to be $94.8 billion (present value in inflation-adjusted 2010 dollars).
Among the recent closures was AEP’s Muskingum River plant in Washington County, Ohio. This plant produced 1,440 MW of capacity. To put this in perspective, 1 MW has the ability to power approximately 1,000 homes. Closing this one plant eliminated enough energy to power 1.44 million households. The Muskingum River plant was the largest facility, in terms of energy generated, of the 9 plants that AEP shuttered on May 31st.
The Picway plant near Columbus, Ohio also closed due to the MATS rule. While this 100 MW plant generated a fraction of the power of the Muskingum River facility, it was important for meeting Ohio’s needs at times of high demand.
Since the power grid is a regional system, Ohioans also rely upon power generated in other states to meet our demand for energy. Unfortunately, AEP also closed three plants in West Virginia, two plants in Virginia, one in Kentucky, and one in Indiana. It is a slight consolation that one of the Virginia plants and the Kentucky plant will be converted to natural gas generators.
In total, AEP shuttered over 5.5 million homes’ worth of electricity in one day. The company expects to spend $3.3 billion to comply with MATS, which will harm shareholders as well as workers. AEP has issued layoff notices for upwards of 250 employees across six plants.
Of course, mercury air pollution is undesirable. But these regulations add far more cost than benefit overall, because coal plant emissions were already tanking before the rule was issued at the end of 2011. According to AEP’s 2014 Corporate Accountability Report, the company had already decreased mercury emissions by 60% since 2001. The Energy Information Administration provides further evidence that energy companies were making great environmental improvements before EPA’s costly mandates.
These regulations also create widespread economic damage by driving energy bills higher, which Part II of this series will examine in further detail.