Electricity customers would see their rates rise if Energy Secretary Rick Perry moves to save financially struggling coal and nuclear plants, but Ohio utility FirstEnergy, which requested the move, would benefit, credit ratings giant Moody’s said Thursday.
“Should an action be adopted, owners of fuel-secured power facilities such as FirstEnergy Solutions and Exelon Generation Company, LLC, along with U.S. domestic coal producers, would likely benefit,” a Moody’s analysis read.
Perry wants to order the nation’s grid operators to pay coal and nuclear plants more, which would be “credit positive” for owners of uneconomic power plants. But it won’t be good for electric bills paid by home owners and manufacturers.
It could also cause headaches for natural gas power plants, which are currently the reason why coal and nuclear plants are struggling, Moody’s pointed out. “Many fuel-secure power facilities have become uneconomic to operate owing to low natural gas prices and the declining costs of renewable resources,” the financial firm said.
“Retail customers will likely pay more for electricity to cover the costs of the subsidy, while efficient gas-generating units, such as those owned by Calpine Corp., would likely be dispatched less often by the grid operators,” the analysis said. “Additional risks involve the broader wholesale power market, which may experience a decline in power prices,” it added. That may mean less investment in the power system.
Moody’s noted that PJM Interconnection, the 13-state grid operator that Perry’s order will likely affect the most, has said there is “no immediate threat to system reliability from plant retirements.”
Nearly 35 gigawatts of nuclear and coal-fired power plant generation is slated to close over the next five years, which accounts for about 3 percent of the country’s total capacity, according to the analysis. Of that total, nearly 34 percent of the power plants scheduled to close are located in the PJM region.
