The Indiana state House recently rejected legislation which would have prohibited electric utilities from closing coal-fired power plants. By placing a moratorium on the Indiana Utility Regulatory Commission, Amendment 7 to Senate Bill 472, further empowered government to act as a middleman between private enterprise and market demands.
Rejected by many Republicans, the move was an effort to save and arbitrarily prop up the state’s struggling coal industry. In 2010 the state housed 26 coal burning power generating units. That number dropped to 13 in 2016. Since then, Indiana’s major utilities have requested similar moves. The company Vectran, for example, has proposed to shut down 3 of their 4 coals units by 2024, hoping to move to natural gas and solar energy. Northern Indiana Public Service Company is considering the same- looking to close 4 of its 5 remaining units within 5 years.
The moratorium would have been in effect from April 30 to January 1, 2021. In that time, the IURC would have been prevented from approving projects that would create new plants, new power contracts or create alterations to fuel sources. This would exclusively apply to massive plants whose generating capacity exceeds 250 MW. The recent amendment included protections for emergency situations and smaller plans. However, had the IURC approved more than 10 GW before 2021, the 250 MW threshold would be lifted, and it would apply to all generation.
The amendment suggested that the IURC would be responsible for researching and developing a plan for Indiana’s energy market and making future recommendations. This portion was received with favor by legislators on both sides of the aisle.
Proponents of the amendment suggested that it would stabilize the rapidly changing energy sector and would ensure that transitions in energy sources would be reliable and efficient. However, this effort was one that placed further regulation on the energy sector, preventing growth and innovation, and costing consumers.
In some markets, coal is a more expensive energy source, when compared to a source such as natural gas, which is just as abundant but much cheaper. On average, utility plants using gas spend $16 per megawatt hour, compared to $22 for coal. The gap is only widened by the increased costs for the shipping and mining of coal.
Because of the significant price differences, a shift from coal to sources like natural gas result in lower costs for consumers. Previously stated, the move by the Northern Indiana Public Service Company was projected to save consumers $4 billion in the long term.
The larger question presented is whether the government should pick and choose energy sources for electricity generation. Whether the source is coal or alternative sources like wind and solar, fewer regulatory mandates and maximum flexibility should be the ultimate objective for lawmakers. In this case, a mandate for keeping open coal plants would have artificially kept prices high, inhibiting public-private enterprises from investing in modernization efforts that benefit most consumers.
This effort is only one of many designed to prop up specific industries, albeit without direct subsidies paid by taxpayers. Legislators nationwide should reject any and all efforts to protect favored interests by letting the free market make decisions about what types of energy are most appropriate in which markets. By limiting the intervention of regulators and mandates in the energy and electricity space, taxpayers and consumers ultimately benefit with lower costs and more reliability.