Coal power plants cost Americans millions when they didn’t have to, study says

A coal-fired power plant in Romeoville, Illinois. (Photo by Scott Olson/Getty Images)

Utility companies in Louisiana saddled U.S. residents and businesses with $340 million in unnecessary costs over the last three years by choosing to run three outdated, inefficient coal plants when cleaner, more affordable energy sources were available, according to a recent study an environmental group commissioned.

The Natural Resources Defense Council, a coalition of environmental lawyers, scientists, advocates and other experts, commissioned the study from Grid Strategies, a power sector consulting firm out of Washington D.C., to analyze the operating costs of power plants that supply electricity to the Midcontinent Independent System Operator (MISO) market. The country’s largest regional electric grid, MISO covers most of Louisiana and spans into a large swath of the Midwest and parts of Canada.

Grid operators such as MISO handle the daily buying and selling of electricity among power generators and utility companies across the grid. MISO is designed to ensure the lowest-cost sources of electricity, such as wind and solar, are used before higher-cost resources such as coal. The power plants decide how much electricity to generate for the MISO grid in accordance with day-ahead demand forecasts.

The cost of the last and most expensive power resource needed to meet the daily demand establishes the market clearing price for all electricity bought and sold across the grid. This allows the costliest resource to break even while all the lower-cost resources earn a profit because the market price is greater than their cost of producing electricity.

The study found several power generators across MISO continued to use their coal plants when they weren’t needed and forced more affordable wind, solar and natural gas plants to curtail their output. Because of this, ratepayers across MISO have borne more than $1 billion in excess costs from 2021 to 2023, and those costs were most pronounced in Louisiana, Indiana and North Dakota, according to the study.

Ratepayers in Louisiana lost a total of $340 million, largely from a single power plant, a Big Cajun 2 coal unit located in Pointe Coupee Parish. Cleco Power, the majority owner of the plant during the timeframe of the study, did not respond to a request for comment. Last month, Cleco sold its majority stake to Atlas Capital , a private equity firm.

Other coal plants in Louisiana also contributed to the excess costs. The R. S. Nelson Generating Plant in Calcasieu Parish, owned by Entergy, is the second least economic coal plant in the state, burdening ratepayers with nearly $49 million in excess costs over the past three years. The third worst, according to the study, was Cleco’s Brame Energy Center coal plant in Rapides Parish, which saddled customers with $24 million in excess costs from 2021 to 2023.

Large utility companies with their own power generation, like Entergy Louisiana and Cleco, have little incentive to give up their old inefficient coal plants. Logan Burke, executive director of the Alliance for Affordable Energy, said the utilities are largely indifferent to fuel prices because state regulators allow them to pass all of their costs through to their customers. As a result, they risk nothing by operating a coal plant when the price of coal skyrockets.

Also, most lower-cost renewable power resources are owned by independent producers who sign contracts to sell their energy to utilities, and the purchasing utility does not typically earn much of a profit from that arrangement. As a result, retiring a utility-owned coal plant to replace it with renewable resources owned by an independent producer “directly reduces the utility’s profit,” the study noted.

The problem is not exactly a new one, but state regulators have been slow to respond in ways that would prevent it. The Louisiana Public Service Commission recently approved a $125 million refund to customers for the uneconomic dispatches of Cleco’s Dolet Hills coal plant. The judge in the case actually recommended a higher settlement of $183 million, but the commissioners reduced the final payment.

Cases like that are often settled long after the fact and are usually spearheaded by third-party groups and nonprofit organizations. Case in point, last month the Public Service Commission approved an agreement the Sierra Club spearheaded that will require Cleco to switch off two of its Brame Energy Center units when more affordable electricity is available. The decision came after analysis by the Sierra Club found the plants operated at a total loss of over $51 million in 2023 — losses that will be passed on to Cleco’s customers.

The Sierra Club intervened in Cleco’s recent rate case and lobbied the commissioners to require the utility to commit to turning off its coal plants when they become uneconomic to run.

Despite these examples, some politicians frequently tout Louisiana as having the lowest per kilowatt-hour energy rates in the country. Public Service Commissioner Eric Skrmetta even said it during a nationally-televised statement at the Republican National Convention last week.

However, Burke explained that the claim is misleading as it fails to paint an accurate picture of the cost of electricity in the state. The true cost of energy is reflected in the actual amounts billed to customers each month, which averages out to be one of the highest in the country, she said.

“Customers don ’ t just pay a per kilowatt-hour rate, ” Burke said. “It would be great if they did. ”

Instead, they pay a myriad of other costs and fees that utility companies add to the bills on top of the per kilowatt-hour rate. These include line items such as a “customer charge, ” an “energy charge ” and a “storm restoration offset, ” among others. More information about those fees can usually be found on a utility company’s website.

“They ’ re actually paying for climate on their bills, ” Burke said.

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