Coal

Utah bets on selling coal power at a premium price, but other western states may not want it

Assuming coal will be the cheapest option for decades may impact ratepayers, advocates warn
Utah bets on selling coal power at a premium price, but other western states may not want it
(Source: Flickr.)

by Alixel Cabrera, Utah News Dispatch

Though coal wasn’t specifically named in a Senate bill that seeks to make Utah an “energy independent” state, the resource was front and center in one of the hottest debates during the last days of the legislative session. The aim of the bills was to keep coal plants from “prematurely” closing, sponsors said, and to not fall in the same “trap” as states like California, which are aggressively pursuing a transition to a cleaner energy grid.

The approved SB224, Energy Independence Amendments, requires the Public Service Commission to change the factors it considers when making decisions on connecting or closing energy resources. One of them is presuming that the cost of “proven” significant energy resources are reasonable. While other parties may challenge that assumption, lawmakers and advocates argue that this not only prioritizes fossil fuels, but breaks a regulatory compact that has kept energy rates low in Utah.

The bill, House sponsor Rep. Carl Albrecht, R-Richfield, said, directs the commission to assume control over the available capacity in Utah plants, as West Coast states renounce coal. 

“As the state grows, this excess capacity can be used in Utah or sold into the market to customers who need reliable, dispatchable power at very attractive rates and keep rates low in the long run for us,” Albrecht told the House on the last day of the session. 

The bill now awaiting the governor’s signature was criticized by lawmakers on both sides of the aisle who, like Rep. Joel Briscoe, D-Salt Lake City, who argued that the legislation is betting that other states mentioned in the debate, such as California, Washington and Oregon, won’t be able to meet their energy needs with cleaner resources, which are emerging in the market. 

That’s a bet that the California Energy Commission predicts won’t pay off. California is in pursuit of achieving 100% clean electricity by 2045 and its policies wouldn’t allow the state to purchase new power from coal plants, including in Utah. 

“California’s investor-owned utilities, which serve a large swath of the state, are prohibited by law from entering into contracts to purchase coal power,” the California Energy Commission said in a statement. 

Data from 2021 shows that 59% of retail electricity sales in California came from non-fossil fuel sources, such as wind, solar, hydro and nuclear power, a rise from the 41% the state had in 2013. 

Still, California, which shares some of the most prominent transmission lines with Utah coal plants, is doing its own in-house emergency planning to use fossil fuels as a backup in extreme weather, agreeing to extend operations at three natural gas plants in Southern California.

Rate increase prediction

During the bill’s House debate, lawmakers from both parties argued that large monopolies — such as utilities — don’t naturally keep rates low. However, the state has a regulating mechanism in which the Public Service Commission requires utilities to demonstrate they are choosing the least expensive mix of power that meets the state’s demand.

Before the bill passed, the burden to show that proof relied on the utility, Rep. Ray Ward, R-Bountiful said. The new policy turns that around.

“We’re just going to presume that if you’re burning coal, your costs are reasonable. Utilities won’t have to show that it is the least expensive to the ratepayers,” Ward said to the House. “And (the bill) says that that presumption can only be challenged by an outside party, who shows that those costs are unreasonable, an outside party that does not have access to the represented utility.” 

Though coal has served the state as the cheapest option for ratepayers, it’s difficult to predict whether it will remain so in the next decades, he said, and the state should be careful before walking away from a regulatory framework that works.

“People will be able to draw a straight line between those rate increases and the vote we take in this body today,” said Briscoe, who unsuccessfully tried to strike that new policy, “because this upends decades of work on the relationship between the utility and the ratepayers in Utah.” 

Rate raises are among the repercussions that the Utah Office of Consumer Service warned about in a public comment, explaining that the rule would shift risks away from the utility to customers.

“This fundamentally shifts utility regulation,” said Michele Beck, director of the office, “and it’s not going to be in a way that benefits customers, you’re going to see higher rates from this.”

Advocates from the Sierra Club added that trying to keep coal plants open is “uneconomical,” as data from PacifiCorp shows that 60% of its plants are more expensive to run than to replace with other sources.

Albrecht doesn’t see how that could be the case for Utah, though. 

“Most people think that if we keep these plants, it’ll raise rates, and that’s absolutely not true,” he said, “because the baseload energy that we have, which is coal and gas, has kept our rates lower.”

Though he has been a fierce defender of coal, Albrecht doesn’t consider himself “a radical coal guy,” as he drives a hybrid car and installed solar panels on his roof. Besides helping run SB224, Albrecht sponsored other bills that could benefit cleaner energy sources, like geothermal, via tax credits. But, as of now, he said, coal and natural gas are what will keep the lights on.

Keeping coal running when others move to intermittent sources like wind and solar, he said, would allow Utah to see its excess power on the market at a premium price, which would lower rates to Utah customers.

To some advocates who said that maintaining decades-old facilities would be expensive for the state, Albrecht said that over the years, they have been maintained “like your best historical race car.”

The quest for energy independence

When legislators speak about energy independence, they don’t mean isolating the grid in a Texas-like model, said Harry Hansen, deputy director at the Utah Office of Energy Development.

The Texas isolated grid system, designed to avoid federal regulation, affected millions during a severe winter storm in 2021 because the state had limited ways to receive help from its neighbors.

“The goal is to be able to sustain our own style of living and our own needs related to energy, not just electricity,” Hansen said. “So that we have that measure of cushioning, I guess, against any potential issues geopolitically.”

Albrecht agreed with that, arguing that Utah’s grid is interconnected with its surrounding states in the West. 

“All we’re saying is that we want to have enough energy for Utah customers,” he said. “We don’t want to be like Texas was and we want to be able to provide energy to other states who are making stupid decisions by going totally renewable.”

Utah’s energy production has been in decline since 2015, turning the state from an energy exporter to an importer in 2020, data from 2021 shows. “This new situation continued into 2021, with an even larger differential, and is predicted to continue in the near term,” a website associated with the Office of Energy Development reads. 

The state’s portfolio changed in the last two decades, going from 94% of coal-fueled electricity in 2000 to 57% in 2022. Renewables represented 15% of the grid’s contribution — up from 3% — while natural gas grew from 3% to 28%.

Hansen said that speaking about coal prioritization is a bit of a “mischaracterization.” It just so happens that coal fits the bills’ parameters of affordability, reliability and dispatchability, he said. 

Though other sources, such as geothermal have the potential to have a bigger capability, “right now the only baseload sources that Utah has are small amounts of hydroelectric or natural gas, (but mostly) coal here in Utah,” Hansen said.

Whenever those resources catch up with established resources, Albrecht believes the state could be able to revisit the newly approved energy policies. But more development in energy storage at a utility scale is needed to be able to sustain intermittent sources such as solar and wind.

“It’s got to be able to carry and store the resource for a day, a week, two weeks,” he said, “so that it can be released into the system at the time of the peak of the system.” 

Utah News Dispatch is part of States Newsroom, a nonprofit news network supported by grants and a coalition of donors as a 501c(3) public charity. Utah News Dispatch maintains editorial independence.