Some monopoly utilities have found a way to exploit loopholes in the market rules and state regulation so that they can run expensive power plants even while lower cost resources are plentifully available on the open market.
Utilities are operating coal plants when cheaper and cleaner resources are available, depriving customers of hundreds of millions of dollars in cost savings.
The practice, which cuts into all power plant owners' revenue, hurts competition and impedes market efficiency. In short, it makes energy more expensive for customers when it doesn't have to be.
In this report, UCS explores just how much this practice costs consumers and how it impacts efficiency, and it finds that utilities across 15 states in the heart of the U.S. exploited power market loopholes, costing customers $350 million in 2018.
Comparing the benefits the Midwest grid operator currently provides with the potential $350 million in additional production cost savings the new UCS analysis has found suggests that eliminating uneconomic self-commitment of power plants would double the benefits to the operator-–and to the customers who rely on power from that grid.
State utility regulators are the first line of defense for consumers, and they should step in to stop these self-commitment practices that are costing customers millions.
Daniel, Joe, Sandra Sattler, Ashtin Massie, Mike Jacobs. 2020. Used, But How Useful? How Electric Utilities Exploit Loopholes, Forcing Customers to Bail Out Uneconomic Coal-Fired Power Plants. Cambridge, MA: Union of Concerned Scientists. https://www.ucsusa.org/resources/used-how-useful