Texas politicians are making a last-ditch push to avoid the retirement of a 37-year-old coal plant in East Texas that they say has another 22 years of useful life.
However, there may be little they can do.
The plant in question, Southwestern Electric Power Co.’s (SWEPCO) (NASDAQ:AEP) Pirkey Plant, was scheduled for retirement in 2020 to comply with environmental regulations. The plant, a 580-MW coal-fired unit in SPP’s eastern Texas footprint, went into operation in 1985 and will cease operations in March.
In a letter to the Texas Public Utility Commission earlier this year, 13 state senators called on the commissioners to delay approving SWEPCO’s pending rate-increase request for renewable generation until they can determine whether there is a “legitimate” reason for Pirkey’s early retirement.
The lawmakers said that the analysis SWEPCO relied upon in deciding to retire the plant was “seriously outdated and … seriously flawed.” They cited testimony in the utility’s rate case docket that “called into question” the economic and environmental regulatory assumptions used to make the decision (53625).
Sen. Bryan Hughes (R), who signed the letter, chairs the State Affairs Committee that held a hearing on Pirkey last year, and his district includes the plant’s site. He made an impassioned plea for its survival during a surprise appearance at the PUC’s most recent open meeting.
He said the lawmakers’ ask of the commission was very simple: to consider their letter and intervene in the proceeding.
“We want to make sure this decision is being made in the best interest of Texas and Texas ratepayers and folks who need that electricity,” Hughes said. “These folks happen to be outside of ERCOT, but they’re inside Texas. You have much more authority outside of ERCOT as far as regulating these companies.
“Slow this process down. You have the power to do it. And if you don’t, it’ll be too late,” he added.
PUC Chair Peter Lake thanked Hughes for his attendance and “highlighting the urgency of the issue,” but he offered no other support. The commissioners did not discuss the issue during the open meeting.
Texas State Sen. Bryan Hughes makes his case before the PUC. | AdminMonitor
PUC spokesperson Ellie Breed declined to speculate on the commission’s decision. “Staff is reviewing the situation and the concerns raised by Sen. Hughes,” she said.
Hughes’ appearance before the PUC caught some by surprise.
“It kind of came out of left field. … We were all a little bit caught off guard by it coming up in a discussion about ERCOT market design,” said Katie Coleman, who represents Texas Industrial Energy Consumers, an intervenor in the SWEPCO docket. “I’m not sure who he had talked with in advance of that, but I think that the narrative around the need for dispatchable resources caught [Hughes’] attention.”
In their letter, the senators say the State Affairs hearing “uncovered evidence about the coercive ‘manage-down-to-zero’ [environmental, social and governance] practices” of American Electric Power’s top three shareholders. AEP is the parent company of SWEPCO, which also services portions of Arkansas and Louisiana. According to Bob Eccles, an ESG expert, Vanguard Group, BlackRock and State Street own a collective 20.5% of the organization.
“AEP is the picture of woke capitalism and ESG virtue-signaling to the detriment of stockholders and, in this case, ratepayers. We believe that’s exactly what’s driving this decision,” Hughes told the PUC.
AEP has been open about its plans to transition to cleaner-burning fuels. It has retired or sold nearly 13.5 GW of coal-fueled generation in the last decade and has committed to achieving net-zero emissions by 2045 and an 80% reduction relative to 2005 levels by 2030.
The Columbus, Ohio-based company said it decided to shutter Pirkey and stop burning coal at the nearby Welsh Plant to comply with EPA’s coal combustion residuals rule. AEP said its actions would save customers an estimated $740 million to $1.2 billion by avoiding compliance costs and higher ongoing operating and fuel costs.
“Pirkey’s fuel costs have been rising for more than 15 years and were expected to remain higher than other similar SWEPCO plants,” spokesman Scott Blake said in an email to RTO Insider.
He said the more than 200 employees at the two plants have since elected to retire or found work elsewhere, many within the AEP system. Pirkey’s closure will also shut down Sabine Mining’s lignite mine that fuels the plant and its 130 jobs; many of its employees have also found work elsewhere.
Blake said the company followed SPP’s notification process for retiring units. The RTO requires at least a 12-month heads-up of a unit’s pending shutdown. It does not approve or reject the retirements but does conduct a study to determine whether its absence would create a reliability issue that needs a short-term mitigation or transmission solution.
“From our perspective, AEP’s plans may continue,” said Casey Cathey, SPP director of grid asset utilization.
Energy consultant Alison Silverstein, a former PUC staffer, said SPP’s opinion “is what matters for closure,” noting that the grid operator did not consider the cost impacts to SWEPCO or its customers, or “the market impacts of having that production available.”
“The whole point of being in a regional market with adequate generation and transmission capacity and a competitive market is that a utility can buy its energy from other producers in the region, rather than just having to own all of its power plants,” Silverstein said. “SPP is highly competitive and has lots of generation and transmission. The fact that they approved the Pirkey closure means they think it’s not needed for long-term grid reliability, and presumably that replacement power from the region is deliverable into the SWEPCO footprint.”
Not surprisingly, the plant’s retirement and the loss of local jobs and tax revenue have created a regional uproar. Eccles wrote a tongue-in-cheek piece for Forbes about the State Affairs hearing and Texas’ dichotomy as a state rich in renewables, yet eager to add dispatchable (i.e., thermal) generation.
In February, Wayne Christian, a member of the Railroad Commission — which regulates Texas’ intrastate gas and petroleum industry but not railroads — keynoted the annual Republican Lincoln Day Dinner in Harrison County, where Pirkey is located.
“AEP bought the thing and decided it was going to shut it down regardless,” Christian was quoted as saying in a local newspaper. “Thirty years of this plant here in Hallsville, got 30 years in reliable generation of electricity, and we’re tearing that sucker down because it ain’t working. It doesn’t fit into the [environmental] religion.”
“I don’t blame legislators for wanting to protect the local utility, local jobs, local communities and tax base by resisting the closure of a coal plant and coal mine,” Silverstein said in an email. “The Pirkey plant … is a great source of ongoing revenue for SWEPCO, so the fact that the integrated utility wants to shut it down before the end of its useful life indicates that they are looking ahead at favorable energy replacement costs, the likely high costs of meeting upcoming EPA coal emissions requirements and potential rate base replacements.
“But this coal plant and coal mine are imposing significant costs on the communities and on all SWEPCO customers, and it appears that they could save money for everyone if they shut down the Pirkey plant and replaced it with SPP region-sourced energy alternatives,” she said, noting the Inflation Reduction Act contains “big incentives to reinvest in communities to ‘retool, repower, repurpose or replace’ fossil infrastructure and recover transition costs.”
“It’s likely that the communities these legislators represent could come out ahead in terms of jobs and utility bills within a few years if the legislators work with SWEPCO for a smart energy transition, rather than trying to protect an old coal plant,” Silverstein added.
Coleman said that SWEPCO being outside ERCOT offers a “different paradigm” and leaves the PUC with few options.
The commission’s next open meeting is March 5, leaving it little time to change AEP’s course.
