Opinion

States Are Bailing Out Failing Power Plants; the Feds Shouldn’t Follow Suit

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Posted: Aug 28, 2019 1:38 PM
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States Are Bailing Out Failing Power Plants; the Feds Shouldn’t Follow Suit

Source: AP Photo/John Bazemore, File

In a free enterprise system, some businesses prosper while some do not. Success and failure are simply a byproduct of the free market that should be expected. And when businesses fail due to market conditions, it should not be the responsibility of the federal government to bail them out or give them special treatment. So why then is conjecture building once again that key members of the Trump administration still want to revive plans to bail out failing power plants?

Last year, the Department of Energy was trying to use its power to revitalize a handful of well-connected but economically uncompetitive coal and nuclear power plants with taxpayer and ratepayer dollars. The plan would have diverted tens of billions of dollars to just a few large companies, all the while raising costs on American businesses, consumers, and taxpayers. It would have represented the epitome of corporate cronyism and an unprecedented interference by big government into America’s energy market. For those reasons, a broad collection of consumer groups, taxpayer groups, and renewable and nonrenewable energy interests have all opposed this flawed idea.

The Federal Energy Regulatory Commission and the president’s National Security Council rejected plans for a bailout last year. It was a wise move, as more heavy-handed government intervention would be counter to the president’s successful work to get Uncle Sam out of the economy and out of the pockets of taxpayers.

However, with Democratic FERC Commissioner Cheryl LaFleur stepping down this month, there are rumblings around Washington that bailout supporters may revive their cronyism plan. Given FERC’s authority, the administration knows the independent energy regulator is its biggest hurdle to subsidizing its favored energy sources. So packing FERC with sympathetic commissioners could be a step toward reviving the bailout plan. According to outgoing Commissioner LaFleur, “We certainly still see people in the administration?—highly placed people in the administration?—make comments about the need to sustain U.S. coal so I’m not sure the issue is gone.”

Certainly, these fears are not totally outside of reality.  After all, the most recently confirmed commissioner, Bernard McNamee, was one of the architects of subsidizing aging coal and nuclear plants. Many Senators find his presence on the independent agency to be problematic, with one Energy Committee member noting McNamee’s nomination isn’t “like the fox guarding the chicken coop. This is putting the fox inside the chicken coop.”

It’s critically important the president nominate a commissioner who brings an impartial perspective to FERC and does not try to tilt the energy playing field in favor of certain industries or companies. 

While these special-interest groups have yet to successfully secure federal subsidies, their army of energy lobbyists’ influence has landed billions of dollars in subsidies for failing power plants - all at the expense of taxpayers and consumers. In Ohio, Pennsylvania, and New Jersey, lawmakers negotiated behind closed doors to dump billions into the coffers of special interest groups. The federal government would be wise to avoid making a similar play.

In New Jersey, some companies will receive more than $3.5 billion over the next decade, making this the most expensive corporate welfare program in New Jersey history - all while the state faces growing budget problems. It’s a similar story in Ohio, where lawmakers handed out subsidies for a few struggling nuclear plants - at an annual cost of $150 million that will be paid for by energy consumers.

America’s energy renaissance from natural gas and renewable sources has been a boon for the economy and consumers, even if it means slowly phasing out older, inefficient energy plants. But renewed attempts to tilt the energy sector through carve outs for special interests with consumers picking up the tab is the wrong approach. In a free market system there are winners and losers, and policymakers who support these subsidy bailouts make clear their constituents are on the losing team.

Thomas Aiello is a policy and government affairs associate with the National Taxpayers Union, a nonprofit dedicated to tax policy advocacy and education at all levels of government.