EHF – going broke. Will Texas declare it "too big to fail"
The Dallas Observer is reporting that there is a good chance that Energy Future Holdings (EFH) (or TXU for most of us) the state’s largest power generator, will go broke – click here to read their story.
The question now becomes – are Texas ratepayers going to have to pay for EHF’s bad bet? Two weeks ago, in an op-ed by Public Citizen’s Texas director, Tom “Smitty” Smith, and its policy and outreach specialist for coal and renewable energy, Kaiba White, they wrote about this question. We have published that op-ed below.
Energy Future Holdings is going broke because of coal and it may be time to pull the plug on the old and dirty coal plants that are bankrupting the company.
Utility after utility has looked at the future of coal and made the decision to retire more than 100 coal plants rather than to retrofit them. If we wait for them to go bankrupt, the choice will be made by the courts, who will sell the plants to the highest bidders and you’ll pay the price in higher costs and unrelenting air pollution.
Energy Future Holdings bet on the wrong fuel when it bought the old TXU. The company got smoked.
TXU was worth about $32.3 billion; EFH paid $45 billion at a time when the price of natural gas was high and the cost of coal was lower than it is now. Today, the costs are reversed. Natural gas prices are at a 10-year low and it’s now cheaper to generate electricity with gas or wind than it is with older, inefficient coal plants. EFH’s generating subsidiary Luminant is very dependent on coal and, as a result, EFH is losing money quarter after quarter, and is losing customers as well.
The losses can’t go on much longer. The big Wall Street analysts and even Warren Buffet, a major EFH investor, are predicting that this company will fold unless natural gas prices rise.
We have known for years that pollution from the big coal plants to the south and east of the DFW area affect air quality in North Texas. Pollution from Big Brown, Martin Lake and Monticello, all owned by Luminant, was estimated to cause 136 early deaths; 204 heart attacks and 149 asthma hospitalizations a year, according to an Abt Associates study commissioned by the Clean Air Task Force in 2010. These three plants are the largest sources of sulfur dioxide emissions in Texas and are some of the worst in the country. They also graced the EPA’s top 10 list for nitrogen oxides emissions in Texas.
For more than 20 years the EPA worked on the recently announced rules to reduce pollution from power plants. In order to meet the lower emissions limits, EFH estimates it will have to spend $1.5 billion on pollution controls. The Sierra Club estimates those controls could cost as much as $3.6 billion.
EFH doesn’t have the cash or credit to retrofit these plants. So it has gone on a PR warpath, claiming that the new pollution rules will make the lights go out. Officials are just blowing smoke. We predict they will ask the Texas Legislature to bail them out. Lawmakers shouldn’t rescue these Wall Street slicksters who made a bad investment.
Other Texas coal companies have begun to invest the money and add the pollution control devices needed. CPS of San Antonio looked at the cost to upgrade one of its old coal plants and decided to retire it and invest the money in renewable energy projects, rather than sink the cash into an outdated technology.
Just two weeks ago, GenOn Energy announced it was closing eight coal plants in three states between June 2012 and May 2015 because it would be less expensive to shut them than to fix them up to protect public health.
So what do we do to keep the lights on in Texas? CPS in San Antonio has a plan to replace its old coal plants and create local jobs with energy efficiency, solar and wind energy, and a new natural gas plant. Utilities across the country are doing the same because it’s cheaper than fixing up their old coal plants, reduces healthcare costs and creates local jobs rather than ones at Wyoming coal mines.
The Texas Senate will be studying this issue over the next several months and should develop a plan to reduce air pollution and the risk of bankruptcy while developing new cheaper ways to meet Texas’growing energy needs. But money talks, and EFH has long learned it’s cheaper to invest in politicians and lobbyists than pollution controls. Texans should call their senators and tell them not to let EFH’s smoke get into their eyes. Your tax dollars shouldn’t be used to bail out Wall Street bankers
We’d like to know what you think. [polldaddy poll=6090363]