THE BLOG

What's Really Behind the Alabama Coal Industry's Attack on Pro-Clean Energy Groups? Answer: Market Share.

12/26/2013 09:46 am ET | Updated Feb 25, 2014

On December 15, the president of the Alabama Coal Association, George Barber, wrote an op-ed attacking pro-clean energy and environmental groups for their "secretive war on coal" and "hiding their intentions" during Public Service Commission meetings earlier this year. But, the coal industry's concerns about pro-clean energy groups are more about how the utility industry is threatened by the emergence of affordable renewable energy and their antiquated business model.

Southern Company is the fourth largest utility in the United States and produces more than half of its electric generating capacity from coal. Alabama Power, a subsidiary of the utility-giant Southern Company, is a member of the Alabama Coal Association, which launched the recent attack on pro-clean energy groups.

The Alabama Public Service Commission (PSC) held a series of hearings this year on the rate structure of the Alabama Power Company. At the time, the Southern Environmental Law Center, the Southern Alliance for Clean Energy and the Greater Birmingham Alliance to Stop Pollution stated in a news release on May 8, "Continuing to invest in older, uneconomic and inefficient coal-burning power plants, rather than beginning the transition to cleaner fuels or investing in energy efficiency measures, costs Alabama ratepayers in numerous ways, from our pocketbooks to our natural resources."

One of the primary issues discussed during these hearings was Alabama Power Company's return on equity (ROE), or the amount of income generated from shareholders' investment. Alabama Power has a ROE of 13 precent to 14.5 percent, much higher than the national average of 10 percent. The profits of the utility come directly from ratepayers - so environmental advocates were pushing for more transparency on the annual expenditures and investments of Alabama Power Company. The same groups attacked by the Alabama Coal Association called for formal hearings on the rate structure that would require representatives from the Alabama Power Company to testify under oath. And PSC Commissioner Terry Dunn also called for formal hearings because they would reveal more information about the utility company's operations and spending, but two other PSC Commissioners opposed holding formal hearings.

John F. Floyd put it well in a column for The Gadsden Times: "Why would anyone want to hold hearings that don't require truthful testimony under oath? The only answer is the company or individual wants to withhold information that might be incriminating, embarrassing or revealing."

Here's the longer answer: Southern Company operates numerous coal-fired power plants that are not economically competitive when compared to the cost of operating facilities like existing natural gas plants or wind turbines according to a report last year by the Union of Concerned Scientists. The report detailed that 14 units in Alabama alone are "more expensive to operate than an existing natural gas plant or a new wind generation facility that takes advantage of the wind energy Production Tax Credit." In addition to Alabama, Southern Company's largest subsidiary Georgia Power also has 12 coal-fired power plants that cannot compete with cheap natural gas and wind prices. Despite these facts, Southern Company and it's subsidiaries want to continue to sell electricity from their old coal-fired power plants because they can generate enormous profits - despite the cost to ratepayers.

Furthermore, Southern Company's financial filings with the Securities and Exchange Commission (Form 10K) highlight how the emergence of affordable clean energy is a threat to the utility industry. From Southern Company:
"There are distributed generation technologies that produce power, including fuel cells, microturbines, wind turbines, and solar cells. It is possible that advances in technology will reduce the cost of alternative methods of producing power to a level that is competitive with that of most central station power electric production. If these technologies became cost competitive and achieved economies of scale, the market share of the traditional operating companies and Southern Power could be eroded, and the value of their respective electric generating facilities could be reduced."

Organizations like the Southern Environmental Law Center and the Southern Alliance for Clean Energy want two things - transparency, to ensure ratepayers are getting a good deal; and second, the public health and economic benefits of more clean energy. That's probably why Southern Company's coal trade association in Alabama launched an attack on these pro-clean energy groups.