A piece from West Virginia Public Broadcasting reporter Curtis Tate recently caught my eye: “Sierra Club, WVPSC Work Toward Settlement of Federal Lawsuit.”
What did I discover?
This story is about more than just a lawsuit—it’s about your power bill.
West Virginia falls within the PJM territorial market. PJM is a regional electric transmission operator. Simply put, PJM runs the electric grid, coordinating numerous utilities that collectively make up the system.
To understand the issue at hand, you need to grasp the basics of two key commodities in the wholesale electric market: capacity and energy. Capacity refers to the ability to produce electricity, measured in megawatts (MW), while energy is the actual electricity produced, measured in megawatt hours (MWh).
Utilities in PJM must meet certain capacity requirements to ensure enough electricity is available during peak demand—on extremely hot or cold days, for instance. But a utility’s own capacity may not always be the most cost-effective option for generating electricity.
This is where economic dispatch comes in.
Economic dispatch ensures the lowest-cost capacity is used first to generate electricity, ultimately keeping prices down for utility customers.
Here’s the problem: when a regulator, such as the West Virginia Public Service Commission (PSC), mandates a fixed capacity factor for a power plant (as suggested in the Sierra Club’s complaint), economic dispatch is disrupted. If a power company is required to operate a plant a certain percentage of the time, regardless of market economics and pricing signals, that plant may produce electricity at a higher cost than other available sources. In other words, customers could end up paying more for electricity than necessary.
If you’ve followed this so far, a lightbulb may be going off: ignoring economic dispatch may mean higher electricity costs for customers. Now, if the State of West Virginia, through legislation or regulatory action by the PSC, determines that keeping power plants running—whether fueled by coal, gas, or another source—is in the best interest of its economy and workforce, that is a policy decision worth debating.
This piece is a not-fully-nuanced, simplistic analysis of complex market rules and principles. However, utility customers should understand that such a decision in this instance could lead to higher electricity bills. Some may accept that tradeoff to support West Virginia’s struggling fossil fuel industries, particularly coal.
I’m not here to advocate one way or another. In fairness, I am a fossil fuel advocate. Coal put food on the table when I was growing up, and natural gas did the same in my adult life for a time. I remain a fan of both; I also spent more than 12 years working for an electric utility.
My goal isn’t to push an agenda—I simply want to ensure awareness and understanding as best as possible.
Decide what you will. Editor’s
Note: Now a MetroNews Talkline Co-Host, Meadows was formerly director of federal policy for American Electric Power. His views are his own and do not reflect the views of any other entity. Click here to view Sierra Club’s complaint.