When We Said “Free Coal,” We Didn’t Want to Subsidize It

President Ronald Reagan famously said: “Government’s view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it.”

At a time when the Trump Administration is being praised for “draining the swamp” and ending the Obama Administration’s war on the coal industry, National Center Senior Fellow Horace Cooper reports in the American Spectator that it is simultaneously flirting with the idea of subsidizing Big Coal rather than allowing the market to correct itself.

After reversing the Clean Power Plan, sidelining or rolling back crippling regulations on the coal industry and pulling the United States out of the Paris Climate Accord, a plan that was introduced last fall to stop coal-fired power plant closures would make payments to plant owners to the tune of billions of dollars.

As Horace noted:

Just as these salutary changes have been going into effect, some over at the Department of Energy have engaged in what can only be called an over-reach or as a good Baptist might say, “Went from preachin’ to meddlin’.” Rather than focusing on eliminating the industry-destroying regulations that should never have been imposed to allow a return to market equilibrium, DOE staff pushed DOE Secretary Rick Perry to pursue outright subsidies for the coal industry…

Back in September when the DOE presented the plan they explained that, with the decline in existing coal plants and the rise of solar and wind power, there were heightened concerns about the reliability of U.S. power generation. In other words, because wind and solar can only provide intermittent power which is available only when the wind blows and the sun shines, our grid power capability could be caught flat-footed during an emergency.

Curiously the plan was drafted in a way to ensure that only a few energy producers would benefit — namely a few coal plants located in the Midwest and the Northeast corridor. In addition, the cost of these subsidies has been projected to exceed $10 billion annually. There was no explanation given for why the elimination of the onerous anti-coal regulation wouldn’t allow the marketplace to self-correct.

Instead, the plan was sent to the Federal Energy Regulatory Commission [FERC] and the agency was given 60 days to either reject or allow it to go into effect.

There’s good news and bad news. The good is that FERC rejected DOE’s request. The bad news is that there are other means that could be used to open the subsidy spigot:

Unfortunately the saga isn’t over. Within a couple months of FERC’s ruling, one company has asked the Department of Energy to issue a temporary order granting it access to subsidies under the DOE’s power to regulate energy markets using the “Federal Power Act.” If this request is granted you can be sure that other companies will follow suit.

The Act allows federal intervention in the energy marketplace for reasons of war, snap increases in the price of power and perilous shortages. And it is up to Secretary Perry, President Donald Trump’s pick to drain the swamp at the DOE, to make the call. Horace warned:

[V]igilance is necessary, because in the swamp, it appears that it’s far too tempting for the feds to control energy regulation rather than leaving it to consumers and the market. Hopefully American consumers will win and the swamp will lose.

To read Horace’s commentary, “Rick Perry is Being Asked to Subsidize Coal at DOE” in its entirety, click here.



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