Difference between revisions of "Rural Electric Cooperatives and Coal"

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Revision as of 20:04, 30 October 2008

{{#badges: Climate change |CoalSwarm}} Rural electric cooperatives (RECs), which receive funding support from the federal Rural Utilities Service, play a major role both in the proposed expansion of coal-fired electrical generating capacity, and in the lobbying and publicity efforts that promote the buildout. RECs receive 80 percent of their power from coal, significantly above the national average of 50 percent.[1]

Existing Coal Plants

Currently, RECs own and operate about 44,000 megawatts (MW) of total generating capacity, most of which is coal-fired.[2] Collectively, they represent nearly 5 percent of the country’s total generating capacity.

Between 2001 and 2008, the Rural Utilities Service loaned $1.3 billion for new coal plants.[3]

Proposed Coal Plants

Since 2000, the RECs have proposed a number of coal plants. As of the Spring of 2008, the list included the following:

Operating or in Construction

Active Proposals

Cancelled or On-Hold Proposals

Rejection of Highwood Station Loan

In February, 2008, the RUS told Southern Montana Electric Generation and Transmission Cooperative that it would not provide financing for the Highwood Generating Station. The RUS cited rising construction costs and the lack of demand for the plant's power.[4]

Suspension of Rural Utilities Service Financing

In February, 2008, the Rural Utilities Service suspended financing to coal plants.[5]

In the letter to Representative Henry Waxman announcing the suspension, RUS Administrator James Andrew wrote that the suspension would continue "until the Agency and OMB develop a subsidy rate sufficient to cover the risks associated with the construction of new generating plants."[6]

At the time of the suspension, the RUS was considering applications for loans totalling $1.2 billion, of which three were for RECs involved in minority shares of the privately-funded plants:

  • Kansas Electric Power Cooperative, 30 MW (3.5%) of a 850 MW plant, $55 million.
  • East Texas Electric Cooperative, 50 MW (7.7%) of a 650MW Plant, $102 million.
  • East Kentucky Power Cooperative, 278 MW, $685 million.
  • Prairie Power (Illinois), 130 MW (8.2%) in two plants totaling 790 MW, $385 million.[7]

Structure of the Rural Electric System

The rural electric system consists of about 900 distribution coops, which maintain local powerlines, and several dozen generation and transmission coops (G&Ts), which operate power plants. Both distribution coops and G&Ts operate as non-profits and enjoy tax-exempt status. In most states, their rates are exempt from oversight by utility regulators.

The rural electric system receives financing assistance from the Rural Utilities System (RUS), a division of the Department of Agriculture formerly known as the Rural Electrification Administration (REA). That assistance consists of loans and loan guarantees.

Political Muscle and Orientation

Several factors combine to give the REC system considerable clout at both state and federal levels:

  • As member-owned and run cooperatives dispersed across in hundreds of rural and suburban counties, the RECs enjoy a unique connection to millions of citizens at the grassroots level. That connection is enhanced by the magazines and radio shows sponsored by the cooperatives in each state, which do not shy away from presenting the stance of coop management on issues such as global warming and environmental regulation.
  • Since its origins as a New Deal program created by Franklin Roosevelt, the REC movement has maintained a strong connection and identification with the Democratic Party. The effect is to neutralize what might otherwise be the tendency of many Democratic legislators to lean toward pro-environment efforts.
  • The National Rural Electric Cooperative Association (NRECA) maintains a strong lobbying presence in Washington.
  • The REC movement benefits from the disproportionate representation of rural states in the United States Senate.
  • The location of coal production in rural states tends to match the greatest concentration of RECs. This coincidence means that RECs are relatively more reliant on coal generation that utilities on either coast; it also means that RECs tend to line up politically with coal interests.

Touchstone Energy

Touchstone Energy Cooperatives is a national alliance of over 640 rural electric cooperatives in 46 states. Collectively, Touchstone’s 30 million customers make it by far the largest utility in the United States, with over $97 billion in generation, transmission, and distribution assets. As a functional matter, Touchstone does not operate as a single financial or electrical dispatching entity. However, it does promote a unified brand for rural electric cooperatives and a coherent advertising program. In political matters, Touchstone appears to defer to the NRECA and to the various state rural electric associations.[8]

Support for Climate Skeptics

In June, 2006, Stanley R. Lewandowski, Jr., General Manager of Intermountain Rural Electric Association (IREA) in Colorado, wrote to fellow REC members urging opposition to a carbon tax or a cap and trade program. Lewandowski reported that IREA has donated $100,000 to Dr. Patrick Michaels, a leading global warming skeptic.[9]

REC reform and activist groups

Resources

References

  1. ↑ Steven Mufson, "Government Suspends Lending for Coal Plants," Washington Post, March 13, 2008
  2. ↑ Petr Nye, “Time to Build” Rural Electric, May 2006.
  3. ↑ Letter from James M. Andrew to Representative Henry Waxman, received March 11, 2008 (PDF file)
  4. ↑ Steven Mufson, "Government Suspends Lending for Coal Plants," Washington Post, March 13, 2008
  5. ↑ Steven Mufson, "Government Suspends Lending for Coal Plants," Washington Post, March 13, 2008
  6. ↑ Letter from James M. Andrew to Representative Henry Waxman, received March 11, 2008 (PDF file)
  7. ↑ Letter from James M. Andrew to Representative Henry Waxman, received March 11, 2008 (PDF file)
  8. ↑ Touchstone Energy Cooperatives website accessed March 2008.
  9. ↑ David Epstein “Helping a Climate Skeptic”, Inside Higher Education, July 31, 2006.

Related SourceWatch Articles

External Resources

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