Bob Murray’s Next Brain Buster: Buy The Power Plants

JM Ashby
Written by JM Ashby

At this point, Murray Energy CEO Bob Murray has been unable to persuade federal or regional regulators that they should raise electricity prices for average people just to subsidize coal-fired power plants that are due for retirement.

Bloomberg reports that Murray is now considering buying the power plants so he can sell coal to himself.

From this we can infer that Murray is neither an economist or even a smart businessman as Bloomberg explains:

While Murray would be free to sell coal at any price to a captive power plant, that wouldn't make it an economic transaction. Either the mine underprices its coal, and that part of the business suffers, or it overprices it and the already struggling generator goes deeper into the red. The bottom line is that even cheap coal struggles to compete in today's market, no matter who owns the assets.

To be clear, the rules may vary depending on where you live and who your local utility is, but a power plant generally does not tell customers what they will pay for electricity. Electricity rates are determined by regional regulators, power authorities, and utility companies.

Murray could buy coal-fired power plants that are retiring, but that doesn't mean he could start charging higher rates to justify the cost of keeping them running so he can sell coal to himself. That's not up to him.

As Bloomberg explains, Murray would essentially have to subsidize himself by accepting a loss on raw coal shipments to increase revenue at a power plant that is going out of business. He wouldn't have the authority to pass costs down to residents and consumers. If Murray tells an electric utility company that the price is going up for no justifiable reason, the utility could switch to a different provider and that provider will likely be a natural gas, wind, or solar provider.

There's still a remote possibility that Energy Secretary Rick Perry will use an obscure rule to grant subsidies to the retiring power plants owned by FirstEnergy (Murray's biggest customers), but if he does I expect it will be challenged in court by numerous parties from environmentalists to state governments and utility companies.

Murray cannot personally be in a great deal of financial trouble if he is considering buying power plants on a whim.

  • Draxiar

    At the beginning of the movie “Gladiator” one of Maximus’s officers says that “people should know when they’re beaten” to which Maximus replies, “Would I…would you?”.
    I think in this case it’s shockingly obvious that Murray and the fuel coal industry as a whole is beaten…and Murray knows this. If he doesn’t then he’s bad at this energy thing.

  • Username1016

    You know, and these chuckleheads constantly deprecate the value of EXPERTISE. Like it doesn’t freakin’ matter if you know what you’re doing, you can just throw some money here and cut a corner there and throw confetti in the air and expect everything to come out right. That’s not how it works!!!

    • I think being really wealthy gives them a sense of grandiosity because they are used to throwing money at problems and seeing those problems go away. And since they rarely suffer the consequences of their failure (see Trump’s five bankruptcies), that sense gets reinforced, over and over again.

      • Christopher Foxx

        Sadly, to a certain extent, they aren’t wrong. Throwing money at the problem has been a fix that typically works for them. So, yes, when it becomes a situation where that won’t work they whine. But it’s understandable that they think that’ is the way the world works since, for the most part, it is how the world has worked for them.

  • muselet

    I tried to make sense of Bob Murray’s cunning scheme. All I got was a headache.

    In any case, if Murray does buy power plants, success wouldn’t rest on transfer pricing. Instead, he would have essentially bought options on regulatory changes and a sustained upturn in U.S. natural gas prices. Good luck with both.

    Aha. Now it makes sense.

    Either Bob Murray is playing the economic equivalent of blindfold eleven-dimensional chess, or this idea is merely a fit of madness. My money’s on the latter.


    • Christopher Foxx

      My money’s on it all being the insistent whining for a petulant toddler who’s been told he can’t have what he wants.

  • gescove

    He sounds like a fine candidate to become Trump’s next economic adviser.

    • ninjaf

      Surprised he hasn’t been tapped to replace Perry so he could directly subsidize his own businesses.