Environment

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

Written by SK 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.