Double Dealing on Carbon


Will the environmental lobby be even-handed with utilities?

Will the environmental lobby be even-handed with utilities?

Fortnightly Magazine - May 2007

They were heralded as “landmark” or “watershed” moments in the industry—a series of deals completed during the last few months in which utilities sat down and negotiated with environmentalists on coal-plant development.

While many in the industry had hoped this was the start of a positive new trend, some environmentalists have double-dealt across state lines, arguing against coal plants in one state and then negotiating for their development in the other.

Utilities may be hard pressed to agree to these deals if environmentalists don’t play straight. The question is whether environmental groups that were completely opposed to coal plants will be able to maintain a pragmatic approach (as in recent deals) or the more extremist nature of some of these groups will resurface.

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Take the Sierra Club. The environmental group fought TXU’s plan to build 11 coal plants tooth-and-nail, even as the governor of Texas and the CEO of the utility emphasized the need for such plants to meet the state’s power-reliability needs at low cost.

“This will create enough capacity to meet Texas’ needs to 2015,” said TXU CEO John Wilder last year. “Texans want ample generation supply, access to lower electric prices, and better air quality, and TXU will deliver all three.”

In fact, the Sierra Club was part of a coalition of environmental groups that sponsored the Clean Sky Coalition, which took out full-page ads in the Wall Street Journal , Roll Call , and in Texas newspapers featuring faces of beautiful people smeared in coal dust.

As everyone probably now knows, that fight was settled by the proposed buyout of TXU by Kohlberg Kravis Roberts & Co. and the Texas Pacific Group, in which the Texas utility agreed to abandon plans to build 8 of 11 coal plants and commit to a broad menu of environmental measures.

But while the Sierra Club fought the coal plants in Texas, the environmental group took a decidedly different tack in Missouri. Perhaps emboldened by the success of the KKR-TXU deal, it decided to negotiate. Kansas City Power & Light announced a deal with the Sierra Club and other environmentalists to pursue offsets for all the global-warming emissions associated with its new coal plant through significant investments in energy efficiency and renewable energy, and promises to cut pollution from its existing plants. Meanwhile, Duke Energy struck a similar deal with regulators should it move forward on its proposed Cliffside coal plant (see “ Power Plant Development: Raising the Stakes ”).

Interestingly, the agreement between KCP&L and the Sierra Club settled a rather nasty dispute between the two. For the past year, the Sierra Club alleged Clean Air Act violations at KCP&L’s Iatan 1 power plant as part of its appeal of the Iatan 2 power plant.

Furthermore, earlier this year, the environmental group won an appeals court victory in its opposition to construction of KCP&L’s new 850-MW coal-fired power plant near Weston. The Missouri Court of Appeals for the Western District had reversed an action by the Missouri Public