Energy Future Holdings says that nearly half its third quarter losses stemmed from charges related to the Environmental Protection Agency’s Cross State Air Pollution Rule. Starting in January, the rule will require Texas power plants to cut emissions of nitrous oxides and sulfur dioxide.
The rule would hike the cost of running older coal burning power plants. TXU operates three such plants in northeast Texas: Monticello, Martin Lake and Big Brown. The company is petitioning both the EPA and the DC Circuit Court to block the rule from taking effect in Texas. For now, it plans to mothball Monticello.
Tom Sanzillo, president and CEO of TR Rose Associates says the company’s financial woes have less to do with environmental compliance costs than with a series of poor business decisions — starting with its thirty-billion-dollar buyout of TXU in 2007. The assumption was that natural gas prices would rise, making coal more profitable.
“And the company has been struggling to make payments on that debt ever since. Most companies understand if they have a coal fleet they have regulatory issues, and these are not insurmountable unless you have no money to address the upgrades that need to take place. Most other companies in the country are doing that. They’re handling the transition away from coal in a financial manner where they’re going to make profits from it. This company can’t do that, because they have made a profound financial mistake.”
Sanzillo says Energy Future Holdings is paying out nearly eighty cents on every dollar it takes in on interest, a situation he says is unsustainable. TXU Energy-Luminant is the largest electric power generator in Texas.