The way Westar Energy runs its coal plants in Kansas unnecessarily costs consumers millions of dollars a year through an obscure, if common, practice known as self-committing generation.
The company essentially runs its coal plants year-round, even during the winter months when its not cost-effective. An analysis by the Union of Concerned Scientists, which advocates for reduced reliance on coal, says thats been costing Westar customers $20 million a year in added fuel costs.
But market operators including the Southwest Power Pool (SPP) Westar buys and sells wholesale electricity through the organization worry that the practice hurts the market.
Regulators in Missouri, where Westars parent company Evergy is headquartered, have opened up an investigation to see if its unfairly costing consumers.
The daily auction
The Southwest Power Pool coordinates electricity generation in Kansas and 13 other states, mostly in the Central Plains. It helps make sure theres enough electricity to meet the needs of users across the service region at the best price.
The SPP forecasts daily demand. Power generators bid to sell into that market based on how much they project it will cost to operate that day.
The SPP dispatches power plants from the least expensive source on up, until the days needs are met. The most expensive unit that gets selected in the auction essentially becomes the market price.
The market price is the price a generator gets paid for providing electricity as well as the price a utility would pay to buy it.
That market system is supposed to ensure that the price of electricity remains as low as possible.
But theres a catch.
The wrench in the works
The market allows power plants to self-commit or send electricity to the power grid regardless of the price. Self-committing is common for regulated utilities across the country.
