Maryland utility bills would go up under proposed deal to keep coal plants open

Under a deal up for approval next month, two power plants in Anne Arundel County would continue to burn coal at least three years longer than planned — potentially costing Marylanders $250 million or more every year.

PJM Interconnection, the region’s power grid operator, has asked the Federal Energy Regulatory Commission to issue an order approving its deal with power plant operator Talen Energy by June 18, according to a tariff filing last month.

Talen Energy owns and operates the Brandon Shores and Herbert A. Wagner power plants along the Patapsco River, southeast of Baltimore. The company announced in November 2020 that it would transition the coal units at both plants to alternatives such as natural gas and oil by 2025. After analyzing the costs necessary to convert the plants, Talen decided it would close Brandon Shores altogether and shut down the coal units at H.A. Wagner.

Those closures ignited capacity and grid reliability concerns from PJM. In January, the operator alerted Talen that its plants would need to continue burning coal until Exelon completes planned upgrades to the regional transmission system to accommodate growing electricity demand and the retirement of generators. But that work won’t be complete until at least 2028.

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Under the proposal, PJM would pay Talen $175 million each year, as well as $29.6 million every month, for at least the three years.

And local ratepayers would foot the bill for that contract, with the average Baltimore Gas and Electric Co. customer seeing an estimated $5 increase in their monthly bill from June 2025 through the end of 2028, said David Lapp, the Maryland people’s counsel.

Emissions spew from a large stack at the coal-fired Brandon Shores Generating Station in March 2018. (Mark Wilson/Getty Images)

Reliability worries

Brandon Shores and H.A. Wagner generate a combined 2,114 megawatts of power for Maryland, D.C. and 12 other states. Talen’s initial plans to transition them to alternatives was a win for the Sierra Club, which in 2018 reached an agreement in federal court with Talen Energy to phase out coal in Maryland and Pennsylvania.

Talen later found that the transition could be “uneconomic” and that it could not justify keeping Brandon Shores or the coal units at H.A. Wagner open beyond June 1, 2025.

PJM’s board passed a $786 million package last year to address and avoid reliability problems through transmission upgrades. However, the planned retirement of coal at the Anne Arundel power plants would happen sooner than that work will be finished.

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Because of this gap in timing, PJM requested Talen Energy continue to operate the Brandon Shores power plant for three more years, at least. The operator cannot compel Talen Energy to keep the plant open, but it can buy time under what is called a “reliability-must-run” agreement.

Talen Energy previously said it believed such an agreement should be “used as a last resort and without distorting the market,” Talen Energy CEO Mark “Mac” McFarland wrote in December to PJM CEO Manu Asthana.

BGE customers would be the most impacted by the cost of the new agreement, Lapp said, with smaller bill increases for Pepco Electric customers.

Lapp and Josh Tulkin, director of the Maryland Sierra Club, said they fear the timeline for completing upgrades could be much longer than three years because upgrade projects are prone to delays.

Lapp and the Office of People’s Counsel are planning to advocate on behalf of customers in the coming weeks.

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“We will certainly be looking at potential relief at FERC,” Lapp said. “Unfortunately, utility customers are captive to these costs, and the only way they can be avoided or reduced is through action at FERC.”

Phasing out coal

The Sierra Club doesn’t agree with Talen Energy’s cost assessment for converting its plants, or with PJM’s agreement. In fact, the deal between the two companies could violate the 2018 federal consent decree between Talen Energy and the Sierra Club, Tulkin said.

In January, the environmental group flagged an analysis of the retirement of Brandon Shores suggesting ways PJM could address reliability concerns without sacrificing environmental progress. The analysis proposed switching the units from coal to battery, arguing it would save customers money and reduce the length of the reliability agreement. PJM rejected the findings.

“PJM does not believe that a battery solution would address the comprehensive reliability needs in the BGE and surrounding areas, be able to be put in place by 2025 or be economically feasible,” PJM spokesperson Jeff Shields told RTO Insider.

Tulkin said the Sierra Club will not adjust the terms of its 2018 settlement with Talen Energy until the organization can have a “transparent and direct conversation with PJM about why they think these alternative strategies won’t work.”

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“And we have concerns about the financial impact of what’s being proposed because it will cost Marylanders a lot of money,” Tulkin said, “as a result of, frankly, PJM’s failure to adequately plan for the retirement of coal.”

The federal government is pushing to phase out coal. The U.S. Environmental Protection Agency announced new regulations on April 25 for coal-fired plants to reduce their greenhouse pollution by 2039.

And the Maryland Department of the Environment has goals to reduce emissions by 60% by 2031, use 100% clean electricity by 2035 and reach net zero emissions by 2045. Yet it does not see the continued use of coal at the Brandon Shores power plant as a derailment to reaching those goals.

“While we would prefer that this specific plant transitioned sooner, delaying the elimination of coal at this plant by three years will not prevent us from reaching our climate goals,” said Jay Apperson, spokesperson for the department.

This story has been updated with PJM's role in determining payments to Talen and with the Sierra Club's involvement in an analysis of Brandon Shores.

Bria Overs

bria.overs@thebaltimorebanner.com