Photographer: Luke Sharrett/Bloomberg

Why Coal Burners Don't Totally Hate Obama's Climate Plan

  • Utilities have sued to block regulations, citing timing, costs
  • AEP and Southern see long-term growth with clean energy rules

Two of America’s biggest coal burners want to have their cake and eat it too.

On the one hand, Southern Co. and American Electric Power Co. have joined in a legal challenge against the Obama administration’s Clean Power Plan, which is meant to steer the U.S. away from coal power and toward renewable energy. The utilities say the rules amount to federal overreach and require the companies to move too quickly.

QuickTake Confronting Coal

At the same time, Southern and AEP said they see the regulations as offering a long-term opportunity to make money by building renewable and natural-gas power plants and power lines.

“It is arguable that electricity will start to grow again as a response to the Clean Power Plan," Southern Chief Executive Officer Tom Fanning said this week at the Edison Electric Institute Financial conference in Florida. AEP CEO Nick Akins told investors at the same event it presents a “a great investment opportunity” for his company.

Utilities appear to be taking a two-pronged approach by suing and planning for the rule at the same time, said Shahriar Pourreza, a New York-based analyst for Guggenheim Securities LLC. Some companies are looking to comply by increasing investments in transmission, wind and solar, Pourreza, wrote in a Nov. 11 research note.

AEP sees a $10 billion investment opportunity in renewable energy in the next 18 years even before considering the impact of the carbon regulations. Southern has added or announced more than 3,600 megawatts of renewable power projects since 2012. The Atlanta-based company also agreed in August to pay $8 billion for natural-gas distributor AGL Resources Inc. in anticipation of greater reliance on the cleaner-burning fuel.

Coal plants representing about 23 gigawatts of capacity are scheduled for retirement over the next five years, wrote Bloomberg Intelligence analysts Rob Barnett and Brandon Barnes in a research note Friday.

Outside Remit

Both Southern and AEP own regulated utilities that can recoup spending and make a profit on new investments if it’s approved by state regulators. That may be one reason why the utilities see long-term opportunity in the federal push for more clean energy resources, said Mark Repsher, an energy analyst for PA Consulting Group.

Last month, Georgia Power, a subsidiary of Southern, said it was joining with other energy companies to challenge the Clean Power Plan in court.

“Southern Company is supporting the challenge because the Clean Power Plan overreaches into what has previously been the purview of the states,” Tim Leljedal, a spokesman, said in an e-mailed statement. “We believe electric utility investments should be approached with a focus on balancing our responsibility to provide clean, safe, reliable and affordable electricity."

Akins at AEP said the speed of the proposed transition is of concern as well as whether the Environmental Protection Agency has overstepped its legal bounds. "It’s really about assuring that we do get the proper analysis done," he said in an interview this week.

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