FERC Members Past and Present See Problems with Perry’s Coal Bailout Plan
With deadlines fast approaching for public comments on U.S. Energy Secretary Rick Perry’s subsidy plan for “baseload” coal and nuclear plants, Greentech Media is reporting that the three members of the Federal Energy Regulatory Commission (FERC) may be divided on the proposal.
“Comments from the FERC’s newly-minted quorum indicate that Perry’s proposal to compensate coal and nuclear plants for stockpiling 90 days of fuel won’t glide through the commission,” Greentech reports, with the strongest support so far coming from Trump-appointed FERC Chair Neil Chatterjee.
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Perry’s Notice of Proposed Rulemaking (NOPR) “contemplates and builds on FERC’s existing regulatory initiatives on price formation. It’s a conversation that I believe we need to have,” Chatterjee told the Energy Bar Association last week. “We must ensure that we don’t find ourselves coming to regret not having asked hard questions like these amidst all the changes in the energy industry.”
But while Perry is looking to FERC for a final go-ahead on the plan in the “not-too-distant future”, Greentech says Chatterjee’s willingness to discuss the rule change “doesn’t necessarily equate to a speedy approval. “Chatterjee on Friday said FERC has a multitude of options in addressing the request, including superseding the DOE NOPR, convening technical conferences to assess the proposal, and extending the comment period.” And “considering the doubts expressed by other members of the commission, a final decision within 60 days is starting to seem unlikely.”
Commissioner Cheryl LaFleur, the last Obama appointee carried over from the previous FERC, emphasized that it would “require more process” to put the NOPR into practice. As well, both she and Trump appointee Robert Powelson pushed back on Perry’s attempt to frame his pitch for coal- and nuclear-fired grid “reliability” as a response to the 2014 polar vortex.
“Two of the major markets have made significant market redesigns in response to the polar vortex, intended to make sure they had enough power at times of greatest system stress,” she said, adding that the outages that occurred “weren’t all gas-related,” as popular wisdom seems ready to claim.
“I can’t stand here and represent what we call a mistruth that the gas industry caused the interruptions of the polar vortex,” Powelson agreed, adding that he didn’t consider it his job to approve actions that would shift markets.
“The moment we put our thumbs on the scale is the moment we bastardize the process,” he told the National Press Club October 16.
“When that happens, we’re done,” he added on Greentech. “I’m done. I don’t need this job.”
While the sitting FERC commissioners still seem to be weighing their response to the Perry plan, a bipartisan group of their predecessors has settled the main outstanding questions. “Eight former members of the Federal Energy Regulatory Commission —including five former chairs—have filed a letter with the commission opposing Perry’s proposal that would give coal and nuclear plants credit for resilience so that they would have a better chance of beating solar, wind, and natural gas competitors,” the Washington Post reports.
“The former commissioners said Perry was seeking to reverse a quarter-century of FERC reforms that have created a marketplace for electric power generators, and that many of the coal plants he is aiming to help have no advantage when it comes to reliability.”
“His focus is clearly coal, and there are a lot of dirty coal plants that are not competitive in today’s energy markets,” ex-FERC chair, former deputy energy secretary, and former Exelon executive Elizabeth Moler told the Post. “To me, he’s effectively proposing to subsidize them and put a tax on consumers in doing so. It’s a tax in different clothing. It’s going to cost customers more money to run dirty old coal plants.”
In their letter, the ex-commissioners concluded that Perry’s coal and nuclear bailout—which he’s desperately spinning as a bid to boost grid reliability—would actually do the opposite, by driving away the investors private utilities depend on. The plan “would be a significant step backward from the Commission’s long and bipartisan evolution to transparent, open, competitive wholesale markets,” they wrote. Adopting the NOPR would “disrupt decades of substantial investment made in the modern electric power system, raise costs for customers, and do so in a manner directly counter to the Commission’s long experience.”
They added that “subsidizing resources so they do not retire would fundamentally distort markets. The subsidized resources would inevitably drive out the unsubsidized resources, and the subsidies would inevitably raise prices to customers.” And when that happened, “investor confidence would evaporate and markets would tend to collapse. This loss of faith in markets would thereby undermine reliability.”