Administration Must Rethink Coal and Nuclear Bailout Proposal

June 6, 2018

In his 500 days in office, President Trump has pushed for energy policies that follow through on campaign promises yet ignore the reality of changing circumstances that render these White House pursuits highly questionable, if not harmful.

None is more suspect than his directive to Energy Secretary Rick Perry to recommend ways to keep online old, failing and/or expensive coal and nuclear plants on line. As a presidential candidate, Trump made promises to reinvigorate flagging legacy energy interests.

Adding to the concern over last week’s directive is the disclosure of a White House memo leaked to Bloomberg news service that indicates DOE could invoke Section 202 of the Federal Power Act and the Cold-War-era Defense Production Act, two rarely used statutes, to give the government the authority to dictate power purchase decisions for two years as a means to try and rescue the older power plants.

Trump reportedly has not signed off on the memo, but the timing of the document – it follows FirstEnergy Solutions, encumbered by ailing coal and nuclear plants in Pennsylvania and Ohio, filing for bankruptcy earlier this year – and the single-mindedness he has exhibited in his efforts to protect an aging sector leave few believing the president would not think about handing down some sort of energy fiat.

The effort to protect coal and nuclear power plants at the expense of other, cleaner and cheaper energy technologies was tried before last year by the administration when Perry called on the Federal Energy Regulatory Commission (FERC) to issue new rules to ensure that power generating facilities with a 90-day fuel supply – nuclear and coal – be compensated for the reliability they add to the grid, in addition to the power they supply.

Some saw the DOE proposal as a ploy to boost the financial fortunes of certain base load energy interests. At the very least, it was a misguided effort to skew the energy market, even with the questionable assertion that it would provide the grid with added resiliency.

FERC members unanimously rejected the proposal, stating that DOE failed to prove the electric system is at risk, nor that keeping coal and nuclear plants online would improve grid reliability.

Yet, here comes the Trump administration again trying to force a remedy on a situation in no need of a fix, proposing to give the president the power to direct regional grid operators to make coal and nuclear plants their priority sources of power.

And as it happened last fall in response to the Perry directive to FERC, a coalition of energy efficiency, storage, renewable energy, natural gas and oil interests has again formed, challenging the prospect of using the 1950 national security statute to give the president broad powers to bail these plants out.

The coalition said the move would represent “a command-and-control mechanism” that would impose a financial burden on consumers and fundamentally disrupt and undermine the competitive electricity markets that have improved our electricity system’s reliability, resilience, and affordability, all while fostering innovation.

Members also note that virtually everyone in the power business, including regulators, grid operators and others experts, have long stated that the orderly retirement of outdated power plans does not pose an emergency for the electric grid.

Even the CEO of Exelon, the nation’s largest nuclear power generator, told Utility Guide this week that the retirement of coal and nuclear plants does not constitute a grid emergency that warrants urgent intervention from the federal government.

An E&E News report Tuesday quotes FERC Chairman Kevin McIntyre as saying that a White House move would likely have to go through FERC, as did the Perry request last September. Under the provision of the Federal Production Act cited by the White House memo, if coal and nuclear plants are unable to reach a contract with grid operators, FERC would take on the matter as essentially a rate proceeding.

The bailout proposed by the White House – ostensibly to enhance grid reliability – is cynically viewed by many as blatant efforts to financially benefit friends of the Trump administration. At the least, a bailout represents bad, Soviet-style policy. Stakeholders are urged to reach out to regulators, including FERC members, and to lawmakers and demand an end to this unnecessary federal intervention. The Trump administration must take an approach to this contentious issue that involves common sense, not political exploitation.

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