Energy & Environment

Perry seeking to prop up nuclear, coal plants

Victoria Sarno Jordan

Energy Secretary Rick Perry is making waves through Washington and the energy world with his unprecedented proposal to prop up coal and nuclear power plants that are at risk of closing.

Experts say Perry’s proposal marks the most significant change to the country’s power markets in decades — a polar contrast to the market-based approach the Federal Energy Regulatory Commission (FERC) had been taking.

{mosads}It correlates with President Trump’s promise to save the coal industry and the administration’s argument that a rash of coal and nuclear plant closings is threatening the electric grid. 

Perry wants to increase the payments to troubled coal and nuclear plants by requiring that certain regional electric grid operations pay power plants their actual costs of operating plus a “fair rate of return.”

It would be a significant shift from the bidding process now allowed and would almost certainly raise electricity costs for consumers, critics say of the plan.

But Perry’s idea has garnered significant praise from coal and nuclear industry leaders, who say it could revive plants they say deserve to be paid more. 

They argue that because these plants build up larger fuel supplies than competitors producing electricity from wind and solar power, they should be paid more. 

“We commend Secretary Perry for initiating a rulemaking by FERC that will finally value the on-site fuel security provided by the coal fleet,” said Paul Bailey, president of the American Coalition for Clean Coal Electricity. 

“The coal fleet has large stockpiles of coal that help to ensure grid resilience and reliability,” he said. 

The renewable power industry disagrees.  

Along with environmentalists and grid experts, they say Perry’s proposal, which would require FERC approval to go into effect, is a poor excuse to abide by Trump’s campaign promises. 

“It suggests that, somehow, there’s something categorically different about that kind of technology than other technology on the grid,” said Sue Tierney, an energy expert at the Analysis Group who was an assistant secretary of Energy under former President Clinton.   

The proposal also divided the natural gas industry from coal and nuclear, even though it often sided with its rivals to oppose Obama administration climate policies. 

Since gas plants usually get their fuel from pipelines and do not store it at the plants, they would not be eligible for incentives that could be doled out to the nuclear and coal industries. 

“We are concerned the agency has mischaracterized the lessons learned from past weather-related events and appears to suggest that additional regulation is the answer where markets have already proven the ability to greatly benefit consumers and give our electric system the flexibility needed to meet constantly, and often rapidly, changing electricity demands,” said Marty Durbin, chief strategy officer at the American Petroleum Institute, which represents the natural gas industry’s interests.  

At the heart of the debate is whether plant retirements are making the grid less resilient — and whether coal and nuclear power are the answer. Critics cite recent reports from the North American Electric Reliability Corporation, the National Academies of Science and elsewhere to argue that the plant closure problem is overblown. 

Perry asked FERC to write a new regulation within 60 days. Past major rules have taken a year to formulate, and the resilience rule would likely rejigger the country’s whole power grid. 

“The turnaround they requested is very quick,” said Tony Clark, a Republican and former FERC commissioner from 2012 to 2016. “You wouldn’t be able to do a complete revamp of the market in that amount of time.” 

But since FERC is independent, it has the power to extend that time window. Eleven energy associations teamed up Monday to ask for such an extension. 

For comparison, the Clean Power Plan, the Obama administration’s Environmental Protection Agency rule to reduce the power sector’s carbon emissions, took years to write and didn’t enforce emissions reductions until 2022. 

Perry’s request is likely to raise legal issues as well, experts said.

FERC’s authority centers on the responsibility to ensure that wholesale power rates are “just and reasonable.” 

Any new regulation would have to demonstrate that without the higher payments for coal and nuclear, rates are unjust or unreasonable. If it fails to do so, a federal court could overturn the new regulation. 

“FERC does not have the authority to just decide that a particular source of generation gets paid differently now because Rick Perry requested it,” said Justin Gundlach, a climate change law fellow at Columbia University Law School.

“There’s a pretty high evidentiary bar, and FERC would need to show some basis whereby rates are not just and reasonable because of how different sources are paid,” he said. 

FERC only has three commissioners out of its five-person contingent. Two additional nominees — including the intended chairman, Kevin McIntyre — are awaiting a final Senate confirmation vote. 

The current chairman, Neil Chatterjee, was Senate Majority Leader Mitch McConnell’s (R-Ky.) energy adviser and is a strong supporter of coal. He said on a podcast in August that “generation, including our existing coal and nuclear fleet, need to be properly compensated to recognize the value they provide to the system.” 

But he also strongly guards the commission’s independence, and he’s resistant to making any major policy moves before McIntyre takes office. 

The commission cannot legally write policies that favor certain generating sources over others. Nonetheless, Perry’s opponents see the idea as a clear attempt to favor coal and nuclear. 

“Rick Perry is trying to slam through an outrageous bailout of the coal and nuclear industries on the backs of American consumers,” said Kit Kennedy, director for energy at the Natural Resources Defense Council. 

New York Attorney General Eric Schneiderman (D), who has already filed numerous lawsuits against the Trump administration, immediately promised a fight. 

“My office will forcefully oppose this and other efforts of the Trump administration to put the interests of special interests ahead of the health, safety, and wallets of New Yorkers,” he said.

Tags Mitch McConnell Rick Perry
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