Regulators kill Perry’s proposal to prop up coal, nuclear power plants

The Federal Energy Regulatory Commission (FERC) Monday rejected Energy Secretary Rick Perry’s proposal to prop up coal and nuclear power plants.

In a unanimous order released Monday afternoon, the five-person commission — four of whom President Trump nominated — said Perry and other supporters of the proposal failed to show that current electricity markets are not just or reasonable, findings that would be necessary in order to mandate the higher electricity payments that Perry sought.

The rejection is a major victory for natural gas, wind, solar and other industries that compete with coal and nuclear. They joined with conservative activists, environmentalists, grid experts, big businesses and others in opposition to the proposal.

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But in a concession to coal and nuclear, FERC launched an effort to formally ask electric grid operators what they are doing, if anything, to ensure that their grids remain resilient, which was the goal of Perry’s plan.

“The [Federal Power Act] is clear: in order to require [grid operators] to implement tariff changes as contemplated by the Proposed Rule … there must first be a showing that the existing [grid] tariffs are unjust, unreasonable, unduly discriminatory or preferential,” the commission wrote. “Neither the Proposed Rule nor the record in this proceeding has satisfied the threshold statutory requirement of demonstrating that the [grid] tariffs are unjust and unreasonable,” it said.

“In addition, the extensive comments submitted by the [grid operators] do not point to any past or planned generator retirements that may be a threat to grid resilience.”

Perry proposed the action in September. It would have required certain grid operators to pay power producers for their costs plus a reasonable profit, if the power plant at issue has at least 90 days of fuel on-site — a standard that only coal and nuclear could meet.

Supporters said that coal and nuclear plant closures, which have been increasing in recent years due to cheap competition and regulations, threatened to make the electric grid less resilient and more prone to long blackouts.

It was roundly criticized as a politically motivated move to boost power sources the Trump administration favors. It was also expected to greatly increase electricity costs, possibly by as much as $11.8 billion, according to a forecast by consulting firm Energy Innovation.

Perry said he was glad to start an important conversation about threats to resilience.

“As intended, my proposal initiated a national debate on the resiliency of our electric system,” he said in a statement.

“What is not debatable is that a diverse fuel supply, especially with on-site fuel capability, plays an essential role in providing Americans with reliable, resilient and affordable electricity, particularly in times of weather-related stress like we are seeing now,” Perry continued, promising to keep working with FERC on the matter.

Energy Department Spokeswoman Shaylyn Hynes went further, saying the nation’s grid may now be at risk.

“While the grid’s integrity is being maintained by an abundant and diverse supply of fuel sources today, the real question is whether or not this diversity will be here tomorrow,” she said.

“Marketplace distortions are putting the very resource mix that has enabled our ability to endure severe events at risk. Without action, we cannot guarantee the long-term reliability and resiliency of the electric grid. This is a priority for Secretary Perry, because energy security drives the economy and ensures our nation’s security.”

The American Council on Renewable Energy said FERC’s dismissal was the right move.

“We believe FERC has laid out a sensible approach to gathering the vital information needed to support any changes to electricity markets, and we are confident that, in the end, the record still will not support market intervention,” Gregory Wetstone, the group’s president, said in a statement.

Mary Anne Hitt, director of the Sierra Club’s Beyond Coal campaign, called FERC’s decision “a return to reality after months of billionaire coal and nuclear executives pressuring [the Energy Department] and FERC to illegally setup bailouts for their uneconomic plants.”

Monday’s action also compels electric grid operators to answer numerous questions from FERC about resilience, including how they define the topic, what they do to ensure resilience and how they evaluate threats to resilience. That information may be used for a future proposal.

Supporters of Perry’s plan may now petition for a reconsideration by FERC, and could eventually sue the agency in federal court over its decision.