In remarkably good news for the US energy industry, the Federal Energy Regulatory Commission has unanimously rejected a proposal by the country’s Energy Secretary, Rick Perry, which essentially sought to subsidise coal and nuclear energy.
In brief, US Energy Secretary Rick Perry, handpicked for his role by newly installed President Donald Trump, filed a proposal with the Federal Energy Regulatory Commission (FERC) on September 29 which would seek to financially subsidise coal and nuclear for their “on-site reserves” under the auspices of providing stability and resilience to the national energy grid.
“Pursuant to his authority under Section 403 of the Department of Energy Organization Act, the Secretary urged the Commission to issue a final rule requiring its organized markets to develop and implement reforms that would fully price generation resources necessary to maintain the reliability and resiliency of our nation’s grid.”
“A reliable and resilient electrical grid is critical not only to our national and economic security, but also to the everyday lives of American families,” said Secretary Perry. “A diverse mix of power generation resources, including those with on-site reserves, is essential to the reliable delivery of electricity — particularly in times of supply stress such as recent natural disasters. My proposal will strengthen American energy security by ensuring adequate reserve resource supply and I look forward to the Commission acting swiftly on it.”
Given the current tenor of politics in Washington and across the United States, hopes that FERC would reject a proposal which would, essentially, fulfil one of President Trump’s campaign promises to some degree — reviving the country’s coal industry — were dim, and it was uncertain whether FERC would have the backbone to stand up to the President.
However, on Monday, January 8, the Commission announced that it was terminating the proposal made by Secretary Perry, and instead revealed that it had initiated a process of its own “to holistically examine the resilience of the bulk power system.” The Commission acknowledged (PDF) its appreciation of “the Secretary reinforcing the resilience of the bulk power system as an important issue that warrants further attention,” but decided to dismiss his proposal — in line with the advice of countless experts and the Commission’s own doubts — and initiated a new proceeding “to specifically evaluate the resilience of the bulk power system in the regions operated by regional transmission organizations (RTO) and independent system operators (ISO).”
In a stinging rebuke of Secretary Perry’s proposal which gives context to the aforementioned “appreciation,” Commissioner Richard Glick explained that “The Proposed Rule had little, if anything, to do with resilience, and was instead aimed at subsidizing certain uncompetitive electric generation technologies.” Commissioner Cheryl A. LaFleur added, “I do not think the record demonstrates the need for the Proposed Rule to support resilience. Further, even had a resilience issue been demonstrated, I have serious concerns about the nature of the proposed remedy, which would address the issue not through market rules but through out-of-market payments to certain designated resources.”
FERC’s decision to unanimously terminate Secretary Perry’s proposal has similarly been met with unanimous praise.
“Federal regulators were right to reject a proposal that would have amounted to nothing more than giving coal and nuclear power plants billions of dollars in guaranteed profits at the expense of consumers,” said Mike Jacobs, senior energy analyst at the Union of Concerned Scientists. “We don’t need to prop up plants that are closing due to market forces. Grid operators are having no problems keeping the lights on as more of the nation’s energy comes from clean, renewable sources.
“Energy regulators must follow the law and act on the best available science, and not pick winners and losers based on political alliances. Secretary Perry’s attempts to tip the scale in favor of uneconomic coal and nuclear power plants to provide a ‘resilience’ benefit that doesn’t exist would have increased carbon emissions, raised costs to consumers, and distorted competitive markets.”
“The law and common sense prevailed over special interests today,” said John Moore, director of the Sustainable FERC Project coalition housed within the Natural Resources Defense Council. “The FERC correctly found that the Department of Energy’s proposal violated the basic requirements of the Federal Power Act. Secretary Perry’s plan would have subsidized coal and nuclear plants with a 90-day fuel supply, yet Perry never explained why those plants were inherently more reliable or resilient.”
A joint statement released by US industry trade associations — AEE, ACORE, API, AWEA, ESA, EPSA, INGAA, NGSA, and SEIA — continued the praise: “We are very encouraged by the action taken by FERC today. We look forward to engaging with FERC, DOE, and grid operators in an examination of what resilience of the electric power system means and requires, and to demonstrating the contribution of our industries to ensuring reliable power for all.”