An unlikely coalition of renewable energy, natural gas, energy efficiency, and oil industry associations have collectively submitted their concerns to the US Department of Energy regarding the possibility of effectively bailing out and subsidizing uneconomic and aging power plants that would otherwise be forced to retire, such as FirstEnergy Solutions’ recent request for the same.
In a move which is striking in its bilateral and bipartisan support, a combination of American industry associations have submitted a legal analysis to the Department of Energy (DOE) effectively condemning the misuse of Government power to prop up coal and nuclear power plants which, for one reason or another, are being forced into retirement. The group of associations includes Advanced Energy Economy (AEE), the American Petroleum Insititute (API), the American Wind Energy Association (AWEA), the Electric Power Supply Association (EPSA), the Interstate Natural Gas Association of America (INGA), and the Natural Gas Supply Association (NGSA) — a cross-section of American energy voices which speak almost louder than words.
The sudden interest in whether or not the US Government should subsidize the aging fossil fuel industry comes in the wake of FirstEnergy Solutions’ plea for help from the DOE, asking the Secretary of Energy Rick Perry to declare “an emergency situation exists … that requires immediate intervention by the Secretary” — intervention that would come in the form of economic subsidies and support for FirstEnergy Corp.’s nuclear and coal-fired power plants, which are otherwise in the process of filing for bankruptcy.
FirstEnergy Solutions, the Akron, Ohio-based electric utility, officially filed for Chapter 11 bankruptcy in early April, and announced that it would be closing its three nuclear plants in Ohio and Pennsylvania. FirstEnergy Solutions, its subsidiaries, and FirstEnergy Nuclear Operating Company together own and operate two coal-fired plants, one dual fuel gas/oil plant, one pet-coke fired plant, and three nuclear power plants. However, according to the Ohio branch of the Institute for Energy Economic and Financial Analysis (IEEFA Ohio), “The utility has been signaling for many months that it intends to get out of the power-generation business” having already closed all but one of its coal-fired power plants in Ohio.
The Chapter 11 bankruptcy filing does not involve parent company First Energy or affect its distribution, transmission, regulated generation, and Allegheny Energy Supply (AE Supply) subsidiaries.
In an effort to stave off bankruptcy, FirstEnergy is seeking protection “in the form of a Section 202(c) emergency” which effectively deems the company’s coal and nuclear plants as essential to the US electricity grid, claiming that its coal and nuclear plants are vital “to maintain the stability of the electric grid” and that PJM Interconnection should “promptly compensate at-risk merchant nuclear and coal-fired power plants for the full benefits they provide to energy markets and the public at large.”
It is an interesting argument, especially considering that it is effectively the same argument that Secretary Rick Perry made himself to the Federal Energy Regulatory Commission earlier this year which was similarly rejected.
In short, and quite accurately, such a move is a naive and underhanded attempt to legitimize economically subsidizing and supporting uneconomic and inefficient power generation due to poor business-handling and an ignorance of the current state of affairs.
It is unsurprising, then, that the appeal by FirstEnergy Solutions has received such strident opposition and led to this week’s legal analysis from the aforementioned trade organizations which strongly and in no uncertain terms shouts down the arguments made by FirstEnergy and fossil fuel proponents. Specifically, the legal analysis (PDF) refutes that such an “emergency” exists in the first place in the case of FirstEnergy Solutions or any of the other companies seeking similar protection, and that “none of the referenced emergency authorities appropriately apply to the requested relief for power plants whose retirements do not threaten the reliability of electric power.”
The legal analysis submitted to Energy Secretary Rick Perry makes the following points:
- The orderly retirement of inefficient, aging power plants in 2020 and 2021 does not constitute an emergency.
- DOE must reject FirstEnergy’s petition under Section 202(c) to provide above-market pricing to power plants.
- The Defense Production Act does not contain authority to provide above-market pricing to power plants.
- Section 215A of the Federal Power Act authorizes only temporary measures in response to grid security emergencies.
The rigorous opposition is not restricted to this legal analysis, either. In immediate response to FirstEnergy Solutions’ original complaint, Malcolm Woolf, senior vice president of policy for AEE, a national business organization said, “Advanced Energy Economy calls on Secretary Perry to reject FirstEnergy’s blatant appeal for a multi-billion dollar bailout of uneconomic and unnecessary power plants. This outrageous attempt to evade established market procedures is unprecedented. FirstEnergy is asking the Secretary of Energy to exercise authority that is reserved for an emergency threatening national security just to salvage power plants that are losing money for their owners and costing money for consumers.”
“Americans enjoy affordable, reliable electricity thanks to well-functioning markets and a robust energy supply,” said Amy Farrell, Senior Vice President, Government and Public Affairs of the American Wind Energy Association. “Consumers will suffer higher electricity rates if Section 202(c) of the Federal Power Act, a law intended to be used narrowly during national emergencies, is misused to prop up failing power plants in the name of ‘resilience.’ There is no emergency and the question of resilience is appropriately being considered in the ongoing FERC proceeding. We urge the Department of Energy to reject FirstEnergy Solutions’ request.”
It’s not just the renewable energy industries which are making their voices heard, either.
“Section 202(c) of the FPA is meant for immediate emergency situations such as sudden increases in demand or a shortage of electricity,” said Dena E. Wiggins, president and CEO of NGSA (PDF) back in late March. “None of this is taking place in today’s power markets.”
And, maybe most impressively, this week the American Petroleum Institute President and CEO, Jack Gerard, penned a letter to President Donald Trump (PDF) calling on him to “defend the ability of customers to enjoy the economic benefits delivered to consumers while ensuring the reliable and resilient operation of the grid while achieving your policy goals.” Gerard’s letter is interesting to read, considering that he essentially — without ever stating it outright — places the blame for coal generation’s decline on the shoulders of the natural gas industry, a fact backed up by research published earlier this month by North Carolina State University and the University of Colorado Boulder.
Gerard’s letter is a subtle attempt to prevent Donald Trump from propping up the ailing coal industry without ever making it seem like he is trying to support renewable energy. His opposition to FirstEnergy Solutions’ plea, however, is absolute, as is the vast majority of the American energy industry.