Energy Secretary Rick Perry has decided that the U.S. should subsidize coal and nuclear power plants if necessary for them to survive in the extremely competitive U.S. energy market on the grounds that the U.S. needs to have a reserve of base power that can only be provided by such plants. A major study by the Department of Energy contradicts Perry’s claims that losing some of the nation’s coal and nuclear plants could impact the stability of the national electrical grid.
“The Federal Energy Regulatory Commission (FERC) is the United States federal agency that regulates the transmission and wholesale sale of electricity and natural gas in interstate commerce and regulates the transportation of oil by pipeline in interstate commerce. FERC also reviews proposals to build interstate natural gas pipelines, natural gas storage projects, and liquefied natural gas (LNG) terminals, in addition to licensing non-federal hydropower projects.” Wikipedia
Neil Chatterjee, the temporary chairman of FERC, has just proposed what he calls an “interim step” of subsidizing coal and nuclear plants which are struggling to compete in the wholesale energy market in the U.S. He says that this would give FERC the additional time that it needs to evaluate the proposal from Energy Secretary Perry that FERC develop new regulations to compensate coal and nuclear power plants for the “reliability and resiliency” that he claims they provide the national electrical grid.
At a S&P Global Platts Energy Podium event in Washington, D.C., Chatterjee said, "What I don’t want to have is plants shut down while we’re doing this longer-term analysis, so we need an interim step to keep them afloat.” He went on to say that FERC would respond to Energy Secretary Perry’s request for a response to his proposal by December 11. Chatterjee said that in the meantime, FERC would be working on some sort of legal rational for providing subsidies to come coal and nuclear plants.
Chatterjee admitted that his “interim” plan would have to be approved by a majority of FERC’s five commissioners which is not guaranteed. He is serving as the temporary chairman of FERC until Kevin McIntyre who was recently confirmed by the U.S. Senate is sworn in as FERC chairman. Chatterjee is more supportive of Perry’s plan than some the other FERC commissioners. Two of the other commissioners are afraid that Perry’s proposal would “blow up” the energy markets in the U.S.
Chatterjee has recently met with FirstEnergy, an investor-owned utility that is a supporter of Perry’s proposal. FirstEnergy has also put forward its own plan for coal and nuclear subsidies. The FirstEnergy plan says that power plants designated as “resilient” should get a monthly payment for operators of the national electrical grid to cover operating costs and provide a “fair return on investment.” Chatterjee said that, "We met with the FirstEnergy team, with our team at the commission, to really kick the tires on what they proposed and challenge them on some of what they had put forward.”
Beyond the coal and nuclear sectors of the utility market, the broader energy industry has been skeptical of Perry’s proposal. The past twenty years have seen an energy market with free competition and little involvement of the federal government. The energy industry fears that Perry’s proposal could seriously impact the stability of the current market system.
The American Council on Renewable Energy (ACORE) belongs to a group of fossil fuel and renewable energy groups that have filed a joint motion with FERC against Perry’s proposal. Yesterday, Greg Wetstone, president and CEO of the American Council on Renewable Energy in a statement to the Washington Examiner, said “There is neither legal authority nor commission support for such a brazen intervention to favor politically preferred sources in the electricity marketplace.”
The reasons offered by supporters of Perry’s proposal simply do not stand up to unbiased analysis. His proposal is a blatant attempt of coal and nuclear power proposal owners to force customers to pay for the inability of their power plants to compete in the energy marketplace. Perry’s plan and the FERC “interim” plan should be rejected.
