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NatGas Industry Calls DOE’s Reform NOPR ‘Fatally Flawed’ as Comment Period Closes

The floodgates opened wide as the public comment period for the Department of Energy's (DOE) notice of proposed rulemaking (NOPR) to implement reforms on the reliability and resiliency of the electricity grid came to an end on Monday, with hundreds of filings submitted by states, cities, corporations, environmental groups, labor unions and individuals.

FERC began accepting comments on DOE's proposal on Oct. 3 [RM18-1].

Analysts initially said the NOPR might not be completed in the timeline requested -- DOE Secretary Rick Perry directed FERC to issue a final rulemaking or interim final rule within 60 days of publication of the NOPR in the Federal Register -- nor exactly as DOE prescribed.

But FERC rejected calls from the oil and gas industry and others, including environmental groups, to extend the public comment period, reaffirming that comments were due by Oct. 23, and reply comments are due by Nov. 7.

FERC Commissioner Cheryl LaFleur said commissioners didn't believe they had the authority to extend the public comment period.

Under DOE's NOPR, FERC would impose rules on independent system operators and regional transmission organizations (RTO) "to ensure that certain reliability and resilience attributes of electric generation resources are fully valued." The rule would allow "for the recovery of costs of fuel-secure generation units that make our grid reliable and resilient," according to Perry.

Eligible units would have to "be able to provide essential energy and ancillary reliability service and have a 90-day fuel supply on site in the event of supply disruptions caused by emergencies, extreme weather, or natural or man-made disasters."

Critics charge that changes detailed in the NOPR would benefit the shrinking number of nuclear and coal generation plants at the expense of natural gas.

Coal and electricity organizations have shown support for the NOPR, while natural gas industry groups have vehemently opposed it. A bipartisan group of eight former FERC commissioners, including five former chairmen, last week joined the chorus of voices speaking out against the NOPR to implement reforms on the reliability and resiliency of the electricity grid.

A review of the hundreds of comments filed at FERC through mid-afternoon Monday found those battle lines still firmly in place. Opposition to the NOPR came in a wide range of comments.

The Interstate Natural Gas Association of America (INGAA) called the NOPR's technical foundation "fatally flawed." If adopted, the proposal would "imperil the benefits of innovation and efficiency spurred by competition," INGAA said in its filing. "The proposal provides no basis for the Commission to alter its market-based rate regime fundamentally by turning back the clock on competition."

"There are numerous problems with this proposal, beginning with its underlying premise and ending with the preferential treatment it recommends, which is harmful, undermines competitive markets, lacks legal basis and would not contribute to resiliency or reliability in the power markets," said Natural Gas Supply Association CEO Dena Wiggins. "Natural gas is a reliability asset in the power sector, as proven repeatedly by its excellent performance during the recent hurricanes and the 2014 polar vortex. By tilting the scales away from natural gas, DOE’s proposal could lead to less reliability in the markets, not more. We urge FERC not to adopt DOE’s proposal."

A group of a dozen large industrial users of electricity, including the Electricity Consumers Resource Council and American Chemistry Council, called the NOPR a "radical departure from competitive markets" that would result in "substantial loss of U.S. manufacturing capacity and jobs."

In a joint filing, the Public Service Commissions (PSC) of Louisiana and Mississippi said DOE's proposed rule "harms ratepayers, intrudes upon rights traditionally and properly reserved to states, is based on false conclusions unsupported by sufficient evidence, conflicts with the Commission's fuel technology neutral policy, and is contrary to the Commission's policies favoring competition."

The North Dakota PSC said in its filing that it shares Perry's concerns about "the early retirement of baseload generation," but the NOPR "needs to be further refined to appropriately compensate baseload facilities and prevent early retirement while maintaining affordable rates for customers." State regulators requested that FERC investigate the extent to which baseload provides value to adequately compensate for its benefits.

Sunrise Coal LLC, which produces more than 10 million tons of coal annually, went further, saying the NOPR is only a first step that would be inadequate to achieve Perry's objectives. Among other things, Sunrise said, "the NOPR does not address the primary reasons for coal generation being at risk, namely wind production tax credits, artificially low natural gas prices, and out-of-date regulatory rate making practices that focus on return on investment rather than the actual price of power."

In the closing days of public comment, labor unions including the AFL-CIO and Utility Workers of America, which represent coal and nuclear plant workers, came on board in support of the NOPR as well. 

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