Daily GPI / Regulatory / Regulatory / NGI All News Access

DOE's NOPR Subsidies Would Cost Up to $10.6B/Year, Study Finds

Subsidies included in the Department of Energy's (DOE) recent notice of proposed rulemaking (NOPR) would cost as much as $10.6 billion a year, with the vast majority of the money going to a handful of coal and nuclear companies, according to a cost analysis by Climate Policy Initiative and Energy Innovation.

DOE submitted to FERC last month the NOPR that would allow "for the recovery of costs of fuel-secure generation units that make our grid reliable and resilient," according to DOE Secretary Rick 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."

An analysis of four possible methods of implementing those out-of-market subsidies indicates that they could cost customers anywhere from $311 million to $10.6 billion annually, according to the report. More than 80% of the increased costs customers would pay to subsidize coal would go to five companies.

On the coal side of the equation, NRG would be one of the biggest beneficiaries of the subsidies, with increased revenue between $40 million and $1.2 billion per year. FirstEnergy and Dynegy would also receive up to $500 million annually. Other companies would receive $100-$400 million, depending on the implementation method.

"The group of owners benefitting from the increased payments to nuclear generation is even smaller," according to the analysis. "Exelon stands to benefit the most across all readings, with increased revenue of $100 million to $3.6 billion per year. Entergy, PSEG, FirstEnergy, and NextEra could all see significant increases in revenue as well, approaching $1 billion per year for some owners. Under all four readings, more than 89% of all the nuclear subsidies paid by customers under DOE's proposal would go to just five companies."

FERC began accepting comments on DOE's proposal to implement reforms on the reliability and resiliency of the electricity grid on Oct. 3 [RM18-1]. Amidst a flood of filings on the final scheduled day of public comment, FERC's web-based system experienced technical difficulties last week, prompting a 24-hour extension by the Commission.

Coal and some electricity organizations have shown support for the NOPR, while natural gas industry groups have vehemently opposed it. Eight former FERC commissioners, including five chairmen, also oppose the proposal, as does the American Public Power Association.

Last week two energy experts said the NOPR is inconsistent and would offer limited benefits to coal. They also said the Trump administration's plans to repeal the Environmental Protection Agency's Clean Power Plan could face difficult legal challenges, and ultimately might not prove to be a boon for the coal industry.

Recent Articles by David Bradley