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Little Need for Trump's Coal, Nuclear Bailout, FERC Tells Senate

None of the five commissioners appointed to FERC believe the kind of emergency exists that would warrant a federal directive typically reserved for wartime and severe grid impairments to bail out faltering coal and nuclear plants. The commissioners’ views emerged during an oversight hearing Tuesday before the Senate Committee on Energy and Natural Resources.

Asked by Sen. Martin Heinrich (D-NM) if they believed electricity reliability is bad enough in some regions like the Southwest or New England that the Trump administration would be justified in ordering the nation’s grid operators to purchase electricity or power generation capacity from struggling coal and nuclear plants, not a single commissioner said yes.

A memo from the Department of Energy (DOE) that was leaked earlier this month suggests the Trump administration is preparing to do just that. The DOE would reportedly use its authority under Section 202(c) of the Federal Power Act, as well as the Defense Production Act, to order grid operators to make the purchases. The move could undermine other fuel sources like natural gas and renewables that have combined to drag down wholesale power prices and outcompete the more traditional resources. 

The plan, however, was widely panned by not only all of the Federal Energy Regulatory Commission, but also lawmakers during what was the first Senate oversight hearing in about a decade for the full commission.

“In my view [FERC] should be pointing the way on policy improvements that address grid vulnerabilities, while reaffirming our commitment to competition in wholesale power markets,” said Chairman Lisa Murkowski (R-AK). “We must increase the light and lower the heat in policy debates.”

Murkowski said she’s seen little decisive action on the matter from FERC in recent years and noted that she has “concerns” about the memo as a “policy vacuum” appears to be forming over the power markets in which the DOE, the Trump administration and FERC are all weighing in.

“We’ve got a controversy out there, and I think we recognize each one of you has referenced it in different ways. As with many controversies, with so much at stake in such a heavily regulated industry, such as the energy industry, the various interests are locked in...this is battle. This is mortal conflict for some.”

Trade associations representing the oil and gas industry have adamantly opposed proposals to bail out uneconomic coal and nuclear plants, which have struggled to compete against natural gas. However, the president has been a vocal supporter of the coal industry since his campaign for the White House. DOE Secretary Rick Perry also had argued that a controversial notice of proposed rulemaking (NOPR) presented to FERC last September was a necessary bulwark to maintaining grid resiliency by subsidizing coal and nuclear facilities.

FERC unanimously rejected the DOE NOPR in January and has since undertaken its own proceeding to study the resiliency of the nation’s grid in close coordination with the companies that operate it.

“It seems that the [coal] retirements in my view have not reached the point where the quality of electric service has been visibly compromised,” Murkowski said. “Are you confident that this situation will persist?”

FERC Chairman Kevin McIntyre is confident, a view the other commissioners shared as well.

“I do not quarrel with the study you referenced in an earlier remark about how there is not an immediate calamity or threat to our ongoing ability to have our bulk power system operate and satisfy our energy needs,” McIntyre said in response to Murkowski’s question. “However, when it comes to resilience, I would say that we need to take a longer-term lense and ask ourselves what should the future landscape of our generation mix look like and ensure that we get that right as well.”

Commissioner Cheryl LaFleur noted that the nation’s power grid has always evolved, pointing to the oil embargos that once prompted a switch to coal and its parallel with the latest switch away from that fuel and nuclear power as natural gas supplies have grown and renewables have become increasingly efficient.

“I believe the resource turnover we’re experiencing is an expected consequence of markets and technological change, and the lower prices that result from well-functioning markets are a benefit to consumers, not a problem to be solved unless reliability is compromised,” she said.

The commissioners seemed to agree that, at the least, a dialogue about grid resilience, especially in an age of never-ending cybersecurity threats, is an important one to have.

Commissioner Neil Chatterjee added that some additional efforts could be needed to maintain reliability. But as far as the Trump administration’s plans are concerned, he said the policy mechanisms to do so are not yet clear.

“It’s a leaked memo,” Chatterjee said. “We don’t know what the administration intends to do with it. But I also think people are too quickly dismissing it. There are a number of points in the memo that are thoroughly well-cited and researched. And I think we can have disagreements about what the remedies may be, but I think that they raise a real issue...We need to look at it.”

What exactly FERC’s role would be in hashing those issues out is also not evident at this point. “From my vantage point, it’s unclear what role there would be [for FERC] because we need some more details about what implementation would look like,” Chatterjee added.

Sen. Ron Wyden (D-OR) expressed concerns about what any kind of bailout would mean for consumers. He said the Trump administration’s plans don’t seem to be rooted in facts, but rather that they’re “jumping the gun” to a solution before a problem exists.

Commissioner Richard Glick agreed, saying that some estimates suggest the proposals included in the memo could increase electricity rates nationwide by up to $65 billion.

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