The Trump administration's plan to order the nation's grid operators to purchase electricity or power generation capacity from struggling coal and nuclear plants could eventually come before FERC, but wouldn't present many problems at that stage, according to Chairman Kevin McIntyre.
Last week, Bloomberg reported that the Department of Energy (DOE) was considering using its authority under two federal laws -- Section 202(c) of the Federal Power Act (FPA), as well as the Defense Production Act (DPA) -- to compel the nation's grid operators to purchase electricity or power generation capacity from uneconomic coal and nuclear plants, which have struggled to compete against natural gas. The plans were outlined in a 41-page draft memo.
If DOE Secretary Rick Perry were to invoke such authority, it "would be completely valid," McIntyre said Tuesday at the 2018 EIA Energy Conference in Washington, DC. "The fact that it's invoked very rarely doesn't render it any less valid."
McIntyre said he doubted that dockets opened at the Federal Energy Regulatory Commission as a result of such DOE action would be "a dilemma" for the agency. Under Section 202(c), he said the first step would be for entities to be compensated to negotiate a contract with DOE, but "if that effort should fail, then the matter could ramp up to FERC." The Commission would approach such cases as it does rate proceedings, "which FERC has been handling for decades," McIntyre said.
"So, from that standpoint, it wouldn't be a dilemma. In a sense, it would almost be our bread and butter. We'd have to figure out how to get the dollars and cents right. That would be probably the biggest trick. But we've got a very talented staff."
Reports said the draft memo of DOE's plan was to be circulated last Friday (June 1) at a National Security Council meeting. In addition to outlining plans for DOE to use its authority under Section 202(c) and the FPA, the memo called for the creation of a Strategic Electric Generation Reserve (SEGR) "to promote the national defense and maximize domestic energy supplies." SEGR would allow DOE to "address the nation's grid security challenges" while a proposed order outlined in the memo was in effect.
Speaking to reporters outside the EIA meeting, McIntyre said it is also possible that DOE's plan could move forward without any role for FERC.
"Under the law as it's written and the regulations of the DOE, I think that there are different scenarios that could develop that would not involve a rate proceeding from FERC, and we're looking at those details now."
If cases were to come to FERC as rate proceedings, they would be subject to the Commission's customary "standards of justness and reasonableness," he said.
Section 202(c) states that it can be implemented "during the continuance of any war" -- "and so it has the feel of kind of a war time emergency," McIntyre said -- but it goes on to say "or whenever...an emergency exists by reason of a sudden increase in the demand for electric energy, or a shortage of electric energy or of facilities for the generation or transmission of electric energy, or of fuel or water for generating facilities..."
That language indicates that the statute may be invoked under situations including non-war emergencies or urgent circumstances, McIntyre said. "That is a decision not for me or for anyone at FERC, but rather for the Secretary of Energy."
McIntyre said he had not seen any list of plants that could be part of the DOE plan.
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. 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. FERC unanimously rejected the DOE NOPR in January.
CEO Dena Wiggins of the Natural Gas Supply Association (NGSA) called the possible Trump proposal "a terrible idea on multiple levels," and warned that the NGSA would file a lawsuit if it moves forward.
Two cabinet departments already appear to be taking the proposed directive as bonafide marching orders. On Monday, Perry told attendees of DOE's annual Cyber Conference in Austin, TX, that the premature closure of coal and nuclear plants could be disastrous if the United States suffers a cyberattack on its energy infrastructure. And Department of Interior Assistant Secretary Tim Petty has hinted that the department may insist that a water conservation district in Arizona continue accepting electricity from the Navajo Generating Station, a 2,250-MW coal-fired power plant near Page, AZ.