Proposed coal and nuclear bailout roundly condemned in FERC comments

In the second round of comments an incredibly diverse group of actors are stating that DOE’s attempts to subsidize “fuel secure” generation is simply a bad idea. And possibly illegal, too.

November 8, 2017 Christian Roselund

A law journal article urges FERC to revive its independent governance agenda.

Image: Wikimedia Commons

20 organizations. That’s the number that signed on to a joint set of power industry comments to the Federal Energy Regulatory Commission (FERC) stating that there is no good excuse for what is increasingly appearing as transparent attempt to subsidize failing coal and nuclear power plants on behalf of a few companies.

And the opposition to the FERC’s Notice of Proposed Rulemaking has brought together and unusually broad and diverse coalition of parties, with the wind and solar industry joined by gas and petroleum interests, large energy consumers, several developers and other interests.

The final comments filed by these 20 organizations, including Solar Energy Industries Association (SEIA) and Advanced Energy Economy (AEE), reveal few surprises and mostly point out the rather large holes in the rationale behind the proposed bailout. In particular the comments note that the companies that would benefit from the “discriminatory payment” proposed by the Department of Energy have failed to demonstrate imminent reliability or resiliency problems, that coal-fired and nuclear generation are not unique in contributing to grid reliability, and that the beneficiaries’ examples of operational difficulties during extreme events don’t provide help their case any.

But one of the interesting things about the DOE’s NOPR is that it is so potentially damaging to power markets that even some of the companies that might benefit from the proposed bailout oppose it. Among those is NRG, a power company that owns 10 coal plants and but became a leader in investing in renewable energy under former CEO David Crane.

“Despite the superficially attractive premise of rate-basing a substantial portion of our generation fleet, at enormous additional cost to ratepayers, NRG is inherently a pro-competition company, with zero captive customers, and believes that only competitive market structures that deliver value for end-use customers has any long-term hope of surviving,” noted NRG’s initial comments opposing the rule,” reads NRG’s comments.

This is not to say that NRG is not interested in reform of wholesale markets, and has actually proposed changes to rules in Texas’ grid with Calpine. However, the company says that this proposal is simply the wrong one. “It would be a mistake for FERC to fight subsidies with more subsidies,” reads a statement by NRG.

Such denouncements are only the latest for the rule, which a study by Energy Innovations and Climate Policy Institute found could cost consumers $10.6 billion annually. And as the rationale for this bailout becomes increasingly shaky, an article by E&E News has linked the proposal to Sean Cunningham, a former lobbyist at Ohio power company First Energy who joined the Department of Energy under the Trump Administration.

Unsurprisingly First Energy is among the few companies issuing comments in favor of the market changes.

It remains to be seen if the newly appointed members of the Federal Energy Regulatory Commission (FERC) will go forward with the controversial proposal, which is being considered on an expedited timeline. However, even if the will is there, that does not mean that the NOPR will see the light of day. Commissioner Cheryl LaFleur noted that what has been put forward to date is not detailed enough to form a final rule, and Ari Peskoe of the Harvard Environmental Policy Initiative has called the NOPR “legally unsalvagable”.

“DOE’s NOPR includes neither a proposed finding about the justness and reasonableness of wholesale rates nor any discernible explanation of how current rates are deficient,” reads Peskoe’s comments. “Under the Federal Power Act and the Administrative Procedure Act, the Commission cannot finalize a legally defensible rule based on the NOPR.”

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