FERC terminates coal, nuke bailout proceeding

Federal regulators have rejected orders from Energy Secretary Perry to design open-ended subsidization of coal and nuclear power plants, and are initiating a new proceeding to look into reliability matters.

January 8, 2018 Christian Roselund

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

Image: Wikimedia Commons

One of the hallmarks of administration of U.S. President Donald Trump is a frequent failure to issue policies that stand up to legal and regulatory scrutiny, as previously revealed in multiple failed attempts to issue a ban on immigration from majority-Muslim nations.

This applies to energy matters as well. Today the coal and nuclear bailout which Energy Secretary Perry attempted to force upon the Federal Energy Regulatory Commission (FERC) fell apart under the weight of its lack of supporting evidence.

Not long after taking the helm of the Energy Department, Perry has been looking for a way to subsidize such production. This started with a expedited study of the electric grid whose conclusion that something needed to be done to protect coal and nuclear power plants from going offline was utterly unsupported in the body of the document.

This formed the basis for the intellectually dishonest argument that was the essence of the “Grid Reliability and Resilience Pricing” docket: that subsidies must be created for plants with 90-day supplies of fuel in order that they protect the reliability of the grid, despite all evidence to the contrary.

The plan was unpopular since it was announced and drew a firestorm of criticism including calls from eight former commissioners at FERC to halt the work, stating that such subsidies would destroy the wholesale power market.

Adding to this was the rather untimely development of the Pilgrim nuclear power plant in Massachusetts going offline in the middle of last Thursday’s snowstorm. This reinforced that the grid needs 90-day supplies of fuel about as much as fish need bicycles.

And while it is unknown what role those factors played in the final decision, there is a much simpler reason that was articulated by FERC, namely that the Federal Power Act requires that you actually have a reason to upend the wholesale electricity market, and the proposed rule supplied none.

Here, FERC is clear. “While some commenters allege grid resilience or reliability issues due to potential retirements of particular resources, we find that these assertions do not demonstrate the unjustness or unreasonableness of the existing RTO/ISO tariffs. In addition, the extensive comments submitted by the RTOs/ISOs do not point to any past or planned generator retirements that may be a threat to grid resilience. We also disagree with assertions that an adequate record exists through the Commission’s price formation efforts to support the Proposed Rule’s action regarding bulk power system resilience.”

Instead, FERC has initiated a process to actually look at pending grid reliability issues, starting with having regional grid operators actually provide information on reliability issues and concerns, instead of inventing reasons to bail out the coal and nuclear industries.

“We conclude that resilience remains an important issue that warrants the Commission’s continued attention, including through the development of a clear understanding of what each RTO/ISO currently does with respect to the assurance or strengthening of resilience and what more the RTOs/ISOs and the Commission could be doing on this issue,” notes the ruling.

Grid operators will have 60 days to submit specific information regarding the resilience of their perspective grids.

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