FERC: There Is No Grid Emergency

President Trump wants to provide financial support to struggling coal and nuclear power plants. He's told the Department of Energy (DOE) to make it happen.

But a bipartisan group of lawmakers on Capitol Hill, along with commissioners from the Federal Energy Regulatory Commission (FERC), made it clear June 12 they don't support federal government intervention in U.S. power markets. FERC is an independent government agency that regulates the transmission and wholesale sale of electricity and natural gas in interstate commerce.

Many utility company executives already have expressed their opposition to propping up coal and nuclear power, countering arguments from power companies such as FirstEnergy still holding nuclear and coal assets in their generation portfolios. Some of those executives, along with environmentalists and advocates for renewable energy, have said incentivizing coal and nuclear power generation will come at the expense of wind and solar power.

The Senate held an oversight hearing Tuesday to look at FERC's approach to overseeing U.S. energy infrastructure. All five FERC commissioners-four of whom were appointed by President Trump-gave testimony during the hearing, which became a debate on Trump's wish to use national security powers to address grid reliability. The president claims the closure of coal and nuclear plants could lead to widespread blackouts and is a threat to the country.

Sen. Martin Heinrich (D-N.M.) directly asked the commissioners: "Do any of you believe that in the wholesale power markets we are facing an actual national security emergency at the moment?"

Commissioner Cheryl LaFleur, the agency's only holdover from the Obama administration, said: "I do not."

Heinrich then asked: "Would anyone answer that with a yes?" None of the commissioners replied.

One Plan Already Rejected

FERC already has dismissed a move last year by the Trump administration and Energy Secretary Rick Perry to require regional transmission organizations (RTOs) to adjust their electricity rates to support power plants that show "reliability and resiliency attributes," in effect coal and nuclear plants. Perry's so-called Grid Resiliency Pricing Rule was hammered by the House Subcommittee on Energy in October of last year, with opponents saying Perry's proposal "picks winners and losers" and would distort energy markets.

Interestingly, Environmental Protection Agency head Scott Pruitt, speaking at the Western Conservative Summit in Denver, Colorado, last week, accused the Obama administration of picking "winners and losers" in energy with its Clean Power Plan and other regulations, which the Trump administration has said unfairly targeted the coal industry. "We shouldn't pick winners and losers," Pruitt told the group on June 8, saying no federal government agency should favor one energy source over another.

Sen. Maria Cantwell (D-Wash.), ranking member on the Senate Energy and Natural Resources committee, on Tuesday noted FERC's rejection of the Grid Resiliency Pricing Rule, which she called a "radical proposal." She told the FERC commissioners, "Not only is the underlying policy wrong, but it is a threat on your independence and oversight, to be directed this way."

Lisa Murkowski, the Republican senator from Alaska who chairs the Senate Energy and Natural Resources Committee, on Tuesday said, "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. We must increase the light and lower the heat in policy debates."

Murkowski said plant closures had "not reached the point where the quality of electric service [has] been visibly compromised."

FERC is currently studying the U.S. power grid to see what impact continuing closures of nuclear and coal plants might have on reliability. A component of the study includes the fact that coal and nuclear plants can store fuel on-site, while natural gas-fired power plants mostly rely on pipelines for fuel, and solar and wind farms are dependent on weather. The Trump administration has said gas plants and renewable generators are more vulnerable to natural disasters and cyberattacks.

FirstEnergy's competitive arm, FirstEnergy Solutions (FES), whose subsidiaries have coal and nuclear plants in Ohio and Pennsylvania, in April filed for bankruptcy after asking DOE chief Perry for federal assistance, saying plant closures represent an emergency and a risk to energy security. "The continued retirement of nuclear and coal-fired generating facilities in PJM [Interconnection] has resulted in an emergency situation that has placed the continuing security of PJM at risk," the company wrote in a letter to Perry. The move came as the company said it would close four uneconomic nuclear units in the next few years, representing 4 GW of generation.

Action Would Create 'Moral Hazards'

Trump earlier this month told Perry to have the DOE "prepare immediate steps" to stop the closing of more coal and nuclear plants, but the FERC commissioners on Tuesday said such action is not necessary. Commissioner Robert Powelson said government intervention could create chaos in deregulated power markets.

"I'm a little concerned about the narrative that's being put out there," Powelson said. "We're going to need all these resources, but I don't think it's appropriate to put FERC in the arena of creating moral hazards in these markets. These markets are working hyper-efficiently."

He continued: "FERC does not pick winners and losers in the market. Instead we create an environment where the market can pick the winners and losers."

Powelson said there are security threats for all power generators and said the government should address them all rather than single out specific targets, such as gas pipelines.

"[DOE is] putting out there that one industrial control system has greater vulnerabilities than the others. Do we really know that?" Powelson asked. "A nuclear power plant or the PJM dispatch center or for that matter a coal plant-they all have industrial control systems."

Commissioner Richard Glick, a former executive with energy company Iberdrola, expressed dismay at the Trump plan.

"We cannot try to stop the natural evolution of this industry by claiming that there is a national security emergency unless there is evidence that suggests that an emergency actually exists," Glick said. "We need to be wary of people using the situation or a potential situation as a way to achieve market changes that they haven't been able to achieve otherwise."

FERC Chairman Kevin McIntyre said: "There is no immediate calamity or threat to our ongoing ability to have our bulk power system operate and satisfy our energy needs. When it comes to resilience, we need to take a longer-term lens and ask ourselves what the future landscape of our generation mix looks like."

Commissioner Neil Chatterjee, while noting previous closures of coal and nuclear plants have not impacted grid reliability, came closest to expressing some support for the administration's plan. "We shouldn't assume that good fortune will continue," he said. "It's important we and our partners in federal government remain vigilant in ensuring the reliability of our bulk power system."

Murkowski said if FERC's current study finds coal and nuclear plant closures are putting the grid at risk, it could adjust federal policy to help those industries. She said the group should quickly determine its policy regarding the issue.

"It is critical for you all to engage," she said. "Frankly, as one concerned about this issue for years now, I find it unfortunate that prior commissions did not lead more effectively."

Reaction to Plan Mostly Negative

Rabeha Kamaluddin, a partner in the international law firm Dorsey & Whitney's Regulatory Affairs group, where she focuses on energy regulation, compliance, and enforcement matters, in an email to POWER on June 13 wrote, "Although both DPA [Defense Production Act] and Section 202(c) of the Federal Power Act provide for broad statutory powers, the circumstances in which such powers have been invoked are limited-one in wartime (DPA) and the other where there was an imminent threat to grid reliability (e.g., California blackout, Hurricane Katrina, among others). Precedent shows that in each instance in which the DOE has exercised its authority under Section 202(c), there was an imminent threat to the power grid."

Kamaluddin, who represents clients in matters before FERC and state utility regulators, continued: "In order to not frustrate the purposes of these statutes, and justify the exercise of such authority, there should be some reasonable evidence that the coal/nuclear plant closings would pose an imminent threat to the power grid, or a threat to national security."

Most reaction to Trump's plan has been negative, even from those within the energy industry. PJM Interconnection, the nation's largest power grid operator and home to many of the coal and nuclear plants that have closed or continue to be at risk of closing, in a statement said, "Any federal intervention in the market to order customers to buy electricity from specific power plants would be damaging to the markets and therefore costly to consumers. There is no need for any such drastic action."

The American Petroleum Institute (API), which represents the nation's oil and natural gas industry, on June 1 joined with a coalition of several groups-including those supporting renewable energy-in condemning the president's plan. Todd Snitchler, market development group director for API, in a statement said: "The Administration's draft plan to provide government assistance to those coal and nuclear power plants that are struggling to be profitable under the guise of national security would be unprecedented and misguided."

Even some ardent supporters of Perry when he served as Texas' governor have questioned whether the DOE should try to manipulate energy markets. Joe Barton, a senior Republican from Texas on the House Energy and Commerce Committee, said of a plan to prop up coal and nuclear plants: "It's not the worst idea in the world. But if you believe in free markets, it's difficult to stomach," he told The Dallas Morning News.

-Darrell Proctor is a POWER associate editor (@DarrellProctor1, @POWERmagazine).

The post FERC: There Is No Grid Emergency appeared first on POWER Magazine.