Washington Update – October 27, 2017


Hundreds Comment on DOE Coal/Nuke Cost Recovery NOPR 

The Federal Energy Regulatory Commission had to extend its Monday deadline for comments to Tuesday to handle the on slot of comments on the Department of Energy’s NOPR to shore up coal and nuclear plants . Here are some highlights.  

On the pro side of the issue are coal-state lawmakers, nuclear industry groups, and labor unions supporting the grid reliability and market failure claims made by the NOPR, and making a plea to support the jobs and economic activity these rapidly retiring power plants provide.

Two coal industry groups urged FERC to fix the “catastrophe” that happened over the seven years in U.S. coal. The groups said FERC has the responsibility to support DOE’s proposal as a way of mitigating the effects of anti-coal regulation approved over the last seven years that led to the retirement or plan for retirement of 101 GW of installed coal power generation capacity.  “This catastrophic pace of retirements has caused cascading effects throughout the coal industry and industries that support coal, like railway and barge transportation, not to mention coal producing communities.  The country is at a crossroads, and urgent Commission action is required before the value provided by critical baseload generation capacity is lost forever,” the groups said in comments.

Supporters argued that FERC has interpreted its mandate to provide just and reasonable rates too narrowly, not accounting for the long-term risks to power customers posed by retirement of baseload generators.  They argue FERC has designed power markets that do not adequately compensate coal and nuclear plants for their value in providing generation diversity and onsite fuel supplies. “The organized markets were not designed to address resilience to fuel supply interruptions, and as a result customers have been left exposed to catastrophic risks,” Exelon, the nation’s largest nuclear generator, wrote in its comments. “As a result, the organized markets are no longer producing just and reasonable market outcomes, and they need modification in order to comply with the Federal Power Act.”

There were different ideas on how to implement the plan.  FirstEnergy urged the commission to finalize the rule with only minor modifications and offered a plan to roll it out to the nation’s organized markets. The Nuclear Energy Institute argued the NOPR is necessary as an “interim backstop” to keep at-risk generation online, but the commission should undertake a broader grid resilience inquiry. Exelon argued that FERC’s current interpretation of the Federal Power Act is too narrow, and wrote it would be open to cost recovery proposals developed in organized markets.

On the con side are a panoply of energy industry groups including ELCON, former federal energy commissioners, free-market think tanks and environmental law groups, whose complaints range from why the NOPR is terrible policy, to why it isn’t even legal for FERC to consider.

ELCON, joined by the American Chemistry Council, American Iron and Steel Institute, American Forest and Paper Association and a number of state industrial energy groups, said in comments that the federal government should not pick winners and losers in energy markets and said the NOPR is a “radical departure from the competitive markets” that would result in a “substantial loss of U.S. manufacturing capacity and jobs.” ELCON and others said they “strongly oppose the Proposal and urge the FERC to terminate this proceeding. If implemented, the Proposal would override the market’s ability to select the most efficient units, increase the electricity costs by many millions of dollars for untold numbers of businesses and consumers, and result in substantial loss of U.S. manufacturing capacity of jobs.”

ELCON also joined in comments by a group that included a diverse group of 12 energy industry associations including the American Petroleum Institute, Electric Power Supply Association, Natural Gas Supply Association and the Solar Industries Association. Those comments urged the Commission not to adopt the proposal which would “provide out-of-market financial support to uneconomical coal and nuclear power plants in the wholesale electricity markets overseen by FERC.”  The energy industry associations comments said:

  • DOE’s request for a rule that provides discriminatory compensation to certain coal and nuclear resources is based on a “justification for the proposed payments – resiliency – [which] is not well defined, nor is it demonstrated to be lacking” in the regions that would be affected by the rule.
  • The DOE request “fails to provide substantial evidence” for its claim that “RTO/ISO markets do not adequately value fuel security,” and fails to justify its conclusion that “full cost of service payments are therefore needed to prevent ‘early retirement’ of resources with 90 days of on-site fuel supply.”
  • Rather, “there is substantial evidence showing that electric systems that lack, or are transitioning to lesser reliance on, coal and nuclear resources are nonetheless operated in a manner that is both reliable and resilient,” and that “outages caused by disruptions of fuel supply to generators appear to be virtually nonexistent.”
  • Therefore, the proposed DOE rule would “prop up uneconomic generation that is unable to compete … and that is not otherwise needed for reliability.”
  • “Accordingly, the proposed rule has not been shown to be just and reasonable and cannot be adopted by the Commission.”

Of course Environmental groups weren’t too thrilled about the proposal either. The National Resources Defense Council (NRDC) submitted comments with Earthjustice, Environmental Defense Fund, Sierra Club, and other organizations saying the claim that the DOE proposal “has no resiliency or reliability benefits” and that Secretary Perry’s “argument that we need to prop up coal and nuclear power to shore up reliability doesn’t hold water.” The comments also include new analysis commissioned by the NRDC and Environmental Defense Fund and conducted by the Rhodium Group which similarly confirmed the original argument that there is no “Clear Link” between coal and nuclear and increased electric system reliability.

The free-market think tank R Street Institute said the proposal “lacks empirical support for its claim that an emergency situation justifies massive, abrupt intervention that will likely cost consumers billions without any clear benefit.” R Street urged FERC to “pursue an alternative course to price reliability and resiliency services that enhances the competitive performance of organized wholesale electricity markets.”

Finally, in an unprecedented, bipartisan action, a group of former FERC Commission members came out against the NOPR. The commissioners, five of whom are past FERC chairmen, said that while ensuring a resilient electric grid is a laudable goal the proposal to give coal and nuclear plants higher payments is not the right way to do it.  The proposal “would be a significant step backward from the commission’s long and bipartisan evolution to transparent, open, competitive wholesale markets.”

What’s next?  According to Acting Chair Neil Chatterjee, who has said that he generally believes coal and nuclear should be “properly compensated,” there are a number of options FERC could take. “We could do an advanced notice of proposed rulemaking; we could do a notice of proposed rulemaking superseding the DOE NOPR; we could issue a final rule or an extension of the comment period and a solicitation of further comments,” he said. “We could convene technical conferences; we could do a notice of inquiry; we could initiate Federal Power Act Section 206 review proceedings — so there are many tools available to the commission to act within 60 days.”

DOE Proposal Costs Consumers $10.6 Billion Per Year

Implementing DOE’s grid resiliency proposal could cost consumers up to $10.6 billion per year, according to new research from the Energy Innovation and the Climate Policy Initiative. Ninety percent of the benefits to the nuclear sector would go to just five companies – Exelon, Entergy, PSEG, NextEra and FirstEnergy – while 80 percent of the benefits to the coal industry would also go to just five companies – NRG, Dynegy, FirstEnergy, American Electric Power and Talen Energy.

Senate Committee Approves EPA Nominees

The Senate Environment and Public Works Committee on Wednesday narrowly approved four nominees for assistant administrator posts at the Environmental Protection Agency, including two that have come under sharp criticism from Democratic members of the committee. The committee vote cleared William Wehrum and Michael Dourson for a Senate floor vote on their appointments to head the Office of Air and Radiation and the Office of Chemical Safety and Pollution Prevention, respectively. Both have been criticized for their ties to industry. The committee also approved Matthew Leopold as assistant administrator for the Office of General Counsel and David Ross as assistant administrator for the Office of Water. Among the four new EPA nominees Wehrum and Dourson attracted the most immediate criticism. Sen. Tom Carper (D-DE), the committee’s ranking Democrat, told Reuters they were of “grave concern,” saying Dourson was “one of the most troubling nominees I have ever considered during my time on this committee.”

Glick Nomination Update

And speaking of nominations, Sen. Jim Inhofe’s (R-OK) hold on Democratic FERC nominee Rick Glick may end up indefinitely delaying the confirmations of a whole bundle of Energy, Interior and FERC nominees his party supports. The Oklahoman desperately wants to get Scott Pruitt some help at EPA and wants the agency nominees confirmed before he’ll release his hold, but Democrats appear exceedingly unlikely to ease the path to passage for any of President Trump’s EPA picks. The problem is Glick’s pick is a component of a negotiated package of nominees between Senate Energy Chairman Lisa Murkowski (R-AK) and ranking member Maria Cantwell (D-WA), so without him the entire package is stuck. “As much as I want to move all of the nominees that have gone through the process, other committees are not mine to resolve,” Murkowski told reporters. “That’s something Senator Inhofe is going to have to work through.”

Bipartisan Resiliency Push for Rebuilding

A powerful bloc of senators, including the top Republican and Democrat on the Senate Energy and Natural Resources Committee and the Finance Committee chairman, are pressing the Senate leadership for weather-resilient distributed energy to rebuild the power grids of Puerto Rico and the Virgin Islands. “Decentralized energy resources operating in microgrids are more likely to remain functioning during and after storms,” says the letter, spearheaded by Sen. Al Franken (D-MN) and signed by Sens. Lisa Murkowski, Orrin Hatch (R-UT), Rob Portman (R-OH) and Maria Cantwell.

And this… 

Not everything is bad about global warming.  Toastier temperatures are improving the quality and taste of wine produced in France, according to a study conducted by the National Aeronautics and Space Administration. As temperatures in France rise—about 1.8 degrees Fahrenheit since pre-industrial times— the quality of wine is improving. This of course begs the question – who’s doing the tasting and where to you sign up?