DOE’s coal crusade keeps the heat on FERC

Source: Sam Mintz and Rod Kuckro, E&E News reporters • Posted: Tuesday, May 8, 2018

Cracks in the public relationship between the Federal Energy Regulatory Commission and the Department of Energy were on display last week with dueling comments from a DOE spokesperson and one of FERC’s five commissioners.

FERC is getting accustomed to high-profile critics. Since its rejection in January of a DOE proposal to subsidize economically struggling coal and nuclear plants, FERC has been bashed by former Trump campaign manager Corey Lewandowski and powerful coal tycoon Bob Murray, among other critics close to the White House.

But a fresh dig at FERC from DOE spokeswoman Shaylyn Hynes last week that suggested the independent regulator had failed to act on a major threat to the electric grid attracted the attention of former officials from both agencies. They characterized the direct criticism as unusual and inappropriate.

Hynes’ comment came in a statement proactively sent out to select reporters, in response to an announcement by Eastern grid operator PJM Interconnection that it would study problems that could result from the closure of coal, nuclear and centralized power plants. PJM, which manages a grid across all or part of 13 states and the District of Columbia, said it would make changes to its future capacity market as part of its ongoing grid resilience efforts (Greenwire, April 30).

FERC has also said it is paying attention to concerns about grid resilience — a catchall term that means the grid’s capacity to rebound from an extreme storm or extra-cold temperatures or a deliberate attack.

DOE’s statement accused the agency of inaction.

“FERC has been studying the underlying economic and regulatory causes of this problem for years, but still has not taken sufficient action,” Hynes said. “We share PJM’s concerns and urge FERC to take immediate action to stop the loss of fuel-secure capacity.”

A DOE official said the agency’s leadership is not, in fact, frustrated with FERC, and still has a strong working relationship with the regulator. But getting some kind of action on “resilience” — protecting at-rick coal and nuclear plants, as Energy Secretary Rick Perry sees it — is still a top priority for DOE, the official said.

“It’s consistent with what we’ve been saying from day one,” the official said.

But Jeff Navin, who served as acting and deputy chief of staff at DOE during the Obama administration, called the DOE criticism a “strange statement.”

“FERC is an independent agency; it is supposed to be free from political influence,” he said. “That statement is a shot across the bow trying to politicize some of these issues and force FERC to make decisions on factors other than the merits. That’s never something that we considered when we were at DOE.”

Navin said that at times, FERC — which falls under the larger DOE umbrella but is constructed by Congress as an independent regulatory agency — made decisions that his DOE disagreed with. “But the integrity of that process requires that everybody respects the independence of FERC,” Navin said. “This DOE and this administration seems to think that FERC works for them. I think that’s where a lot of this tension is coming from.”

There is a sense among both former officials and people close to DOE that Perry and his team are under pressure from the White House to act on coal and nuclear plants. That has led it to put pressure on FERC.

Saving aging coal-fired power plants and nuclear reactors from closure is a political goal of the Trump administration. Coal and nuclear face economic pressure from cheaper natural gas and renewable energy. Meanwhile, flat electricity demand since the Great Recession has made it harder to recoup rising costs at those plants.

“It’s pretty clear that Secretary Perry is feeling a lot of pressure from friends of the president and the White House to push some of these anti-market forms of relief for these plants,” Navin said.

“Given all of the craziness around Cabinet politics, you wonder if the intended audience of the statement was less FERC, and more the White House,” he said, “to assure them that Perry is following the party line.”

For decades, FERC and DOE have swapped staff experts and political appointees.

From 1998 to 2001, current FERC Commissioner Richard Glick served as a policy adviser to Energy Secretary Bill Richardson.

Grid consultant Alison Silverstein has a similar pedigree, having served as an adviser to former FERC Chairman Pat Wood III.

“In the time I worked at FERC, my boss spoke regularly with people in the secretary’s office and I spoke regularly with senior people at the staff level, and we tried to coordinate on a lot of issues as necessary,” Silverstein said.

Since then, she has for 13 years been a frequent consultant to DOE.

“I am not used to agencies taking shots at each other. It has been traditional that the Department of Energy would respect the FERC expertise and the people in the field’s ability to do these kinds of analyses,” she said.

“But FERC is limited in what it can do by its statute,” she said. “DOE may be complaining about this because they have no power to act themselves.”

FERC talks softly

Frustration with the tone of the policy discussion goes both ways.

A FERC spokeswoman said the agency had no comment, but in public statements last week, Republican Commissioner Robert Powelson criticized recent pushes to subsidize coal and nuclear plants, which DOE has been active in.

Powelson said using the Defense Production Act to compensate coal and nuclear plants, a move DOE is considering, “would be the greatest federal moral hazard we’ve seen in years.”

He also decried unnamed “others” outside of FERC who are “putting their thumb on the scale to try to pick winners and losers in the market.”

“We’ve gotten caught up in political rhetoric, and we haven’t looked at the ways these markets can address these issues,” he said.

Jon Wellinghoff, who served as FERC chairman during the Obama administration, said the public discord between the two agencies is “relatively new” and that he couldn’t think of an example of a similarly visible spat during his time at FERC.

“We looked at each other as equals, and that’s how the Energy secretary needs to look at FERC,” Wellinghoff said.

The two agencies regularly work together on a wide range of issues, including electric grid resilience but also areas such as cybersecurity and natural gas exports. Wellinghoff said the conflict ultimately circles back to the disagreement about how to deal with retiring coal and nuclear plants and FERC’s statutory limitations.

DOE, he said, has submitted no evidence in support of its ongoing claim that there is an electric grid resilience emergency and that immediate action is needed.

“They can beat their chests all they want to, but it doesn’t change the fact that FERC has a responsibility to take action based on only substantial evidence of record,” he said.

“If you’re in the path of a steamroller, if you’re not the steamroller, you’re going to get rolled,” Silverstein said.

“I think that’s where old coal and nuclear plants are now — they’re getting rolled,” Silverstein said.

“And I think DOE is in front of a political steamroller just the way coal and nuclear plants are in front of a technology steamroller,” she said.