FERC regulators: No grid emergency to justify DOE coal, nuke bailout

Source: By Gavin Bade, Utility Dive • Posted: Wednesday, June 13, 2018

  • Members of the Federal Energy Regulatory Commission criticized President Donald Trump’s order to bail out coal and nuclear generators during a Senate committee hearing on Tuesday, saying it could unravel wholesale power markets.
  • All five FERC members told lawmakers they do not believe there is a national security emergency in wholesale power markets that justifies immediate federal intervention. Security concerns underpin a Department of Energy memo on saving coal and nuclear generators that was leaked the day before Trump’s order.
  • FERC is currently addressing coal and nuclear retirements in its resilience docket, but Commissioner Robert Powelson said a “hard and fast mandate” to save the plants could “usurp the marketplace” and force other resources offline.

Dive Insight:

If implemented, the Department of Energy’s plan to keep coal and nuclear plants online would constitute an unprecedented federal intervention into wholesale power markets and a direct rebuke of FERC, which early this year unanimously rejected a separate subsidy proposal from the agency.

FERC regulators on Tuesday told the Senate Energy and Natural Resources Committee what they said in that January rejection: there is no reliability emergency to justify the bailout.

“There is no immediate calamity or threat to our ongoing ability to have our bulk power system operate and satisfy our energy needs,” FERC Chairman Kevin McIntyre said. “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.”

Since FERC’s rejection in January, DOE has shifted its argument, saying coal and nuclear plants should be saved not only for their contributions to grid reliability and resilience, but their national security value as well.

In particular, the leaked DOE memo advocates keeping the large generators online to protect against cyber threats to natural gas pipelines. Agency officials say FERC and regional grid operators may not “have the visibility or the proper information to determine if something is a national security issue.”

But FERC regulators, who receive classified intelligence briefings on security threats to pipelines and other infrastructure, declined to endorse DOE’s interpretation of the threat. Asked by Sen. Martin Heinrich, D-N.M., if “any of you believe we are facing a national security emergency in wholesale power markets,” the five commissioners fell conspicuously silent.

After the hearing, Powelson confirmed that while regulators are aware of threats to gas infrastructure, they do not believe they constitute a security emergency.

“Let’s not just change the narrative and start going after the interstate pipeline system and saying it’s unreliable or a national security threat,” Powelson said. “There are issues that have popped up in pipeline security — physical and cyber — and I want to go back to the original point of working with the RTOs and national security agencies to take a more holistic approach.”

All energy infrastructure faces potential security threats, Powelson said, and federal agencies should seek to address them all rather than singling out gas pipelines.

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

Other regulators echoed Powelson’s sentiment. Commissioners Richard Glick and Neil Chatterjee wrote an op-ed in Axios this week calling on the Transportation Security Administration to step up cyber protections for pipelines, but neither of them expressed concern about a security emergency during the hearing.

DOE should refrain from supporting uneconomic plants, Glick told senators, “unless there is an emergency that actually exists.”

The regulators’ comments follow a wave of criticism for the DOE proposal from many major players in the power sector. Even the CEO of Exelon, the nation’s largest nuclear operator, told Utility Dive last week that there is no power market emergency to justify a bailout and pushed DOE to release more information on security threats.

“We don’t know the vulnerability,” CEO Chris Crane said. “It’s a classified vulnerability as far as we can see it. Until the markets can see what the vulnerability is, we’re not going to be able to come up with the right design.”

If the Trump administration moves to subsidize a significant number of coal and nuclear plants, energy analysts say they could “blow up” wholesale power markets. Moving so many generators out of competitive markets, they warn, could depress prices for other plants, forcing them to retire or seek subsidies of their own.

Powelson reiterated those concerns to lawmakers Tuesday, saying that a bailout could unfairly penalize generators who took the risk to build in competitive power markets.

“To put someone’s risked capital at play, I have grave concerns about that,” Powelson said. “It goes against everything we talk about in supply and demand-side economics.”