How FirstEnergy used a DOE lab study to boost bid for help

Source: Rod Kuckro and Sam Mintz, E&E News reporters • Posted: Tuesday, April 3, 2018

A request by a unit of struggling utility FirstEnergy Corp. for an emergency order from the Department of Energy that could help rescue its coal and nuclear plants was the culmination of a year of work by the company.

But in a last-minute scramble that included an all-nighter by company lawyers, the utility incorporated into its request the results of a conveniently timed and supportive study that one of DOE’s national laboratories released two days earlier.

The study out of the National Energy Technology Laboratory in Pittsburgh found that coal plants played a leading role in maintaining power on the electric grid during the “bomb cyclone” cold-weather event earlier this year. The timing of the study, made public on March 27, raised questions among critics of Ohio-based power plant owner FirstEnergy Solutions (FES) after the company repeatedly cited it in its request Thursday for help from the Trump administration.

The company filed its request to Energy Secretary Rick Perry under Section 202(c) of the Federal Power Act, which in the past had been used to keep individual power plants open, often to stave off closures mandated by environmental standards. Section 202(c) helped guarantee power supplies during major emergencies such as the California energy crisis in 2000 and in the aftermath of Hurricanes Katrina and Rita in 2005.

In this instance, FirstEnergy Solutions requested that DOE use its authority to direct regional grid operator PJM Interconnection to compensate the utility for the “full benefits” of its power plants across the region. The request came a day after the company announced plans to close its three nuclear plants — two in Ohio and one in Pennsylvania — in the next three years.

FirstEnergy has been communicating with DOE and the Federal Energy Regulatory Commission about how to keep its coal and nuclear plants in business since President Trump came to office. Meanwhile, Trump and his agency heads have been searching for ways to reverse coal’s steady decline in the power sector. Last year, DOE explored legal avenues for intervening in electricity markets to guarantee revenue for older coal plants that have been losing out to cheaper natural gas.

The Ohio utility was a major backer of DOE’s push to compensate its coal and nuclear plants in the name of grid resilience. FERC ultimately rejected that request in January (Energywire, Jan. 9).

One person familiar with a successful past 202(c) application by a different generation company said that there were “months” of communication between the company and both DOE and the White House leading up to the formal filing.

E&E News asked FirstEnergy Solutions if it had advance knowledge of the NETL study, if FirstEnergy Solutions discussed it with DOE or NETL personnel and how it came to play such a prominent role in its filing for an emergency order from the government.

“FES has long considered a 202(c) application and of course did a great deal of advance work to prepare for one,” said FirstEnergy Solutions spokesman Thomas Mulligan. “It should not be surprising that we were able to quickly incorporate the results of a timely and relevant study, especially since it accorded with our own research.”

An attorney familiar with the filing said, “We’ve been considering 202(c) for a long, long time, and we think the report that was issued by the lab underscores the need for the secretary to act on 202(c).”

The NETL study

The national lab study examining the bomb cyclone that struck much of the eastern United States from Dec. 27 through Jan. 8 originated from a request by Steven Winberg, DOE’s assistant secretary for fossil energy, according to NETL’s Peter Balash, who led the study.

The analysis, which took roughly two months, focused on the organized markets administered by independent system operators (ISOs) in the eastern U.S. and Texas. The study was completed weeks before its formal release last Tuesday, and only minor edits were made during that gap in time, said Balash, an economist who has worked at the NETL since 2002.

The request from Winberg came in the form of a memo that contained some “key takeaways” for the lab to examine, Balash said. The request memo was not included in the NETL study, and DOE declined to provide a copy.

The study found that fossil fuel and nuclear power plants “provided 89 percent of electricity during peak demand across all the ISOs; coal provided the most resilient form of generation” in PJM, the largest power market; “renewables imposed a resilience penalty” on the grid as power output decreased as demand increased; and “underestimation of coal and nuclear retirements could give rise to reliability concerns and an inability to meet projected” demand for electricity.

“The broad performance of the grid was known at the time. What was not known at the time was the relative contributions of coal, nuclear, natural gas and wind until later when PJM data became available,” Balash said in an interview.

Balash said he had no contact with FirstEnergy as NETL was drafting the study.

FirstEnergy cited the NETL study several times in its March 29 request for financial relief to Perry. “The findings of the NETL report fully support the Secretary determining that an emergency exists with the meaning of the [Federal Power Act] Section 202(c) that warrants immediate action,” the company wrote.

Environmental groups took aim at both FirstEnergy and the national lab after the utility’s request for an emergency order, questioning NETL conclusions about the role of coal generation during the bomb cyclone.

“It’s kind of shocking that it’s coming from a national laboratory, when the grid operators have said exactly the opposite,” said Mark Kresowik, eastern region deputy director of the Sierra Club’s Beyond Coal campaign.

“I don’t know that I’ve seen something from an independent national lab spun so dramatically by the lab itself,” he said.

Still, the bomb cyclone heightened the concerns of grid operators across the East, particularly ISO New England. Across the region, natural gas prices soared and a major nuclear station went offline. Oil-fired plants picked up some of the slack.

In late January, ISO New England Chief Executive Gordon van Welie warned a Senate panel that New England may have been one more bad ice storm away from rolling blackouts. He highlighted challenges to electric power reliability and resilience in extreme conditions, as older, uncompetitive power plants retire (Energywire, Jan. 24).

At the same hearing, FERC Chairman Kevin McIntyre cautioned that Eastern regional grid operators weren’t wholly dependent on coal plants to keep the lights on. “We wouldn’t have seen any widespread outages absent coal,” he said. “That said, coal was a key contributor.”

The top official from grid operator PJM, which provides power to 65 million people in all or parts of 13 states and the District of Columbia, said that some 45,000 megawatts of coal was needed; but, the official noted, the region had shut down 20,000 MW of coal-fired generation in recent years and could shut down more (Climatewire, Jan. 24).

Asked if NETL researchers had spoken with the grid operators while preparing the report and its conclusions, Balash said no.

“We did not discuss our assessment of their data while we were writing this report. Since the report has been posted, members of the ISOs and [regional transmission organizations] that belong to the [North American Electric Reliability Corp.] reliability assessment subcommittee have been alerted to the report, and we have told them we welcome their comments,” Balash said.

Balash commented on McIntyre’s conclusion that widespread outages would not have been the end result of burning less coal.

“I would say that he must not have been aware of the data,” Balash said of McIntyre, suggesting that FERC and others should consider revisiting their findings. “We think that would be a productive way forward.”

The NETL study “compares amount of demand on the system to the amount of generation available, and had no coal been in the mix, capacity would have been short of the demand,” Balash said.

As with the regional grid operators, NETL did not discuss the study with FERC as it was being written.

Van Welie of ISO New England said an ISO analysis looking ahead seven years found that “rolling blackouts” could occur without new sources of electricity.

“I think our concerns are more short term than that,” Balash said of the New England projections. “The time horizon they have is based on how they do analysis. I do not think they look at analysis that brings in unexpected near-term retirements.” That includes, for example, retirements announced by FirstEnergy in the PJM region, he said.

“I worry that they don’t take into account how long it actually takes natural gas generation to be built as opposed to a theoretical estimate,” he said.

Critics look to postpone DOE action

Parties opposed to the action sought by FirstEnergy blasted the request in letters to Perry.

“There is no immediate threat to system reliability,” PJM wrote.

The grid operator said it will undertake an analysis over the next 30 days and, based on findings, work for another 60 days with FirstEnergy on solutions if issues are found.

Separately, a coalition of oil industry, electricity, natural gas, renewables and consumer interests urged Perry to establish a formal notice-and-comment period of at least 60 days before taking any action.

On Friday, FirstEnergy hit back.

“Like they did before FERC, PJM continues to advocate for delay,” attorneys for the utility said. “It continues to ask the Secretary (and FERC) to rely and trust its process. FES respectfully submits that allowing PJM to continue to kick the can down the road is how we have arrived at this crisis. The time for action is now.”