Perry proposes regulatory overhaul to boost coal, nuclear

Source: Sam Mintz and Hannah Northey, E&E News reporters • Posted: Monday, October 2, 2017

In a rare move that could spark sweeping changes in energy regulation, Energy Secretary Rick Perry Friday called on the Federal Energy Regulatory Commission to take action that could prop up struggling coal and nuclear plants.

The Department of Energy wrote in a notice of proposed rulemaking that FERC has an “immediate responsibility to take action to ensure that the reliability and resiliency attributes of generation with on-site fuel supplies are fully valued.”

The proposed regulation directs FERC to require the electricity markets it oversees to change their rules to compensate “fuel-secure” sources of generation that have a 90-day fuel supply on-site — which could include coal, nuclear and hydropower plants — by allowing them to fully recover their costs.

“If FERC actually adopted this rule, it’d be the largest change to electricity regulation in decades,” Travis Kavulla, a Montana regulator and former president of the National Association of Regulatory Utility Commissioners, said on Twitter.

But implementation of the regulation could prove challenging, and FERC still has a say in how it responds. And ultimately, opponents could ask the courts to intervene in any final rule.

DOE’s proposed rule orders FERC to finalize the regulation within 60 days of its publication in the Federal Register, but that timeline might not meet legal requirements, said Ari Peskoe, a senior fellow at the Harvard Law School Environmental Policy Initiative.

“FERC rules usually have much more technical detail,” said Peskoe. “This reads more like a directive to FERC to figure this out.”

Legally, he said, “FERC can’t issue a problem statement like that and then 60 days later finalize a rule.” He added, “People have to have notice of what the proposal is so they can meaningfully comment on it.”

A FERC spokeswoman said the agency has received the proposal and is reviewing it.

Sue Tierney, a senior adviser with the consulting firm Analysis Group and a former DOE official, said any action FERC takes will have to stand on a record.

“FERC will have to cover things on a record, and you can just bet this will be taken to court no matter what. That doesn’t mean they won’t come up with a point of view and interpret a body of evidence that’s favorable to the Trump administration’s conventional position, but it’ll be harder for them to just make up a document,” she said.

Despite the potential roadblocks, the recently installed FERC chairman has shown an appetite for boosting grid reliability by supporting struggling coal and nuclear plants.

Neil Chatterjee said in his first week on the job in August that he thinks coal and nuclear need to be “properly compensated to recognize the value they provide to the system” (E&E News PM, Aug. 14).

A fight over ‘resiliency’

Former FERC officials agreed that Perry’s call on the commission to conduct a rulemaking reflected a “bold” move that will undoubtedly fuel a debate over what constitutes “resiliency.”

They also noted that FERC’s independence is laid out in statute and the commission will ultimately decide whether to take up the rulemaking and gather public comment.

This isn’t the first time DOE has asked the commission to consider a new regulation. In one instance in the 1970s, the department called for a rulemaking during a time of energy scarcity to replace the use of fuel oil with natural gas.

But this request is unique in its profile and scope.

Tony Clark, a former Republican member of FERC, said Perry’s request for a rulemaking is a “fairly bold” way of forcing issues like “resiliency” and being “fuel-secure” at the commission that could trigger extensive debate.

“Does fuel security mean a mine-mouth operation where you’ve got 100 years’ worth of coal on-site? Does it mean more traditional coal plants with a 30- to 60-day coal pile?” Clark asked. “Does it mean nuclear units or dual fuel units?

“If you’re looking at it as a clean energy advocate, you have distributed energy resources that are available like microgrids that might be able to respond much quicker in a disaster,” he said. “It’s never been really defined at the federal level, so that’s where the bulk of the debate is going to take place.”

Former FERC Chairman Jon Wellinghoff, a Democrat, said the Trump administration is already going in the wrong direction in defining resilience by focusing on fossil fuels and proposing to guarantee rates for coal and nuclear plants across the country.

The Department of Energy, he said, should be looking at systems like microgrids that can withstand storms made worse by climate change, instead of pushing a proposal that on its face “makes no sense.”

“A coal plant isn’t resilient in a blizzard and you’ve got a frozen coal pile. There’s nothing resilient about a coal plant or the diesel plants in Puerto Rico that have diesel sitting on-site providing no energy to anybody on that island,” Wellinghoff said. “The entire premise is misplaced.”

Industry reactions: Nuclear thrilled, renewables glum

Today was a particularly good day for the nuclear industry, which will also be celebrating DOE’s announcement that it is offering a $3.7 billion loan guarantee to the struggling reactor construction project at Plant Vogtle in Georgia (see related story).

Maria Korsnick, CEO of the Nuclear Energy Institute, said the proposed FERC rule is a “decisive action” that will benefit ratepayers, homeowners and small businesses.

“In the wake of the incredible disruptions caused by extreme weather events in recent years, including multiple hurricanes and polar vortices, the urgency to act in support of the resiliency of the electric grid has never been clearer,” Korsnick said.

But the announcement represents a fear coming true for renewable advocates, who had somewhat dodged a bullet when DOE came out with a much-hyped staff report on grid reliability last month that fell short of concrete policy direction (Greenwire, Aug. 24).

“We worry today’s proposal would upend competitive markets that save consumers billions of dollars a year. The best way to guarantee a resilient and reliable electric grid is through market-based compensation for performance, not guaranteed payments for some, based on a government-prescribed definition,” said Amy Farrell, senior vice president for government and public affairs at the American Wind Energy Association.

The oil and natural gas lobby is also not thrilled about the move.

“We support efforts to ensure reliability, and we look forward to fully participating in the rulemaking process to come,” said Marty Durbin, executive vice president of the American Petroleum Institute. “However, as we review the proposal, we are concerned the agency has mischaracterized the lessons learned from past weather-related events and appears to suggest that additional regulation is the answer where markets have already proven the ability to greatly benefit consumers and give our electric system the flexibility needed to meet constantly, and often rapidly, changing electricity demands.”