U.S. grid regulator: interim plan could aid nuke, coal plants for years

Source: By Timothy Gardner, Reuters • Posted: Thursday, November 16, 2017

WASHINGTON (Reuters) – The top U.S. electricity regulator wants to prop up ailing coal and nuclear plants for as long as it takes to determine whether they provide vital services to the grid – a process that could take two years or longer, he said in an interview late on Wednesday.

Neil Chatterjee, the acting head of the Federal Energy Regulatory Commission, said his interim plan to keep the plants open would likely require regional grid operators to evaluate which power plants should be helped, so they could recoup costs through regulated pricing.

“When the power goes out for a substantial amount of time it can be truly, truly debilitating, with not just economic consequences but cultural and society and safety consequences,” said Chatterjee, a Republican from coal-producing Kentucky, who experienced long power outages when he visited India as a child.

“I quite frankly don’t even understand why it would be even remotely controversial,” to figure out how to reward plants for making the grid reliable and resilient, he said.

FERC, a little-known independent agency with broad powers over electricity regulation, is working on the issue at the direction of Energy Secretary Rick Perry, who has said he is concerned that a slew of coal and nuclear plant shutdowns in recent years has undermined the grid. Hundreds of aging coal plants have been retired, along with many reactors, because of competition from cheap and plentiful natural gas and the expansion of wind and solar power.

Perry proposed that coal and nuclear plants should be allowed to recover operating costs through regulated pricing of power they generate if they store 90 days of fuel on site, and gave FERC until Dec. 11 to take action.

But the effort has been widely criticized by the renewable energy industry, environmentalists, and the gas drilling industry, which view it as an unfair subsidy for aging power plants that are no longer competitive.

Chatterjee said that Perry’s directive, part of President Donald Trump’s policy to maximize U.S. coal, natural gas and oil output, is the “most significant” item that has been on FERC’s agenda for decades and “probably will be for decades.”

He said FERC could issue so-called “show cause orders” to grid operators, such as PJM Interconnection in the U.S. Northeast, that would ask them to determine whether the resiliency of the grid would suffer if there were further shutdowns of coal and nuclear plants.

Plants that were identified as being crucial to grid resilience could then recover certain costs through regulated pricing, he said.

Chatterjee, a former energy adviser to Senate Majority Leader Mitch McConnell, said he has sought input from fellow commissioners Cheryl LaFleur, a Democrat, and Robert Powelson, a Republican, but he has yet to furnish them a draft of his plan, which can only be adopted by a vote.

He will remain a commissioner at FERC, though fellow Republican Kevin McIntyre, who will soon be sworn in, is expected to take his place as chairman.

Chatterjee said FERC might vote to study Perry’s proposal, which could take 18 to 24 months or longer, before taking more permanent action.

“We need the interim step to keep these plants afloat to allow time to do that longer-term analysis,” he said.

Chatterjee admitted that it could be “messy” if the interim plan ends up compensating power plants, but the wider study determines that there were few grid resiliency issues to begin with. “Look, if this thing was easy, clean and simple it would have been solved years ago,” he said.

Reporting by Timothy Gardner, additional reporting by Valerie Volcovici, Scott DiSavino in New York and Nichola Groom in Los Angeles; Editing by Richard Valdmanis and Lisa