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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--The Federal Energy Regulatory Commission (FERC) (Washington, D.C.) is an independent agency housed in the U.S. Department of Energy (DoE) Washington, D.C.). The electricity business may soon learn just how independent FERC is.
At full strength, FERC has five commissioners. The agency only regained a quorum of three commissioners in August when two candidates nominated by President Donald Trump won Senate approval. Two other commissioners nominated by Trump await Senate confirmation. For more on FERC's lost quorum, see March 6, 2017, article - New Hurdle for Interstate Energy Projects: A Quorum-less FERC.
So how will a regulatory agency controlled by Trump appointees respond to a recent request from Energy Secretary Rick Perry that FERC consider ways to intervene in wholesale power markets with measures that financially support for nuclear and coal plants to preserve their financial viability? "The resiliency of the electric grid is threatened by the premature retirements of fuel-secure traditional baseload [generating] resources," Perry wrote in a September 28 letter to FERC that accompanied a draft Notice of Proposed Rulemaking (NOPR) designed to slow or reverse the closure of coal and nuclear power plants.
According to the DoE's Quadrennial Energy Review, released in January 2017, 32,000 megawatts (MW) of coal-fired power plants were retired over the past six years. That report said an additional 34,400 MW of coal-fired generation is slated for retirement over the next five years. It noted that between 2000 and 2016, 4,666 MW of nuclear generating capacity was retired, and another eight nuclear reactors representing 7,167 MW of nuclear capacity have announced retirement plans since 2016. The report also said that seven other nuclear reactors avoided early retirements due to state intervention.
"America's greatness depends on a reliable, resilient electric grid powered by an 'all of the above' mix of generation resources," Perry's letter continued. "This diverse fuel mix must include traditional baseload generation with on-site fuel storage that can withstand major fuel supply disruptions caused by natural or man-made disasters."
Perry said it was time for FERC to "issue rules that protect the American people from the threat of energy outages that could result from the loss of traditional baseload capacity. ... Much more work needs to be done to preserve these fuel-secure generation resources that have the essential reliability and resiliency attributes needed to keep the lights on for all Americans in times of crisis."
Perry's letter to FERC followed by five weeks the release of a DoE report on the reliability and resilience of the nation's power grid. For more on that study, see August 25, 2017, article - U.S. Department of Energy Study Calls for Increased Baseload from Coal, Nuclear Plants.
That August DoE report foreshadowed Perry's September 28 letter and draft NOPR on "fuel-secure" generation. Perry urged FERC to direct regional transmission organizations (RTOs) and independent system operators (ISOs) to "develop and implement rules that accurately price generation resources needed to maintain the reliability and resiliency of our nation's electric grid. Specifically, the rule allows for the recovery of costs of fuel-secure generation that make our grid reliable and resilient." To be eligible for this treatment, plants need to have a 90-day supply of fuel stored on a power plant's site.
Perry instructed FERC to "consider and complete final action on the proposed NOPR within 60 days from its publication in the Federal Register." FERC has asked for public comments on the draft rule by October 23.
Coal and nuclear interests cheered Perry's letter while natural gas and renewables interests heaped criticism on it. Members of Congress slammed the NOPR, which they said amounted to the federal government trying to pick winners and losers in energy markets - criticisms leveled by Trump, Perry and other administration officials against the Obama administration.
Perry's letter on "fuel-secure" generation came one day before the DoE granted the owners of the Alvin W. Vogtle Nuclear Power Station up to an additional $3.7 billion in conditional loan guarantees, on top of the $8.3 billion in loan guarantees DoE years earlier had pledged to those owners. Construction of two new units at that site is years behind schedule and billions of dollars over budget. For more on that, see September 1, 2017, article - Georgia Power Recommends Construction Continue at Vogtle.
One FERC commissioner, Chairman Neil Chatterjee, signaled his view on the draft NOPR when he said, a week before receiving Perry's September 28 letter, that coal-fired power plants should be "properly compensated to recognize the value they provide." Prior to becoming FERC chair, Chatterjee was an energy aide to Senate Majority Leader Mitch McConnell, who represents coal-dependent Kentucky.
But FERC's other sitting commissioners - Robert Powelson and Cheryl LeFleur - appear to be far less eager to intervene in wholesale energy markets. "We will not destroy the marketplace," Powelson told an industry conference on October 4, one week after Perry's draft NOPR was sent to FERC. "Markets have worked well and markets need to continue to work well. FERC does not do politics. We don't do energy politics."
Powelson is a former state utility commissioner. His speech received loud applause and a standing ovation from attendees at the annual meeting of the Organization of PJM States, or OPSI, in Arlington, Virginia, according to a news report in SNL.
"I'll give Secretary Perry credit; he's trying to be thoughtful in the approach, but there [are] many different approaches on how we can tackle this issue," Powelson said, adding: "I did not sign up to go blow up the markets. When that happens, we're done. I'm done; I don't need this job."
Cheryl LaFleur, the sole remaining FERC commissioner appointed by the Obama administration, endorsed Powelson's comments in a tweet, calling it a "great message."
Coal groups, on the other hand, applauded Perry's move. Paul Bailey, the president of the American Coalition for Clean Coal Electricity, commended Perry for starting a process "that will finally value the on-site fuel security provided by the coal fleet," according to a report by the Associated Press.
That AP report also quoted Maria Korsnick, president of the Nuclear Energy Institute, as saying electricity markets are unduly driven by short-term prices and don't value everything that matters to the electricity system. Nuclear reactors, she said, "find themselves struggling to survive when the nation needs them most."
But advocates for natural gas and renewable energy slammed the attempt to rejigger electric prices. So too have manufacturers, members of Congress and former FERC commissioners.
The American Wind Energy Association (AWEA) (Washington, D.C.) blasted the effort, saying it would "upend competitive markets. 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," AWEA spokeswoman Amy Farrell told Reuters.
And Marty Durbin, the executive vice president and chief strategy officer for the American Petroleum Institute (API) (Washington, D.C.), told the news agency, "We need to be careful that government doesn't put its thumb on the scale. It's better to let markets choose, which is what the United States is seeing with the growth of natural gas as the United States' leading energy source for electricity in 2016."
In a House Committee on Energy and Commerce subcommittee hearing held October 5, Perry's letter drew bipartisan scorn from lawmakers. Representative Frank Pallone (Democrat-New Jersey) called the proposal an "ill-conceived and wholly unjustified effort" to get FERC to "provide unduly preferential and discriminatory rates to coal and nuclear generators." And Representative Pete Olson (Republican, Texas) said he is concerned the rule would drive up power prices by "picking winners and losers."
Consultants ICF International (NASDAQ:ICFI) (Arlington, Virginia), released a study estimating the cost of the fixes sought by Perry would cost consumers and businesses between $800 million and $3.8 billion annually through 2030.
All six witnesses at thet October 5 congressional hearing said they opposed, for procedural and substantive reasons, the DoE's draft NOPR, according to a report from Natural Gas Intelligence. "We are dead set against this proposal," John Hughes, longtime chief executive of the Electricity Consumers Resource Council, told lawmakers. "We believe that it will destroy the ISO [independent system operator] and RTO [regional transmission organization] markets. If not, it will destroy competition in those markets. The attempt here is to create a big ATM machine for uneconomic, obsolete coal and nuclear plants."
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com.
At full strength, FERC has five commissioners. The agency only regained a quorum of three commissioners in August when two candidates nominated by President Donald Trump won Senate approval. Two other commissioners nominated by Trump await Senate confirmation. For more on FERC's lost quorum, see March 6, 2017, article - New Hurdle for Interstate Energy Projects: A Quorum-less FERC.
So how will a regulatory agency controlled by Trump appointees respond to a recent request from Energy Secretary Rick Perry that FERC consider ways to intervene in wholesale power markets with measures that financially support for nuclear and coal plants to preserve their financial viability? "The resiliency of the electric grid is threatened by the premature retirements of fuel-secure traditional baseload [generating] resources," Perry wrote in a September 28 letter to FERC that accompanied a draft Notice of Proposed Rulemaking (NOPR) designed to slow or reverse the closure of coal and nuclear power plants.
According to the DoE's Quadrennial Energy Review, released in January 2017, 32,000 megawatts (MW) of coal-fired power plants were retired over the past six years. That report said an additional 34,400 MW of coal-fired generation is slated for retirement over the next five years. It noted that between 2000 and 2016, 4,666 MW of nuclear generating capacity was retired, and another eight nuclear reactors representing 7,167 MW of nuclear capacity have announced retirement plans since 2016. The report also said that seven other nuclear reactors avoided early retirements due to state intervention.
"America's greatness depends on a reliable, resilient electric grid powered by an 'all of the above' mix of generation resources," Perry's letter continued. "This diverse fuel mix must include traditional baseload generation with on-site fuel storage that can withstand major fuel supply disruptions caused by natural or man-made disasters."
Perry said it was time for FERC to "issue rules that protect the American people from the threat of energy outages that could result from the loss of traditional baseload capacity. ... Much more work needs to be done to preserve these fuel-secure generation resources that have the essential reliability and resiliency attributes needed to keep the lights on for all Americans in times of crisis."
Perry's letter to FERC followed by five weeks the release of a DoE report on the reliability and resilience of the nation's power grid. For more on that study, see August 25, 2017, article - U.S. Department of Energy Study Calls for Increased Baseload from Coal, Nuclear Plants.
That August DoE report foreshadowed Perry's September 28 letter and draft NOPR on "fuel-secure" generation. Perry urged FERC to direct regional transmission organizations (RTOs) and independent system operators (ISOs) to "develop and implement rules that accurately price generation resources needed to maintain the reliability and resiliency of our nation's electric grid. Specifically, the rule allows for the recovery of costs of fuel-secure generation that make our grid reliable and resilient." To be eligible for this treatment, plants need to have a 90-day supply of fuel stored on a power plant's site.
Perry instructed FERC to "consider and complete final action on the proposed NOPR within 60 days from its publication in the Federal Register." FERC has asked for public comments on the draft rule by October 23.
Coal and nuclear interests cheered Perry's letter while natural gas and renewables interests heaped criticism on it. Members of Congress slammed the NOPR, which they said amounted to the federal government trying to pick winners and losers in energy markets - criticisms leveled by Trump, Perry and other administration officials against the Obama administration.
Perry's letter on "fuel-secure" generation came one day before the DoE granted the owners of the Alvin W. Vogtle Nuclear Power Station up to an additional $3.7 billion in conditional loan guarantees, on top of the $8.3 billion in loan guarantees DoE years earlier had pledged to those owners. Construction of two new units at that site is years behind schedule and billions of dollars over budget. For more on that, see September 1, 2017, article - Georgia Power Recommends Construction Continue at Vogtle.
One FERC commissioner, Chairman Neil Chatterjee, signaled his view on the draft NOPR when he said, a week before receiving Perry's September 28 letter, that coal-fired power plants should be "properly compensated to recognize the value they provide." Prior to becoming FERC chair, Chatterjee was an energy aide to Senate Majority Leader Mitch McConnell, who represents coal-dependent Kentucky.
But FERC's other sitting commissioners - Robert Powelson and Cheryl LeFleur - appear to be far less eager to intervene in wholesale energy markets. "We will not destroy the marketplace," Powelson told an industry conference on October 4, one week after Perry's draft NOPR was sent to FERC. "Markets have worked well and markets need to continue to work well. FERC does not do politics. We don't do energy politics."
Powelson is a former state utility commissioner. His speech received loud applause and a standing ovation from attendees at the annual meeting of the Organization of PJM States, or OPSI, in Arlington, Virginia, according to a news report in SNL.
"I'll give Secretary Perry credit; he's trying to be thoughtful in the approach, but there [are] many different approaches on how we can tackle this issue," Powelson said, adding: "I did not sign up to go blow up the markets. When that happens, we're done. I'm done; I don't need this job."
Cheryl LaFleur, the sole remaining FERC commissioner appointed by the Obama administration, endorsed Powelson's comments in a tweet, calling it a "great message."
Coal groups, on the other hand, applauded Perry's move. Paul Bailey, the president of the American Coalition for Clean Coal Electricity, commended Perry for starting a process "that will finally value the on-site fuel security provided by the coal fleet," according to a report by the Associated Press.
That AP report also quoted Maria Korsnick, president of the Nuclear Energy Institute, as saying electricity markets are unduly driven by short-term prices and don't value everything that matters to the electricity system. Nuclear reactors, she said, "find themselves struggling to survive when the nation needs them most."
But advocates for natural gas and renewable energy slammed the attempt to rejigger electric prices. So too have manufacturers, members of Congress and former FERC commissioners.
The American Wind Energy Association (AWEA) (Washington, D.C.) blasted the effort, saying it would "upend competitive markets. 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," AWEA spokeswoman Amy Farrell told Reuters.
And Marty Durbin, the executive vice president and chief strategy officer for the American Petroleum Institute (API) (Washington, D.C.), told the news agency, "We need to be careful that government doesn't put its thumb on the scale. It's better to let markets choose, which is what the United States is seeing with the growth of natural gas as the United States' leading energy source for electricity in 2016."
In a House Committee on Energy and Commerce subcommittee hearing held October 5, Perry's letter drew bipartisan scorn from lawmakers. Representative Frank Pallone (Democrat-New Jersey) called the proposal an "ill-conceived and wholly unjustified effort" to get FERC to "provide unduly preferential and discriminatory rates to coal and nuclear generators." And Representative Pete Olson (Republican, Texas) said he is concerned the rule would drive up power prices by "picking winners and losers."
Consultants ICF International (NASDAQ:ICFI) (Arlington, Virginia), released a study estimating the cost of the fixes sought by Perry would cost consumers and businesses between $800 million and $3.8 billion annually through 2030.
All six witnesses at thet October 5 congressional hearing said they opposed, for procedural and substantive reasons, the DoE's draft NOPR, according to a report from Natural Gas Intelligence. "We are dead set against this proposal," John Hughes, longtime chief executive of the Electricity Consumers Resource Council, told lawmakers. "We believe that it will destroy the ISO [independent system operator] and RTO [regional transmission organization] markets. If not, it will destroy competition in those markets. The attempt here is to create a big ATM machine for uneconomic, obsolete coal and nuclear plants."
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com.
