Advanced Energy Perspectives

Latest Trump Administration Plan to Prop Up Failing Power Plants Leaves Many Questions Unanswered but Bottom Line is the Same: High Cost for No Benefit

Posted by Dylan Reed and Maria Robinson

Jun 13, 2018 3:39:48 PM

    

no coal bailout 2018-730

In what feels like a never-ending showing of the movie Groundhog Day, the Trump Administration is yet again trying to bail out uneconomic power plants that are slated for retirement. This time, it looks like the Administration is using a national security approach to justify its attempt to help major campaign donor Bob Murray’s failing coal business. But once again, within the broader energy industry, the reaction against this latest scheme has been strong, with AEE fully engaged. Late on the night of May 31, Bloomberg News reported that it had obtained a memo outlining plans from the Trump Administration to use emergency executive authority to help struggling coal and nuclear plants across the United States for the next two years. This memo differed significantly from the NOPR proposed by Energy Secretary Rick Perry late last year, in that the emergency authority would apply to uneconomic plants across the entire United States, both FERC-jurisdictional regions and those not under FERC control. The NOPR would have only applied to plants in the 13-state PJM region. FERC rejected this proposal, in a unanimous vote, in January, in favor of a more methodical look at grid resilience.

The memo attempts to justify the Administration’s use of Section 202(c) of the Federal Power Act and the Defense Production Act. Action under these laws is unlikely to be legally defensible, as discussed in detail in a letter AEE, with a coalition of energy trade associations, sent to Secretary Perry. The memo also leans on assertion of significant natural security concerns about the cybersecurity of natural gas pipelines, indicating that a larger analysis needs to be undertaken over the next two years, at which point the Administration could then make longer-term decisions about the future of these plants.

By the following afternoon, White House Press Secretary Sarah Huckabee Sanders responded affirmatively to questions about this memo, stating that President Trump has ordered Secretary Perry to take immediate steps to help these “fuel secure” power plants.

AEE and a broad coalition of energy industry groups representing natural gas, renewables, energy efficiency, storage, and other advanced energy technologies swiftly condemned the proposal. News outlets have covered the controversy surrounding the proposal and numerous editorial boards (including the Wall Street Journal, the Washington Post, and the LA Times) have joined the industry voices denouncing the plan. AEE’s Malcolm Woolf was featured in the Wall Street Journal and in an NBC Nightly News segment highlighting objections to the Trump Administration’s attempt to bail out uneconomic coal plants, with Woolf calling it “crony capitalism, Trump style.”

There are still many more details to be learned about what the administration has in mind. The memo obtained by Bloomberg News was merely an addendum to a detailed order that included a list of plants that the Administration authorized to receive emergency assistance. Neither the order nor the list of plants has been seen yet. We also do not yet know whether the order will result in direct contracting with these plants, how dispatch order in competitive markets will be impacted, or which agency (DOE or FERC) would set the price of energy and capacity for these plants. While the memo does not mention cost-of-service ratemaking, it mentions payments to the listed plants; the details of the size and source of the payments are not discussed in the memo. However, it is not unreasonable to assume that this would result in catastrophe for competitive markets and also lead to massive rate increases for consumers costing them tens of billions of dollars. The DOE NOPR was estimated to have $4 billion/year impact – and that only covered a small portion of the country.

What is clear is that other federal agencies are equally in the dark. FERC Chairman Kevin McIntyre stated that he has not been briefed on the memo or any proposal from the Department of Energy. It appears that this memo is coming from DOE with little or no input from other agencies that have authority over the electric power system.

At this point, we are waiting to see how the Administration moves forward with this ill-formed, as well as ill-conceived, plan. In the meantime, AEE is working with its coalition of unusual allies to ask Congress to keep DOE accountable and remind the agency that there is no grid reliability emergency justifying such extreme action to turn back the clock on energy progress. Please join us by clicking below!

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Topics: Federal Policy Update, Wholesale Markets

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