The latest ploy the Trump administration is considering to bail out failing coal and nuclear plants in the PJM Interconnection’s competitive wholesale markets is drawing fire from the right and the left. At the behest of Akron-based FirstEnergy, the Department of Energy is reviewing a petition to employ the emergency provisions (Section 202(c)) of the Federal Power Act to rescue the company’s two Ohio nuclear plants and one in Pennsylvania, as well as several coal-fired units.
FirstEnergy’s first attempt, orchestrated by Murray Energy’s Bob Murray, was a DE petition to the Federal Energy Regulatory Commission to overturn the competitive markets to support the coal and nuclear plants on the grounds of an unsupported notion of resilience. That failed.
The latest approach presented to DOE by FirstEnergy, Murray Energy’s largest customer, is a petition to use the FPA’s emergency provisions to do what FERC has refused to do: wreck the competitive markets in order to support generating technologies that can’t compete. The basis of the latest attempt is based on an unspecified appeal to “national security,” without making any sort of plausible case for that argument.
In an April 25 paper, Katie Tubb of the conservative Heritage Foundation argues, “Secretary of Energy Rick Perry should reject this second attempt to subsidize coal and nuclear power plants and defend market competition in the electricity sector. Adding more distortions to electricity markets for the sake of a short-term Band-aid for coal and nuclear power plants will have long-term negative consequences for customers, technology innovation, and the future of the electricity grid.”
Tubb says, “Instead of micromanaging the grid, politicians and regulators should be reducing the barriers and distortions that undermine its efficacy. True competition, customer choice, and political discipline can actually achieve grid reliability and national security ends that the [earlier Notice of Proposed Rulemaking] could – and would – not have accomplished.”
Writing in pv magazine at the same time, Dick Munson of the Environmental Defense Fund, a national environment advocacy group, said of FirstEnergy’s latest attempt to rescue its uncompetitive units, “The proposal comes from the subsidy-seeking utility, FirstEnergy, which over the last decade made bad business decisions and tried to force taxpayers or ratepayers to bail them out. This particular plea, however, is more audacious – and dangerous.”
Munson says the FirstEnergy argument for use of the FPA section is bogus. “There’s no precedent, let along legal justification, for suggesting this law should guarantee profits for all the coal and nuclear plants in a region that spans 13 state and D.C. Furthermore, PJM has declared that FirstEnergy’s troubled plants are not needed, and that there is plenty of capacity, largely from natural-gas-fired turbines and wind farms, to keep the region humming.”
Munson noted that DOE has expressed serious doubts about the application of Section 202(c) to FirstEnergy’s problems. So the administration has raised another possible legal hook for the bailout, the 1950 Defense Production Act. In the 1980s, some key House Democrats tried using the DPA to justify large federal investments in coal-to-gasoline projects during the period of high gasoline prices. That failed.
Munson quotes a Republican energy strategist, Mike McKenna, as skeptical about using the DPA, which “is specifically premised on the idea that this stuff is essential to national security – that we’re going to war. The problem in this instance is that some might think that an approach relying on the act trivializes national security.”
Heritage’s Tubb says, “Competitive electricity markets have begun to allow the dispersed wisdom and innovation of investors and consumers to determine what are the best means for meeting customer needs. In contrast, there is no better way to fossilize an industry than by guaranteeing prices and knocking out the competitors of a select few companies. Such an avenue is precisely what FirstEnergy has requested. Ultimately, this approach would punish competitive, innovative technologies and companies in order to keep others afloat”
— Kennedy Maize