In a stealth move that went virtually unnoticed by major media outlets, Energy Secretary Rick Perry last week used an obscure provision of law to essentially put the government’s thumb on the scale in favor of coal-fired and nuclear power plants. Secretary Perry directed the Federal Energy Regulatory Commission (FERC) to issue a new rule requiring the country’s independent electricity grid operators to charge you, me, and every other energy consumer an additional fee that would be paid to coal and nuclear plants. This charge would be above and beyond the market-based compensation that such plants already receive for the energy that they produce.
This order completely contradicts the free market principles purportedly supported by the Trump administration. What’s more, it threatens to reverse years of progress that have driven down energy costs through increased market competition achieved by independent grid operators like our own ISO-New England.
Perry is Trying to Justify His Market Manipulations in the Name of “Resilience”
The proposed new rule would provide special, out-of-market compensation to electricity generators that provide so-called “resiliency benefits,” but only those that store a 90-day fuel supply on site. This sounds reasonable on the surface, but the Department of Energy comes close to lying by omission because it fails to call out coal and nukes as the sole beneficiaries of this subsidy program. As a practical matter that is exactly what the Order means, as only coal and nuclear plants keep a 90-day fuel supply on site.
Importantly, the Order also does not define “resiliency.” Perhaps this is because they know that coal and nuclear generators don’t actually make the electricity grid more resilient. In fact, recent history reflects quite the opposite. During Hurricane Harvey, Texas coal plants were inoperable because coal piles were saturated with water. During the 2013 polar vortex, coal plants couldn’t run because their coal piles were frozen stiff and therefore unusable. And during Hurricane Sandy, nuclear generators were shut down for safety reasons.
Our Tax Dollars Being Used to Prop Up Old, Uneconomical Power Plants
The fact is that the Department of Energy Order is a thinly disguised ruse to spend billions of electricity customer dollars propping up old, dirty, uneconomical coal and nuclear plants. If the Order is implemented, it would unravel decades of work developing competitive wholesale electricity markets that have benefitted every family and business that pays a monthly electricity bill.
In this context, environmentalists may be joined in opposing the DOE Order by some surprising allies. Consumer advocates (who sometimes oppose renewable energy projects because of the assumed cost) will be on our side in this battle because they do not want to see billions of dollars wasted on propping up uneconomic coal and nuclear plants. Owners of gas-fired power plants (and gas pipelines) that compete with coal and nukes may be on our side, because of the unfair discrimination against their businesses.
There are multiple opportunities to undo the potential mischief that could result from Secretary Perry’s Order. Perhaps most important among them, FERC has the discretion to consider the matter and decide to take no action. CLF strongly urges that FERC defend competitive markets against this intrusion. Should FERC issue a proposed rule along the lines that Secretary Perry is suggesting, it can expect an avalanche of opposition from environmentalists, consumer advocates, and climate activists – CLF among them.