An Obscure Statute Is Helping Trump Save U.S. Coal, Nuclear
Likely to change rules and help coal and nuclear plants compete in wholesale power markets.
(Bloomberg) -- The Trump administration is taking advantage of an obscure 30-year-old statute to make good on a promise to help America’s ailing coal industry.
Rick Perry is using an authority granted to him as U.S. energy secretary to call on the independent Federal Energy Regulatory Commission to change its rules and help coal and nuclear plants compete in wholesale power markets. Perry said he’s seeking to ensure dependable power plants recover “a fair rate of return.” Those capable of storing 90 days of fuel supplies at their sites, such as coal and nuclear generators, would be eligible.
The move underscores the Trump administration’s determination to aid fossil fuels and rescue money-losing coal and nuclear power plants that have seen their profits squeezed by cheaper natural gas and renewables. Federal Register filings show a U.S. energy secretary hasn’t used this authority to direct the energy commission’s work since at least 1994.
"Ensuring a reliable and resilient electric supply and corresponding supply chain are vital to national security," Perry said in a letter to the commission, which will consider the proposal. He pointed to a recent Energy Department report that emphasized the importance of so-called baseload plants capable of running around the clock.
FirstEnergy Corp., an Ohio utility owner that has said it may place some coal and nuclear plants into bankruptcy, gained the most since July 28. Exelon Corp., which runs the biggest fleet of nuclear plants in the U.S., rose as much as 1.4 percent. Coal plant owners Dynegy Inc. and NRG Energy Inc. were also up.
The proposal could essentially prevent coal and nuclear plants from closing even if they’re not economic to run, said William Nelson, an analyst at Bloomberg New Energy Finance. “It would be a huge departure from FERC’s predominately pro-market pro-competition approach to governing,” he said.
FirstEnergy welcomed the proposal which it said recognized the importance of a “reliable, resilient” electric grid. Both Dynegy and NRG said they’re reviewing the directive while Exelon said it was looking forward to working with the commission to develop a final rule.
Kit Kennedy, director of the Natural Resources Defense Council’s energy and transportation program, described Perry’s move as an attempt to “slam through an outrageous bailout of the coal and nuclear industries on the backs of American consumers.” She warned that such market rule changes would lead to higher energy bills for consumers and businesses.
The Natural Gas Supply Association called the proposal a “drastic action that would distort energy markets” and favor some sources of power over others, while the American Coalition for Clean Coal Electricity commended Perry for working to “finally value” the energy security that coal plants offer.
Coal’s Value
The Energy Department’s proposal may have a friend in Neil Chatterjee, who was tapped by President Donald Trump to temporarily lead the energy commission. Chatterjee has repeatedly said coal-fired plants are a crucial part of America’s energy mix that need to be “properly compensated to recognize the value they provide.”
While grid operators may find implementing such changes to be “difficult or problematic,” ClearView Energy Partners managing director Christine Tezak said some kind of rule may be formalized as soon as next spring.
The energy commission, an independent agency under the Energy Department, has authority over power markets, though the energy secretary may propose rules to the commission. Perry is seeking final action within 60 days.
New York Attorney General Eric Schneiderman vowed on Friday to fight the proposal, saying it “puts the interests of special interests ahead of the health, safety, and wallets of New Yorkers.”
The American Petroleum Institute said it was concerned that the Energy Department had “mischaracterized” the lessons learned from severe weather events that have taken down power resources in the U.S. in the past.
“We need to be careful that government doesn’t put its thumb on the scale,” said Marty Durbin, executive vice president at the institute, which represents oil and gas producers. “It’s better to let markets choose.”
--With assistance from Ari Natter Joe Ryan Naureen S. Malik and Tim Loh
To contact the reporters on this story: Catherine Traywick in Washington at ctraywick@bloomberg.net, Jim Polson in New York at jpolson@bloomberg.net.
To contact the editors responsible for this story: David Marino at dmarino4@bloomberg.net, Lynn Doan, Stephen Cunningham