Shake-Up at Energy Regulator Raises Specter of Coal Bailout

(Bloomberg) -- An untimely resignation has given one Kentucky Republican a second shot at saving coal.

Neil Chatterjee, former energy adviser to Senate Majority Leader Mitch McConnell, has been tapped to lead the Federal Energy Regulatory Commission after Chairman Kevin McIntyre stepped down this week due to health issues.

This will be Chatterjee’s second go as head of the agency that oversees U.S. electricity markets. He served as interim chairman for a few months last year -- and spent most of that time shepherding an ill-fated plan to temporarily subsidize money-losing coal and nuclear plants.

To some, his fresh appointment signals "that the agency would be more receptive to policies to support coal and nuclear power plants,” said Joel Eisen, a professor of law at the University of Richmond School of Law. "At the very least we could expect the same sort of solicitude for the industry that Chatterjee showed" the first time around.

Second Chance

McIntyre, also a Republican, submitted his resignation letter Monday, citing his 2017 brain cancer diagnosis and other ongoing health concerns. In it, he proposed staying on the five-seat panel as a commissioner "while undergoing the treatment necessary to address my health issues."

The leadership shuffle comes as Trump officials weigh a new plan to keep uneconomic coal and nuclear plants online. Under the proposal, the president would seize sweeping authority under the 68-year-old Defense Production Act to force grid operators to buy electricity from specific power plants at risk of closing. The approach also would include establishing a strategic reserve of critical power generators: a stable of coal and nuclear plants that could be revved up in case of an emergency.

“To the extent FERC is involved in responding to this plan that has yet to be seen, it is impossible to guess what the commission might do with something that is unknown,” said Mike McKenna, a Republican energy strategist.

While the energy commission rejected an earlier bid to subsidize the plants, FERC staff are helping the administration identify generators “critical" to maintaining both national and grid security.

Pivotal Role

Chatterjee played a pivotal role in the earlier efforts to throw a lifeline to the coal industry. Last year, a controversial Energy Department proposal called on the energy commission to change the way power is priced so that coal and nuclear generators could better compete in wholesale power markets. As chairman, Chatterjee sought to persuade his fellow commissioners to agree to at least a short-term subsidy for the plants. He was not successful.

When McIntyre took the gavel, Chatterjee joined the rest of the commission in rejecting the proposal, but said he hoped the panel would soon find a solution to the issue.

Now, the commission is reviewing public comments on whether the early closure of coal and nuclear plants is threatening the electric grid. The panel has not proposed any federal action and Chatterjee hasn’t shared his agenda as chairman.

In a statement after the announcement, Chatterjee said: "Although this is a difficult period for the Commission, I want to assure my fellow Commissioners, staff within the building and stakeholders outside it, that it’s my full intention to build upon Kevin’s hard work."

His elevation to chairman coincides with another closely-watched appointment: Earlier this month, President Donald Trump tapped Energy Department staffer Bernard McNamee to fill a vacancy at the energy commission. McNamee, who directs the Energy Department’s Office of Policy, is widely regarded as being more amenable to the administration’s efforts than his predecessor. He previously served as the agency’s deputy general counsel under Trump and was involved in the agency’s earlier coal bail-out plan.

The agency also is in the process of reviewing, and potentially amending, its nearly 20-year-old pipeline policy, and is evaluating a 1978 law promoting the wider use of energy efficiency and renewable energy.

“With respect to the agenda, it seems likely that it will proceed along the same trajectory,” said McKenna.

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