U.S. Coal Bailout Review Is Said to Slow as Trump Faces Pushback

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(Bloomberg) -- A bankrupt power generator’s plea for President Donald Trump to help saving money-losing power plants has drawn opposition from key administration officials, slowing action on the proposal, according to two people familiar with the deliberations.

FirstEnergy Solutions Corp. asked the Trump administration last month to immediately declare a grid emergency and guarantee profits for money-losing coal and nuclear power plants -- a move the government has generally reserved for times of war and potentially widespread blackouts. The Energy Department has yet to decide on the request, and instead opened a public comment period on the underlying authority.

Some members of Trump’s administration see the FirstEnergy Corp. subsidiary’s plea as premature, lacking evidence that the situation is dire and requires urgency, said the officials, who asked not to be identified because the deliberations aren’t public. The company has said some of the plants in question won’t shut until 2020 at the earliest.

"It’s a break-glass-in-case-of-emergency deal," said Republican energy strategist Mike McKenna, arguing that FirstEnergy Solutions’ economic woes shouldn’t qualify. "A business deficiency is not a circumstance for panic."

The Latest: Trump’s Plan for Saving Coal Comes From the Cold War

The pushback from Trump’s own administration underscores the challenge the president faces in making good on his pledge to help save coal and nuclear industries that are struggling in the face of competition from cheap natural gas. Trump is encouraging Energy Secretary Rick Perry to find some way to solve the problem, two people familiar with the discussions said, and other administration officials concerned about the resiliency of the electric grid want to keep coal and nuclear power plants online.

But none of the potential solutions have worked. The Federal Energy Regulatory Commission rejected a proposal by Perry to subsidize plants in January. And one idea to grant power generators loans or subsidies in the name of national defense remains a long shot.

"I think the issue is challenging for the administration because they want to secure victories for coal, but the proposals that have been coming in are all sorts of Hail Marys," said Thomas Pyle, who led Trump’s energy transition team. "They are going through what options they have, what options they are willing to take. It’s not like it’s going to happen tomorrow."

Representatives of the White House and Energy Department did not respond to a request for comment.

Bailout for Coal

FirstEnergy’s request under section 202 of the Federal Power Act puts the administration in a tough position. If the administration does nothing, it may appear Trump is turning his back the coal industry. If the administration grants the request, it will look like government resources are being used to bail out a money-losing power company whose executives just happened to dine with Trump earlier this month.

"They cannot say no to this without making fools of themselves, so they are looking for anything they can do," said James Lucier, managing director of research firm Capital Alpha Partners LLC. "It puts Rick Perry in a box because he can’t turn this thing down flat without seeming to disavow the department’s own policy agenda."

There are legal challenges to FirstEnergy’s grid emergency request too. Under federal law, that 202 authority is generally reserved for emergencies such as war -- not economic problems such as when power generators can’t break even. Perry may have acknowledged those concerns when he told Bloomberg New Energy Finance on April 9 that an emergency order may not be "the most appropriate" and "most efficient way to address this."

Long-Range Issues

Faced with that Catch-22, administration officials are approaching the request deliberately -- with an eye on fixing long-range issues with the grid and developing a solution that helps the broader industry or a specific region, not a single company, said two people familiar with the deliberations.

Bruce Walker, the assistant energy secretary charged with making a recommendation on FirstEnergy’s request, said in an interview earlier this month he hadn’t even finished reading the 44-page application, which was filed March 29.

"I’m reviewing it," Walker said, adding there was no time frame for completion. "I haven’t finished reading through all the facts that were set forth by FirstEnergy."

©2018 Bloomberg L.P.

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