Trump Said to Mull 2015 Grid Emergency Law to Save Coal Plants

(Bloomberg) -- The Trump administration is weighing a broad array of strategies for keeping coal and nuclear power plants online as a matter of national security, with options ranging from invoking a 68-year-old law to a three-year-old one, according to a senior Energy Department official.

Members of the National Security Council agree that something must be done to ensure the long-term reliability and resiliency of the nation’s electric grid, said the official, who asked to speak anonymously about internal deliberations. More than 90 percent of American military installations are served by civilian utilities, and the government has an obligation to ensure those facilities are safe and supplied by electricity, the official said.

The effort is driven by concerns over the closing of many nuclear and coal plants, and the capability of systems to snap back after intense storms or cyber attacks. But the government’s analysis is not limited to any single company, region or type of power, the official added.

A final decision has not been made, and the official said there was no timetable for making one.

Environmentalists, natural gas producers and renewable power advocates have blasted proposals for government intervention to help coal and nuclear plants, saying there is no emergency compelling such moves and arguing that they would represent unfair meddling in the power market.

The Energy Department is already working to identify electric generating units that are critical to maintain in a national emergency, the official said. It also is looking at several strategies for keeping them online, as flat power demand and competition from cheap natural gas makes it impossible for some facilities to earn enough to continue operating.

A FirstEnergy Corp. subsidiary has asked the Energy Department to declare a grid emergency and steer subsidies to coal and nuclear power plants under Section 202 of the Federal Power Act. But the official downplayed the notion the administration would act narrowly to help a single company.

While the department is considering FirstEnergy Solutions Corp.’s request for emergency assistance, the official said that its broad review was not limited to any single company and the agency was under no obligation to act quickly.

Truman Precedent

Separately, the administration is considering using the Defense Production Act of 1950 to keep plants in operation. That Cold War-era statute, once invoked by President Harry Truman to help the steel industry, now could be used to order companies to accept or prioritize contracts for coal and nuclear power. The military already uses power purchase agreements to acquire certain types of energy, the official noted.

Administration officials also are examining options under the 2015 highway bill, which included provisions authorizing the energy secretary to order emergency actions if the president declares the nation’s electric grid is under threat.

The law specifically allows the Energy Department to take emergency action to protect the bulk power system or defend critical electric infrastructure, including issuing orders to infrastructure owners and operators.

Ensuring “resilience and reliability in our grid” is a vital national security issue, Energy Secretary Rick Perry told lawmakers last week. “I’m looking for a solution.”

So far, that’s been hard to find. A proposal to subsidize some power plants was unanimously rejected by the Federal Energy Regulatory Commission in January.

And a coalition of natural gas and renewable power advocates last week sent Perry a white paper arguing that since “power plant retirements are a normal, healthy feature of electricity markets,” there is no emergency that would justify Energy Department action.

“The Defense Production Act cannot be used to command favorable pricing for a favored class of power plants,” said the groups, including the American Petroleum Institute and the American Wind Energy Association. “To invoke the concept of ‘national defense’ for what is transparently a domestic effort to boost an uneconomic segment of industry would be an unprecedented abuse of the act.”

American power generators are expected to retire -- or announce the retirements of -- 16,200 megawatts of coal-fired and 550 megawatts of nuclear plant capacity this year, according to Bloomberg New Energy Finance. Nationwide, two dozen nuclear plants -- representing nearly 33 gigawatts -- are either scheduled to close or probably won’t make money through 2021, Bloomberg New Energy Finance said on Tuesday.

The Defense Production Act gives the president wide latitude to act, generally without congressional approval unless the step is expected to cost more than $50 million.

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