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Washington Week: Power sector gets reassurances on FERC grid action


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Washington Week: Power sector gets reassurances on FERC grid action

Although final action is yet to come, Federal Energy Regulatory Commission members continue to assure power groups the agency will not “blow up” competitive markets as FERC weighs how best to value the system’s energy resources.

Temporary FERC Chairman Neil Chatterjee said during an Oct. 13 briefing with reporters that he wants to correct possible market deficiencies but do so without undermining the wholesale markets the commission oversees. The gathering came after the U.S. Department of Energy asked FERC in late September to come up with a rule directing regional grid operators to allow plants with 90 days of onsite fuel supply to fully recover their costs in wholesale markets a move that would largely benefit coal and nuclear plants.

"We will evaluate whether attributes certain sources have aren't currently being accurately valued, with a desire to preserve our existing market structure," Chatterjee said, adding the commission would do so "in a legally defensible manner that doesn't blow up markets."

Chatterjee's comments followed new FERC Commissioner Robert Powelson’s promise at an Oct. 4 industry event that FERC “will not destroy the marketplace,” adding that competitive markets have worked well so far.

FERC members typically demure from such talk ahead of a formal decision, but the DOE’s proposal has sent shockwaves through the power sector. Critics of the request say a rule ensuring full cost recovery for certain plants would upend the functioning of organized markets and place some resources, including gas-fired and renewable power, at a disadvantage.

But FERC’s ultimate action could look very different from what DOE seeks. Under the Department of Energy Organization Act, the DOE can ask FERC to look at an issue but “can’t dictate an outcome,” said Mary Anne Sullivan, an energy industry lawyer for law firm Hogan Lovells US LLP and a former general counsel at DOE.

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Energy Secretary Rick Perry testified Oct. 12 before a U.S. House of Representatives subcommittee, in part on the DOE's grid rule proposal.

The inability to dictate an outcome may not stop the Energy Department from trying. During an Oct. 12 hearing on Capitol Hill, Energy Secretary Rick Perry said the DOE proposal was both a “conversation” and a directive, expressing alarm at the rate of coal and nuclear plant retirements and urging swift action.

“This has been talked about a lot, but there hadn't been any action," Perry said.

In his written statement, Perry said the grid proposal was just a “first step” and that DOE “is continuing to study these issues and, if necessary, will be prepared to make a series of additional recommendations to improve the reliability and resiliency of the electric grid.”

Absent big changes from FERC, the Trump administration has other plans in motion to underpin the struggling coal sector.

The U.S. Environmental Protection Agency on Oct. 10 formally proposed to repeal the Obama administration’s Clean Power Plan, which would have driven substantial cuts in utility carbon emissions. Although utilities expect to keep shifting to lower-emitting generation, the repeal could allow several states to ease decarbonization efforts, particularly those heavily reliant on coal that would have faced steeper reduction targets.

The EPA is holding a 60-day comment period of the proposal but is widely expected to overturn the rule. The bigger question from industry is what will replace it. Many are skeptical the Trump administration will quickly propose a successor rule, even as many large utilities press for one to reduce regulatory and legal uncertainties.


The U.S. House of Representatives is out of session this week, but the Senate is back and will take on some energy-related matters. At long last, the Senate Committee on Appropriations will introduce its fiscal year 2018 spending bill for the U.S. Department of Interior and EPA, with a subcommittee markup scheduled for Oct. 17 followed by the full committee’s on Oct. 19.

The House already passed its interior and environmental appropriations bill in September, legislation that would take a big whack at the EPA’s budget. The House version would lower the EPA’s fiscal year 2018 spending to $7.5 billion, down $528 million from the prior year, while cutting Interior’s to $11.9 billion from $12.3 billion a year earlier. The legislation also included policy riders that would speed up repeal of the EPA and U.S. Army Corps of Engineers’ Clean Water Rule and prevent the U.S. Bureau of Land Management from spending money to implement its methane waste prevention rule for oil and gas producers on public lands.

The Senate Appropriations Committee could propose more modest cuts for the two agencies, but Republicans in both houses of Congress have supported policies aimed at overturning many Obama-era environmental rules for energy producers.

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Other stories from last week

Analysts: Clean Power Plan could have driven deeper carbon cuts for power sector

Consulting firm Rhodium Group predicted that the soon-to-be-defunct Clean Power Plan could have had a significant impact on power emissions, especially if states crafted their own plans beyond what the rule suggests. Between 12 and 21 states would have been forced to take some action to reduce carbon, depending on energy market trends, while the remaining states could have continued with existing policies and still met the requirements, according to the analysts.

Federal Register notice of DOE resilience proposal adds important word: capacity

The DOE made a small change to its plan to provide more cost support for struggling nuclear and coal-fired power plants. According to the version of the rule initially posted on FERC's website, the DOE's proposal would apply only to those plants that stockpile a 90-day fuel supply, are not subject to cost-based rate recovery, and operate in regions that have FERC-approved independent system operators and regional transmission organizations with organized energy markets. However, the Oct. 10 Federal Register version says those regions must also have capacity markets.

Move to boost coal adds to effort to dismantle Obama energy legacy

The DOE's proposal to help certain coal plants recover their full costs was well-received by coal producers, but at the expense of much of the rest of energy sector. The policy is just the latest in a string of actions supporting the coal sector including moves to repeal the Clean Power Plan, reversing the Stream Protection rule, appointing officials sympathetic to the industry and even helping to arrange trade deals with other countries.

Trump picks former Texas regulator to chair White House environmental board

President Donald Trump named Kathleen Hartnett White as chair of the White House Council on Environmental Quality. Hartnett White served as chairman and commissioner of the Texas Commission on Environmental Quality from 2001 to 2007, supports hydraulic fracturing practices and was an outspoken critic of the U.S. Environmental Protection Agency during the Obama years.

Court allows Dakota Access to remain in service while under review

The U.S. District Court for the District of Columbia Circuit ruled to allow Energy Transfer Partners LP Dakota Access oil pipeline to continue operations while the U.S. Army Corps of Engineers finishes conducting a review of its environmental impacts. The $3.8 billion pipeline has been operating since June 1.