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Much of US energy industry recoils at Trump plan to prop up at-risk power plants

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Much of US energy industry recoils at Trump plan to prop up at-risk power plants

A plan to force grid operators to buy power from at-risk coal and nuclear power plants went over well with some connected to those industries but prompted a swift backlash from a larger group of energy stakeholders.

A draft U.S. Department of Energy memo outlines two federal laws the agency plans to use to save struggling coal and nuclear power plants. The memo came at the behest of President Donald Trump, who "directed Secretary of Energy Rick Perry to prepare immediate steps to stop the loss of these resources, and looks forward to his recommendations," White House Press Secretary Sarah Sanders said June 1.

The document points to the Defense Production Act, aimed at securing critical resources needed for national defense, and Section 202 of the Federal Power Act, a law that allows the DOE to order the provision of resources to address potential emergency shortfalls in energy.

A grid operator in the eastern U.S. and much of the American energy industry protested the decision, calling it unnecessary and a blow to competitive energy markets.

But some power and coal companies facing the biggest financial fallout from a shifting U.S. power grid applauded the Trump directive, saying it is needed to preserve grid resiliency.

FirstEnergy Solutions Corp., a subsidiary of FirstEnergy Corp., asked the DOE in late March to ensure full cost recovery for economically struggling coal-fired and nuclear power plants in the PJM Interconnection. FirstEnergy President and CEO Charles Jones said in a statement following the leak of the memo that he supports efforts to save baseload coal and nuclear plants.

"The company has advocated for solutions that recognize the critical attributes coal and nuclear plants provide because preserving these vital facilities is the right thing to do for the industry, the electric grid and our customers. I am pleased that the federal government is also recognizing this issue," Jones said.

Murray Energy Corp., a major coal supplier to at-risk FirstEnergy plants, also was supportive. Murray Energy CEO Robert Murray has often lauded the Trump administration as it pushes energy policy that Murray has supported in the past. Murray said that before the election, he was one of Trump's "energy guys" and would be consulted on energy matters.

"We support all efforts to ensure the security of our nation's electric power supply, which is critical to the reliability of our electric power grids, to low-cost electricity, and to our national defense," Murray said in a statement. "This action is essential in order to protect the resiliency and reliability of our nation's electric power grids."

A backlash outside of coal, nuclear

Other stakeholders were far less supportive of the administration's plan to intervene in energy markets.

"There is no national emergency justifying the use of these powers," said Michael Steel, a spokesperson for the Affordable Energy Coalition, a group of organizations including those supporting wind, industrial energy consumers and others. "Independent experts, regional grid operators, and even the government's own data show that competitive electricity markets keep the lights on and prices affordable."

The oil industry, through the American Petroleum Institute, joined a broad group of energy industry associations representing energy efficiency and storage, natural gas, solar and wind to condemn efforts to subsidize "failing" coal and nuclear plants.

"Unprecedented government intervention in the energy markets to support high-cost generation will put achieving that vision in jeopardy and hurt customers by taking more money out of their pockets rather than letting people keep more of what they earn — a key priority of this administration," said Todd Snitchler, American Petroleum Institute's market development group director.

Other industry groups opposing the administration's proposed policy included the American Council on Renewable Energy, the American Wind Energy Association, the Natural Gas Supply Association and the Solar Energy Industries Association.

PJM, which operates a regional transmission organization near abundant coal resources, said in a statement following the release of the DOE plan that there was "no need for such a drastic action." It noted its recent capacity auction results secured reliable supplies through 2021/2022 and there was even an increase in the amount of coal resources that cleared the market.

"Our analysis of the recently announced planned deactivations of certain nuclear plants has determined that there is no immediate threat to system reliability," PJM's statement read. "Any federal intervention in the market to order customers to buy electricity from specific power plants would be damaging to the markets and therefore costly to consumers."

The Union of Concerned Scientists called the proposal an attempt to "fleece ratepayers" by doling out billions of dollars in guaranteed profits to coal and nuclear plants. The Sierra Club said coal and nuclear plants will continue to retire even though the administration is pushing "illegal directives [that] will be met with fierce resistance in the courts and in the streets."

Broad support from at-risk sectors

Coal and nuclear groups, however, stood by the plan. The National Mining Association warned that without action, the U.S. could "pass a reliability and resiliency crisis point of no return." Paul Bailey, president and CEO of the American Coalition for Clean Coal Electricity, noted almost 40% of the country's coal fleet has already shut down or is expected to close.

"We are pleased the administration is considering steps that will help ensure that our nation's electricity grid is resilient and reliable," Bailey said. "The loss of fuel-secure electricity sources, especially coal-fueled power plants, pose an increasing threat."

Nuclear Energy Institute President and CEO Maria Korsnick said the finality of closing a decommissioned nuclear power plant means it is "critically important" to preserve the fuel security that at-risk plants offer. Nuclear power supplies about 20% of U.S. electricity without contributing to emissions, she said.

"Nuclear energy is America's most reliable and resilient power generation resource and must remain a part of the national energy mix," Korsnick said. "Something must be done now to adequately value all that America's nuclear power plants deliver."