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DOE's Perry: Coal, nuclear support need to be provided by states

The U.S. Department of Energy has not forgotten about the plight of at-risk coal and nuclear plants, but states should craft their own programs as a workable federal solution continues to elude the department, Energy Secretary Rick Perry said.

"We're looking for the answer to a question that vexes us at the moment," Perry said March 13 at the CERAWeek by IHS Markit conference in Houston.

Over a year has passed since the Federal Energy Regulatory Commission rejected the Trump administration's original plan (FERC docket RM18-1) to prop up coal and nuclear generators by guaranteeing full cost recovery and a return on investment for generators with 90-day on-site fuel supplies. Since then, continued federal efforts to curb retirements of coal and nuclear units for resilience and national security have met with much resistance and found little success.

"I've thrown a lot of Jell-O at the wall on this, and I'm trying to find some solutions that we can all, or at least the majority of us, can get behind," Perry said.

As the administration continues to seek options to keep struggling coal and nuclear plants afloat, Washington insiders have grown increasingly skeptical that action at the federal level to keep baseload generation online can find a legal foothold. Too many unanswered questions, such as which plants should get funding and where the money would come from, have stood in the way of crafting a legally justifiable plan that White House advisers could support.

"I think it's just going to be very difficult to do anything on the federal level, although I think the administration is going to continue to try," Barry Worthington, executive director of the United States Energy Association, said in an interview. "Maybe they will find a formula that does work," but so far, it has been "very hard to find a path that would hold up in court."

Possibly the biggest impediment to aiding coal and nuclear plants is that those retirements are in line with how the wholesale power markets are supposed to work, with lower-cost facilities causing higher-cost resources to exit the market. Those market fundamentals conflict with the president's campaign promises and certain communities' need for a thriving coal fleet for jobs and economic purposes.

In the meantime, rural communities that depend on tax revenues from coal-fired power plants and mining operations are being devastated as those facilities close. "I think the states are going to have to say, sooner or later, 'the feds can't bail us out. There's not any legal, legislative, or regulatory path for the feds to take action. It's going to be up to us to do something,'" Worthington said.

Illinois, New York and New Jersey turned to zero-emissions credits programs to save their nuclear fleet. Pennsylvania lawmakers recently introduced legislation to move in that direction as well.

Worthington said coal-producing states may look to craft programs to help coal units. Wyoming, for instance, passed a law earlier in the month requiring utilities to look for buyers for their coal-fired generating units before retiring them.

Perry said it was "pretty wise" for states to seek "control of [their] economic destiny" and have conversations about whether certain industries in the state are worth subsidizing or supporting.

"I support those types of thoughtful competitive programs for states," he added. States "don't have to rely on the federal government to support a particular industry sector."

Jasmin Melvin and Jim Magill are reporters for S&P Global Platts. S&P Global Platts and S&P Global Market Intelligence are owned by S&P Global Inc.