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FERC's Powelson defends gas plant reliability in face of DOE rule request

Federal Energy Regulatory Commission member Robert Powelson brushed off assertions that natural gas plant performance issues drove power outages during the 2014 polar vortex, a key assumption behind the U.S. Department of Energy’s recent proposal to better compensate coal and nuclear plants to ensure reliability.

Powelson spoke Oct. 16 at the American Association of Blacks in Energy's, or AABE's, 2017 policy summit in Washington, D.C.

The relatively new FERC commissioner discussed the DOE’s request for FERC to create a rule ensuring full cost recovery for merchant power plants operating in regions with competitive wholesale energy and capacity markets that have at least 90 days of fuel inventory on-site. The proposal is aimed at benefiting coal and nuclear power plants, which Energy Secretary Rick Perry has said are needed for reliability in part due to performance issues with gas plants during high demand periods such as the cold snap known as the polar vortex in winter 2014.

But Powelson, who previously served on the Pennsylvania Public Utility Commission, called the belief that gas plants drove those outages a "mistruth."

"There’s a dirty little secret going around that the gas guys didn't perform during the Jan. 6 and 7 timeline," he said. "I am here to tell you unequivocally that is not the case, and I can’t stand here and represent what we call a mistruth that the gas industry caused the interruptions of the polar vortex."

Powelson acknowledged the challenges northeastern grid operators faced during the polar vortex, including a spike in wholesale power prices partly due to gas buyers with variable rate contracts being charged steep prices. But he said regulators helped "weed out some of these bad actors in the marketplace" and noted the PJM Interconnection crafted a capacity performance construct to deal with nonperforming baseload units after that storm.

American Petroleum Institute senior director Khary Cauthen echoed Powelson's comments at the AABE event, saying "there was gas during that time period. It just went to those who had contracts."

Powelson viewed both FERC and the bulk power system as being "in a better spot" thanks to the lessons learned from the polar vortex. He had earlier told the audience of an Oct. 4 industry event that he did not join FERC to "blow up" competitive power markets. Powelson reassured attendees at the AABE summit that the DOE cannot "usurp" the FERC rulemaking process and promised all stakeholders "peace of mind that your voices will be heard."

The DOE's proposal has split electric power producers, with the coal and nuclear industries welcoming the request for the most part, while natural gas and renewable energy producers are on edge.

Robert Powers, senior director of legislative affairs for the Nuclear Energy Institute, said the institute was "supportive of DOE's proposal going forward" and would be providing comments. "Something needs to be done. We feel the markets are not working currently," Powers said.

But energy resources that stand to lose market share under the proposal are unhappy, including with the short time frame the DOE gave FERC to respond. "This is a major change in the way our markets would work in the United States for electricity, and it’s not something that should be jammed through in the space of only a few weeks," said Christopher Mansour, vice president of federal affairs for the Solar Energy Industries Association.

Also speaking during the AABE event, Perry said he expects FERC to act on the DOE’s request in the "not too distant future" but did not discuss the agency’s proposal beyond that.

The DOE gave FERC 60 days from its Sept. 28 request to take action, and the commission rejected requests for more time to comment. But FERC Chairman Neil Chatterjee said Oct. 13 that the agency does not necessarily have to propose a final rule within that time frame and could pursue other options, including issuing a different notice of proposed rulemaking or asking for more comments.