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Perry: DOE grid proposal part of 'conversation' on grid reliability

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Perry: DOE grid proposal part of 'conversation' on grid reliability

Energy Secretary Rick Perry told lawmakers that the U.S. Department of Energy's controversial call to aid struggling baseload power plants is part of an ongoing "conversation" on reliability, even as he maintained that quick action is a must.

Perry testified Oct. 12 before a U.S. House of Representatives subcommittee on the DOE's mission and priorities, his first appearance before Congress since the agency released its grid proposal. The Energy Department in September asked the Federal Energy Regulatory Commission to craft a rule to ensure that certain power plants serving wholesale markets can fully recover their costs. To qualify for full cost recovery, plants must have at least 90 days of fuel supply onsite, meaning the proposal would largely benefit coal and nuclear power plants.

Critics of the proposal, including renewable power and natural gas industry groups, stress that as an independent agency, FERC does not have to issue a rule unless one is needed to ensure reliability.

During the hearing, Perry repeatedly described the DOE's request in the context of a "conversation" between regulators and industry and noted that FERC and lawmakers already have been considering whether needed energy resources within wholesale markets are properly compensated. But he said the increase in coal and nuclear plant closures in recent years poses a reliability threat, particularly during periods of high demand, such as the polar vortex of winter 2014.

"I want to drive this conversation. ... This has been talked about a lot, but there hadn't been any action," Perry said before the House Energy and Commerce Committee's Subcommittee on Energy.

Several committee members criticized the DOE's request and questioned whether Perry was merely trying to have a discussion.

U.S. Rep. Mike Doyle, D-Pa., said the Energy Department's notice of proposed rulemaking included the word "must" 12 times and contained phrases such as "the commission must act now." Doyle also noted that the PJM Interconnection, the grid operator for his home district, created new market rules to address some of the power performance issues it experienced during the polar vortex.

"You're putting a heavy finger on the scale here," Doyle said.

Perry replied that the proposed rule was both a directive and a conversation and FERC would not move forward with any rulemaking that results in substantially higher power prices for consumers. Despite those assurances, Democrats on the committee blasted the proposal.

"You are distorting the market, damaging the environment and delivering preferential treatment to favored industries," said Rep. Frank Pallone Jr., D-N.J., the top Democrat on the House Energy and Commerce Committee. He said the DOE's own grid report released in August found that electricity markets were providing reliable power while minimizing short-term costs and cited a recent study that said less than 1% of major power outages between 2012 and 2016 were due to fuel supply problems.

When assessing the health of the grid, Perry said FERC tends to look at a "snapshot in time" when the power system is operating well and conditions are optimal. "That's not the world I've been asked to participate in," Perry said, adding, "I think one of my roles is to think outside the box."

Perry noted his history of helping to boost wind generation in Texas while serving as the governor of that state and his commitment to an "all-of-the-above energy strategy." He said he still is committed to that approach but noted that "the wind doesn't always blow, the sun doesn't always shine, the gas pipelines ... can't guarantee every day that supply is going to be there."

Pallone said he sent a letter to Perry seeking details on how the Energy Department crafted its proposal, including records of meetings between Perry and his staff and the taxpayer funds spent developing the request.

Rep. Paul Tonko, D-N.Y., also hit Perry over the costs of and need for the proposal, recalling that the DOE assessment noted that over 90% of power interruptions stem from distribution system problems rather than ones at generating units.

"What factors did you consider when deciding it would be more cost-effective to support specific types of generation to enhance reliability rather than shooting right at improving infrastructure," Tonko asked.

Perry responded that "the cost-effective argument on this is secondary to whether or not the lights are going to come on."

When pressed further about the cost to consumers, Perry said, "What's the cost of freedom? What does it cost to build a system to keep America free? I'm not sure I want to just put that straight out on the free market and say, 'OK, whoever can build the cheapest delivery system here to keep American free.'"

Tonko responded that businesses and manufacturers were concerned about the cost of the agency's request, but Perry said, "I'm concerned about a citizen that's calling you up and saying, 'Why did you not address this issue when you had the opportunity to in 2017?'"

In response to concerns that the proposal was anti-competitive, Perry said a "perfect free market world" does not exist, with multiple energy sources from renewables to oil and gas receiving tax preferences or subsidies of some kind.

He said he did not have a problem with subsidies but added later in the hearing that he looked at wind and solar energy "kind of like my kids" in terms of receiving extra market support: "Once they're out of college, they're kind of on their own."

FERC is working quickly to respond to the DOE's notice, which gave the commission 60 days to act. FERC denied a request from industry trade groups seeking more time to file comments.

Supporters of the proposal are happy about the expediency. At the Oct. 12 hearing, Rep. Kevin Cramer, R-N.D., asserted that baseload generating assets, such as coal and nuclear plants, are "inherently more reliable" than other energy resources and Perry was "entirely appropriate and right" to push for the price formation rule.

Rep. Morgan Griffith, R-Va., echoed those sentiments. "I appreciate you trying to do something in advance of a problem," he said. Rep. Fred Upton of Michigan, the leading Republican on the energy subcommittee, was more measured, saying he would "reserve judgement" for now.