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Washington Week: US power sector awaits action on emergency pleas

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Washington Week: US power sector awaits action on emergency pleas

The U.S. Department of Energy has yet to respond to requests from industry and lawmakers to throw a lifeline to financially troubled coal-fired and nuclear power plants, leaving the utility sector on edge.

Nearly two months have passed since merchant generator FirstEnergy Solutions Corp., or FES, asked the DOE to grant an emergency order under Section 202(c) of the Federal Power Act that would require the PJM Interconnection to ensure full cost recovery for financially struggling coal and nuclear plants in the region. The company said the order was necessary to support bulk power system operations in PJM, an assertion the grid operator has denied.

The Energy Department also has not responded to a plea from U.S. Sen. Joe Manchin, D-W.Va., to invoke a rarely used defense law to keep vulnerable coal-fired and nuclear plants running. Manchin, who is running for reelection in November, asked President Donald Trump and Energy Secretary Rick Perry in April to rely on the Defense Production Act to avoid future retirements.

The law allows the federal government to require private entities to sell their products to the government or its contractors if the products are deemed scarce and necessary to promote the national defense. The act also permits the government to make loans or loan guarantees to private entities to avoid shortfalls of industrial resources and other materials essential for national defense.

An industry divided

Proponents say the emergency requests are a necessary remedy for flawed market rules that are forcing the early retirement of crucial coal and nuclear plants. Critics say the proposals would distort competitive markets and raise costs for ratepayers without providing added reliability or resilience to the grid. They also have pointed out that most prior uses of these emergency authorities have been temporary and not in response to economic or market factors.

Perry's hesitation to act quickly may stem from the DOE's past difficulties seeking relief for coal and nuclear plants. The agency stumbled in its bid to have the Federal Energy Regulatory Commission craft a rule to cover costs for power plants in competitive markets if they store at least 90 days of fuel on-site, a proposal that would have mainly benefited coal-fired and nuclear units.

Absent federal action, several states have taken steps to prop up nuclear plants. Most recently, New Jersey Gov. Phil Murphy signed legislation into law May 23 that will use a zero-emissions credit program to compensate nuclear plants for their environmental and fuel-diversity benefits. The move follows similar efforts by Illinois and New York to pay nuclear plants for their ability to generate power without producing carbon dioxide and other emissions.

Despite rejecting the DOE's grid proposal, FERC also is pondering possible action to ensure resilience. The commission recently took comments from regional grid operators and other stakeholders on how resilience should be defined and what is needed to provide it. FERC has indicated new policies are likely to come from the review even if they do not mirror either the DOE's or FES' requests.

But in a May 24 filing in FERC's grid resilience proceeding, FES said the commission must act now to save coal and nuclear plants in the PJM, if not nationally. The company dismissed suggestions from some regional grid operators that additional transmission and natural gas-fired generating capacity will ensure resilience.

"If the resilience of the PJM-operated grid is going to be preserved, the commission must act now, not only to direct immediate and meaningful action by PJM but also to ensure the preservation of existing nuclear and coal-fired generation until longer-term measures are implemented," FES said.

Congress resists Trump energy cuts

The U.S. Congress is out of session this week following the Memorial Day holiday, but lawmakers will take up spending bills when they reconvene in early June.

On May 24, the U.S. Senate Committee on Appropriations approved its fiscal year 2019 energy and water development bill. The bill would provide $43.8 billion for energy and water development and related agencies, which would be up $566 million from fiscal year 2018 enacted levels and $7.24 billion above the Trump administration's budget request for fiscal year 2019.

The legislation would keep funding steady for the DOE's Office of Energy Efficiency and Renewable Energy at $2.3 billion, well above the Trump administration's call for $696 million, while lifting spending on fossil energy research and development. Money for nuclear energy research would remain in line with fiscal year 2018 but well above levels sought by the administration.

In addition, the bill would increase funding for the Advanced Research Projects Agency-Energy, known as ARPA-E, a program to support groundbreaking energy technologies, even though the Trump administration has called for defunding the program. The U.S. House of Representatives' appropriations committee included funding for ARPA-E in its fiscal 2019 energy and water bill but proposed less money for the agency than it received in fiscal 2018.

Congressional leaders are hoping to carry out a regular appropriations process for fiscal year 2019, which would require both chambers to pass their own energy funding bills before reconciling the legislation. But time is short for debating all 12 government appropriations bills. Congress is out of session the first week of July and all of August, and the 2019 fiscal year begins Oct. 1, 2018.

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Federal agencies
May 31 - June 1

The U.S. Environmental Protection Agency's Science Advisory Board will meet to review a draft report on the agency's screening methodologies to support risk and technology reviews and to discuss information from the EPA on planned actions and their supporting science.

Industry events
May 30

The North American Electric Reliability Corp. will host a webinar to discuss its 2018 Summer Reliability Assessment.

May 30

The World Resources Institute will hold a forum on the one-year anniversary of the U.S. withdrawal from the Paris Agreement on climate change.

May 30

As part of its Cyber Statecraft Initiative, the Atlantic Council will model a downstream petroleum refinery that will be manipulated in real time to demonstrate supply-chain vulnerabilities. The exercise will be followed by a discussion on threat identification and mitigation strategies for the energy sector.

May 30 - June 1

The US|SIF Forum for Sustainable and Responsible Investment will host its annual conference in Washington, D.C., on sustainability and impact investing.

Other notable stories from last week

Regulatory targets, carbon capture drive coal sector lobbying in Q1

US industry, customers at odds on timing of returning extra tax collections

EPA 'secret science' proposal: 'Trojan Horse' or a victory for transparency?

PJM pending auction results clouded by state nuclear subsidy debate

FERC extends deadline for comment on pipeline policy review