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Perry position on FES request for PJM emergency order complicated by Trump comment

The emergency order request recently filed by First Energy Solutions with Energy Secretary Rick Perry to give financial support to some PJM coal and nuclear facilities may have gained ground with reports late Thursday that President Trump expressed some support. But industry experts are skeptical the request will get traction.

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The request for a declaration of emergency in the PJM Interconnection market under little used Section 202c of the Federal Power Act was filed with the DOE by FES on March 29. FES on the same day said it would be retiring its three nuclear facilities by 2021, and two days later the Akron, Ohio-based merchant generating arm of FirstEnergy filed a Chapter 11 bankruptcy petition.

FES's request for an emergency order was based on its belief that PJM should immediately begin negotiations to secure the long-term capacity of nuclear and coal-fired generation and see asset owners compensated "for the full benefits" their assets provide.

Speculation began immediately as to how Energy Secretary Perry would respond to the application. On Thursday evening, during a speech in West Virginia, President Donald Trump told the audience, "We'll be looking at that."



FES hasalso said that the US Federal Energy Regulatory Commission, in rejecting in January the NOPR put forward by Secretary Perry in late September that called for certain nuclear and coal-fired facilities with 90 days of fuel onsite to receive cost recovery, had "failed to acknowledge" the value of those plants providing reliability to the grid.

AN APPROVED ORDER WOULD BE COURT CHALLENGED

It remains unclear whether Secretary Perry will approve the Section 202c application.

"FERC, the agency responsible for overseeing the grid, has already rejected this bailout in another form," Joel Eisen, professor of Energy Law at Richmond University, said on Friday. "FirstEnergy's request is just an attempted end run around that decision."

Any approved order would certainly be challenged in federal court "immediately," Eisen said. "If Perry does approve the order, and it goes to court, FirstEnergy Solutions wouldn't get immediate relief."

The FES board approved the filing of the 202c application and thus apparently concluded that there was some financial advantage from doing so. If the order is approved and not reversed by a court, and FES's assets are granted financial relief, the value of those assets would only increase, Eisen noted.

WOOD FINDS APPROVAL A 'REVERSAL' FOR PERRY

Pat Wood, the former FERC chairman who was also the chairman of the Texas Public Utility Commission in the first few months of Perry's first term as Texas governor, said Friday in a phone interview that he believes Perry will not approve the order.

"First, a case for an emergency in PJM has to be made, and I don't believe it can be," Wood said. Noting the timing of the filing -- two days before a bankruptcy filing -- Wood said that 202c applications have in the past been directed at specific facilities, often transmission lines, "not company financials that don't rise to the level of a national emergency."

Wood also said, "It would be such a reversal" for Perry to issue such an order. He said Perry has long been "big on competition in the power markets" and had a "phenomenal record" supporting not only competition but also wind generation in Texas. "He's got to be mindful of all that."

Wood said he suspects that other DOE officials will also be mindful. "I have faith there will be the right outcome," which, he said, is to deny the application.

DINNER WITH TRUMP, FOLLOWED BY COMMENTS

On Wednesday, the day FES filed its 202c application, a White House spokeswoman said President Trump was to attend a dinner with House Majority Leader Kevin McCarthy, Republican-California.

The dinner was held at the Georgetown home of Jeffrey Miller, who once worked with McCarthy but more recently advised Perry in his presidential run in 2016.

Miller subsequently opened a lobbying firm in Washington. On the front page of his lobby report filed January 19, Miller said his top client is FirstEnergy Service Company, a unit of FirstEnergy.

The day following the dinner, during a speech in White Sulphur Springs, West Virginia, Trump, according to the transcript, said, "The [coal] miners are happy. And we'll be looking at that 202. You know what a 202 is, right?"

In its Friday newsletter, Energy GPS, a Portland, Oregon-based consulting firm, said that PJM had "made it clear that there is no emergency and grid reliability issue. While Trump may consider it a national crisis if he doesn't carry Ohio and Pennsylvania in 2020, PJM was not convinced."

"Unless the White House comes through in the clutch, it appears that FES and its subsidiaries are heading for a long, slow, slog through the bankruptcy process," Energy GPS said. --Jeffrey Ryser, jeffrey.ryser@spglobal.com

--Edited by Matt Eversman, newsdesk@spglobal.com