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100--US FERC chairman confident DOE to make 'right decision' on use of emergency authority

Washington — Federal Energy Regulatory Commission Chairman Kevin McIntyre toldreporters Tuesday that he believed Energy Secretary Rick Perry would make"the right decision" as the Department of Energy contemplates steps topreserve coal and nuclear power generation.

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The White House June 1 directed Perry to take immediate action to preventfurther losses of fuel-secure coal and nuclear power plants that havestruggled to remain economic in an energy landscape dominated by cheapnatural gas and increased integration of renewable energy resources.

DOE officials have confirmed that using emergency authorities underSection 202(c) of the Federal Power Act and the Defense Production Act isunder consideration as one option for addressing baseload retirements andfuel security issues. But the department has not offered any time linefor when it would finalize its approach.

Speaking at a Natural Gas Roundtable luncheon Tuesday, McIntyre said anypolicy action being weighed by a governmental body should never goforward until the legal implications of such action have been carefullyconsidered. "Once that has been undertaken, that amounts to a set of laymarkers within which policy decisions can be made," he said.

Talking to reporters after the event, he said the standards for invokingemergency authority to address power issues "are spelled out prettyclearly not only in the relevant statutory provisions but also in DOE'sexisting regulations."

RIGHT OR WRONG, DECISION IS UP TO PERRY

Characterizing Perry as a smart, talented quick study of energy policy,McIntyre expressed confidence in the energy secretary's ability to reviewand rule on the grid resilience questions before him. Ultimately, "thelaw assigns that role to him, so if anyone's going to make the decision --right or wrong -- it's going to be him. And I trust that he will make theright decision," McIntyre said.

A draft DOE memo leaked May 31 that attempts to justify a nationalsecurity argument for saving coal and nuclear power plants fromretirement stoked concerns among a large swath of the energy industry.Natural gas trade groups, in particular, pushed back against the memo'sclaims regarding natural gas system vulnerabilities.

Cheaper gas-fired generation presents a key source of competition tovulnerable coal and nuclear plants, and the gas sector has feared thatefforts to give a lift to the at-risk generating resources could resultin gas-fired units getting squeezed out.

DOE's draft memo referred to a plan that would require grid operators tobuy energy or capacity from designated facilities for two years toprevent retirements.

It also asserted that gas pipelines were more vulnerable to cyber andphysical attacks, and that disruptions to gas-fired power plants wereevents with a higher impact and a higher likelihood.

McIntyre said he had not been briefed on the memo, but made clear thatDOE had no obligation to do so. He also seemed to question thesignificance of the leaked document.

'THAT SHOE HAS NOT DROPPED'

"I think it's important for us to remind ourselves that nothing hashappened," he told reporters. While the leaked draft offers potentialjustifications to support exercising DOE's emergency authority, "thatshoe has not dropped; we don't know whether it will."

McIntyre added that the grid "generally held up pretty well despite verychallenging weather conditions," including last winter's bomb cyclonethat rattled the US East Coast.

This and other weather events of late have provided data and analyses ongrid performance that indicate, despite some operational challenges, thesystem performed well, he said. "Of course the system intentionally isdesigned to anticipate such events and be prepared for them. That's all apart of resilience," McIntyre said.

Regarding FERC's separate review of grid resilience launched in January,McIntyre told luncheon attendees that the commission was looking toanswer a number of questions, "including real fundamental ones like whatshould [resilience] mean for purposes of considering action to shore upresilience."

"Does it mean 90 days of on-site fuel supply at a generator, or is it amore complex answer than that?" he said. With comments from industryunder review, he said, "I think most people are in that latter camp."

-- Jasmin Melvin, jasmin.melvin@spglobal.com

-- Edited by Valarie Jackson, newsdesk@spglobal.com