By Jeff St. John
October 12, 2017 - Federal regulators have denied requests from a multitude of energy interest groups seeking to slow down a 60-day review of an Energy Department proposal that could upend the country’s wholesale energy markets, by propping up coal and nuclear plants in the name of grid resiliency.
On Wednesday, the Federal Energy Regulatory Commission (FERC) issued a brief statement denying the requests of a long list of energy industry groups, ranging from solar and wind to the American Petroleum Institute, to extend the comment period for the notice of proposed rulemaking, or NOPR, handed to it by Energy Secretary Rick Perry late last month.
The proposal, if adopted, could secure cost recovery for certain generation resources deemed to be essential to grid reliability and resiliency -- ill-defined terms that DOE equates to having a 90-day supply of fuel on hand. That qualification would apply almost exclusively to nuclear reactors with their always-on fuel, dams with big reservoirs and the leeway to control the flow of water, and coal plants with big enough piles of fuel to qualify.
While the DOE’s reasoning for linking fuel stores to grid resiliency has been widely criticized for its vagueness and gaps in logic, its idea for a solution is clear: "full cost recovery” for those power plants now playing by the rules of the energy and capacity markets run by interstate grid operators serving about three-quarters of the country.
Robbie Orvis, policy design project manager at energy research firm Energy Innovation, noted in a Wednesday tweet that a slight wording change in DOE's NOPR limits its application to grid operators with both energy and capacity markets. This technical detail might end up excluding California, which has a regulatory process for utilities to secure "resource adequacy" that's done in cooperation with grid operator CAISO, but not structured as a market. It might also exclude Midwest grid operator MISO, which has a voluntary capacity market.
Nonetheless, the DOE proposal is widely viewed as an unheard-of intrusion into the principle of letting markets determine which resources best serve society with low-cost and low-environmental impact electricity, and one that's almost certain to increase costs to consumers. It’s also unsupported, and in some cases contradicted, by the DOE study ordered by Perry in April that examined the link between coal and nuclear plant retirements, market forces and grid reliability and resiliency.
Despite this, DOE has asked that FERC move ahead with an interim rule setting its guidance in motion, and shorten the public comment and rule-making process to 60 days. This drew an immediate legal response from an unprecedented coalition of 14 industry trade groups, representing divergent interests in energy policy. The groups united to file a motion the Monday after DOE filed its NOPR, calling the timeline “wholly unreasonable and insufficient” to create what could be the biggest change to wholesale energy markets in decades.
“The time frame provided in the Letter for comments is far too short to allow stakeholders to submit careful analysis on this complex and significant rulemaking,” the groups wrote. DOE’s proposed timeline allows only 45 days for notice and comment on the NOPR, despite the fact that there’s no grid reliability emergency to justify the rush, they said.
DOE’s timeline would also require FERC to “complete final action on the rule” within 15 days after receiving comments, which the groups argued is “patently insufficient to allow the Commission time to meaningfully consider the comments submitted and draft a thoughtful final rule.”
It would also force the country’s organized markets to submit compliance filings within 15 days after that -- again, an unheard-of turnaround in a world where minute and arcane rule changes take months, if not years, to debate and implement.
The groups participating in the motion included the Advanced Energy Economy, the American Biogas Council, the American Council on Renewable Energy, the American Petroleum Institute, the American Public Power Association, the American Wind Energy Association, the Business Council for Sustainable Energy, the Electric Power Supply Association, the Electricity Consumers Resource Council, the Energy Storage Association, the Interstate Natural Gas Association of America, the National Rural Electric Cooperative Association, the Natural Gas Supply Association, and the Solar Energy Industries Association.
FERC’s brief statement this week provided no justification for denying the groups’ motion, however: “Upon consideration, the motions of the Energy Industry Associations, Independent Producers, and Industrial Energy Consumers of America for extension of time to file comments are hereby denied.” FERC will be sticking to its previously announced deadlines of Oct. 23 for comments and Nov. 7 for reply comments, it noted.
The absence of reasoning provided is striking, said GTM Research chief Shayle Kann, given that “it takes longer to list the names of the organizations who requested an extension than it does to write FERC's explanation for denial.” In that light, “the complete lack of justification for such an unprecedented rulemaking, implemented in such an unprecedented timeline, is astonishing," he said.
So far, the only energy trade groups to come out in support of the proposal are from the nuclear and coal industries. Nuclear Energy Institute CEO Maria Korsnick told lawmakers last week that the NOPR would support a “strategic asset that contributes to energy security, reliability, economic growth and environmental protection, while advancing American influence abroad."
And American Coalition for Clean Coal Electricity CEO Paul Bailey said that he’s hoping FERC will do more. "We have a DOE rule that helps merchant coal and nuclear," he told lawmakers at a House committee hearing. "There are other market reforms that could be undertaken to help those other fuels secure coal-fired generating units.”
The Edison Electric Institute utility trade group has taken a neutral stance, saying last week that "a balanced energy mix that includes 24/7 energy sources is vital to sustaining a secure, reliable and resilient energy grid.”
Because DOE’s guidance is so vague on the details, industry observers have been forced to predict how FERC’s five commissioners -- only one remaining from the Obama administration -- will interpret it. To date, FERC Chairman Neil Chatterjee, a former aide to Sen. Mitch McConnell (R-Tenn.), has been placed in the pro-coal and nuclear camp, based on comments during a FERC radio appearance in August. During the interview he said that “baseload power should be recognized as an essential part of the fuel mix,” adding that "generation, including our existing coal and nuclear fleet, needs to be properly compensated to recognize the value they provide to the system.”
Other commissioners have responded negatively to the NOPR. Rob Powelson, a former Pennsylvania public utilities commissioner nominated by the Trump administration in May and approved by the Senate in August, said last week that "FERC does not do politics,” adding, "I did not sign up to go blow up the markets. […] When that happens, we're done. I'm done; I don't need this job." Commissioner Cheryl LaFleur, former CEO of National Grid and the sole remaining Obama appointee, tweeted her support for Powelson’s statements.
Right now, these three commissioners constitute a quorum, the first for FERC since early this year. Two more Trump appointees are in the process of Senate confirmation: Kevin McIntyre, an energy attorney at the large international law firm Jones Day, and Richard Glick, Democratic General Counsel for the Senate Energy and Natural Resources Committee.